The Real Retirement Gamble: It's Not What You May Think
In keeping with the expression, “there is no such thing as bad publicity,” popular media is often a mixed blessing. It raises awareness but not always the kind one might prefer. I was reminded of this throughout my viewing of the recently aired PBS Frontline Segment, “The Retirement Gamble,” which turned out to be a decidedly mixed-bag exploration of the today’s retirement industry. While there were messages of worth, in the end, the meaning was missed, and misleading.
Messages of Worth …
To its credit, “The Retirement Gamble” called attention to critical issues that still plague many retirement plans, including all-too-common industry tendencies to:
(1) Pile on hidden and unnecessary costs – The show rightfully focused on the difficulty of determining all-in costs, which can eat away dramatically at investors’ hard-won returns.
(2) Leave participants in the lurch – All too often, retirement plan providers throw participants into a “do it yourself” lion’s den of too many choices with too little support for promoting well-reasoned decisions .
(3) Indulge in conflicts of interest – Even with recent legislation aimed at increasing disclosures, many providers and sponsors alike overlook the vital importance of fiduciary advice, which places investors’ best interests well ahead of any profit motives.
I have long grounded my own advice in these same points, so it was good to see them aired in the popular press. Some of my favorite quotes from the segment came from respected sources:
On reducing hidden costs: “A lot of 401(k) programs are lousy. The fund choices stink. The fees are outlandishly high. And in many cases, you can take two next-door neighbors, you know, living on Maple Street in Anytown, USA, and one person is paying 10 times as much to invest in a 401(k) as the other person.”
— Wall Street Journal “Intelligent Investor” columnist Jason Zweig
On well-reasoned investing: “If you want to gamble with your retirement money, all I can say is be my guest. But be aware of the mathematical reality. Maybe you have a 1 percent chance of beating the market over time. It has been proven right year after year after year because it can’t be proven wrong. It’s a mathematical certainty, a tautology, if you will.”
— Vanguard Founder John Bogle
On fiduciary versus suitable advice: “If you’re working with somebody who is trying to sell you financial advice, you say to them, ‘Are you acting in my best interest here? Would you be willing to sign a pledge that says that you’re going to act as my fiduciary at all times with all products? Because if you’re not, then I’m going to leave.’ And it’s really just as simple as that.”
— New York Times “Your Money” columnist Ron Lieber
But the Meaning was Missing …
So, yes, the segment promised worthwhile food for thought for retirement plan sponsors. Still, it left me hungry in the end. It rightfully presented our challenges, but failed to explore constructive solutions, implying instead that our 401(k) system is broken, in need of a “do-over.”
In reality, there are a number of 401(k) plan providers and advisors like me who already offer solutions grounded in the tenets that are critical to retirement plan success, as described above.
In past blogs, I’ve long promoted the critical need to disclose fund costs and conflicts of interest. We have long provided plan sponsors with professionally managed investment models, acted as their ERISA Section 3(38) investment fiduciary and offered employees information to help them in making their investment selections. We coordinate a team of like-minded service providers to provide the back-end support for these plans. And I am not alone in my approach. We may not be conglomerate-sized, household names, but we exist.
Should industry-wide improvements continue? Absolutely. But the segment does a disservice by implying we must start from scratch to move forward. The movement already is well under way, and I am proud to be a part of widening its reach. Our country, and our world, for that matter, has not flourished by bemoaning all that is wrong and wishing it would go away. While life’s risks are never far away, I believe the best way to manage them is to candidly assess them, creatively address them, and build on progress made over time – patiently, objectively, determinedly. The biggest gamble comes when we falter from our shared goals.