Trump’s Department of Labor, Securities and Exchange Commission are scheming to make 401ks “greater” than ever, i.e., greater fees, greater risks and greater conflicts. That’s great for the wolves of Wall Street, not-so-great for America’s workers and no way to Make America Great Again.  

Trump U. S. Department of Labor recently opened the door for private equity wolves to sell the highest cost, highest risk, most secretive investments ever devised by Wall Street to 401ks. As private equity is embraced, 401k costs will skyrocket, risk will dramatically increase and transparency will plummet.

That’s great, says Trump’s DOL, because paying greater fees to Wall Street and taking greater risks will permit 401k savers to “overcome the effects the coronavirus has had on our economy.”

That is, private equity gambling gains will make up for COVID losses.  

Chairman of the U.S. Securities and Exchange Commission and unabashed private equity cheerleader, Jay Clayton commended the Department’s efforts “to improve investor choice and investor protection” by permitting private equity in 401ks.

Last week the Department of Labor unveiled a proposed exemption that would permit 401k fiduciaries to receive compensation for recommending participants in plans roll over their savings into an IRA and other similar types of rollover recommendations. ERISA generally prohibits investment advisors from self-dealing or profiting from recommending their own funds.

Once again, the SEC Chairman commended the efforts of like-minded officials at Trump’s DOL.

“The proposed exemption announced today reflects in part the Commission’s constructive and ongoing engagement with the department,” Mr. Clayton stated. “I look forward to continuing our work with the department so that collectively we can enhance investor choice and increase investor protections.”

Of course, the SEC Chairman is well aware that throwing 401k investors to the wolves has nothing to do with “investor choice” or “investor protection.”

Have 401k investors been clamoring for the right to pay Wall Street big bucks to gamble on high-risk, opaque private equity deals that, as I detail in Who Stole My Pension? more-often-than-not fail to deliver outperformance?

Is there a private equity “pro-choice” movement?

And how exactly does private equity in workers’ 401ks increase investor protection? Chairman Clayton needs to have a sit-down with the Commission staff.

The SEC itself, within days of the DOL private equity guidance, issued a risk alert that warned of deficiencies the staff had identified among private equity advisers that may have caused investors to overpay fees and expenses.

As to the more recent DOL fiduciary exemption, show me a single 401k investor who craves making it easier for 401k plan fiduciaries to profit from self dealing. Are workers demanding the right to choose conflicted financial advice? How could allowing conflicted advice ever enhance investor protection?

For 401k investors the message is clear: We are in an era of wholesale pandering to Wall Street by federal regulators. Agencies charged with protecting investors and employee retirement plans are not only not doing their jobs, they are actively misleading investors about fees, risks and dangers related to conflicts of interest. These are dangerous times.