There’s a fight in Congress over a new rule that would save Americans an estimated $17 billion a year.
The fiduciary rule would require brokers to act in the best interest of clients who are saving for retirement. Brokers would no longer be allowed to push their clients into high-fee funds just because the fund paid them.
The Obama administration thinks that Americans could save more for retirement if their brokers weren't allowed to rip them off. The Financial Services Roundtable, a lobbying organization representing banks that oppose the rule, disagrees. It argues that we can fix the problem of Americans not saving enough money if Americans start saving more money -- 10 percent of their income, to be specific.
That's an objective, not a policy. But never fear, the FSR has a plan to promote savings: Giving away free pizza to 100 people in Washington, D.C. The group handed out the free pies at an event last week promoting an initiative called "save-a-slice." You're supposed to "save a slice" of your income for retirement. Get it?
Or maybe you'd like enter a contest and win $10,000 from the FSR by submitting a video explaining how you plan to save 10 percent of your income.
"Don't want to spend your retirement eating cat food on toast, win $10,000," for creating a video about it, a promo for the contest intones.
FSR does have some good ideas -- making retirement plans at companies that offer them automatically enroll employees, for example -- but its big idea is unrealistic. Middle-class incomes have fallen over the last 15 years, so it's unlikely that regular people have more money to save. The American savings rate, currently just above 5 percent, hasn’t been at or above 10 percent for any sustained period in the last 35 years.
And telling Americans to save more for retirement while trying to stop a rule that would keep Americans saving for retirement from getting swindled by high-fee funds they don’t need is exactly the sort of conflicted advice that costs investors billions.