In the years since Obamacare took effect in March 2010 the nation has spent countless months — and a lot of money — debating the pros and cons of the healthcare law without either side of the proceedings offering a compelling solution to the problem.
However, one thing is certain: Regardless of where you position yourself in the healthcare debate, you certainly agree both patients and practitioners nowadays have a far greater awareness of the pros and cons of medication, especially the side effects of prescription drugs.
The U.S. Food and Drug Administration mandates pharmaceutical manufacturers label products accordingly, informing consumers of everything from the bimolecular formula to the potential secondary, negative effects of the medication. Thanks to FDA edicts medication abuse has declined, especially in vulnerable segments of the population such as teens and the elderly, according to the National Institute of Drug Abuse.
Now, here is something that works — and helps save the lives and livelihoods of a lot of people every year.
And that got me to thinking, why not simply copy this policy and apply it to the financial services industry, mandating that companies, financial advisers and planners provide a similar kind of warning on the products they recommend to clients?
Don’t get me wrong — I’m not naïve; I know that adopting such a policy would take time and would likely be an uphill battle, especially given the power and influence of the financial lobby. That said, it’s noteworthy to remember people made the same comments about the (supposed or real) might of the tobacco or pharmaceutical industries, back in the days when legislators were considering far-reaching laws — which, I might add, were ultimately adopted.
But today, retirement has grown to become an issue impacting too many individuals and far too much of the economy to be taken lightly. The Harvard Business Review reported recently that retirement was in crisis in this country. The problem is real and millions are at risk.
Requiring the financial industry reveal the potential downside, or side-effects of their products will help make the investment process more transparent, so that no American ends up with a retirement plan on steroids — meaning, a plan comprised mainly of financial products whose price is prone to artificial inflation and having the potential to lose large amounts of value practically overnight.
The modern concept of retirement as we understand it today is completely opaque. Wait a minute, did I say completely opaque?
I meant to say, utterly and ridiculously opaque.
Some in the financial sector wanted it that way so a majority of Americans would never develop a reasonably good understanding of the investment and planning process — when to buy or sell, which sectors make the most sense, or what strategy is the best fit for their particular situation and objectives, etc.
And don’t get me started on the complicated fine print and disclaimers that even lawyers themselves sometimes don’t understand. Instead of attaching a sample of legal arcana to financial products, why not simply break it down and summarize key points with the singular purpose of assisting people in making better decisions?
Finance can be complicated, but so too is the world of medicine and prescription drugs. Yet, if big pharma can highlight some of the critical key elements, especially the potential side effects of all the drugs and medications it sells, then so can the financial sector.
Plus, displaying the side effects of financial products won’t require extra effort — the content is already there, buried inthe fine print. All that’s needed is a concise, brief summary that’s easy to read and readily understandable.
It’s a logical and fair approach.
And, if we go back to the pharmaceutical-industry analogy, we all know some of the meds advertised in newspapers, magazines, and on TV report symptoms that are downright frightening. But that hasn’t stopped some from buying them anyway — at least now they’re making a better-informed decision.
I believe having a similar display of the potential problems, or side effects, is much needed in the field of financial services.
Dry mouth, Dizziness, and Constipation
Various sectors and products could benefit from this display of side effects.
For instance, a standard warning for a stock investment might look something like:
“Should stocks experience another sell-off (crash) and the government determines it is unable to provide another multi-trillion dollar bailout for Wall Street and the big banks, you could lose a substantial portion of your retirement savings and may never have the time or opportunity to recover those losses…”
Something like that could be a real attention getter, don’t you think?
Or, a typical 401K plan disclaimer might reveal: “The cost of this plan includes fees, expenses, service charges, etc., that, added together, can result in the transfer of as much as half the average value of your account to the plan provider in approximately three decades’ time.” (1.67% x 30 years = 50.1%)
But don’t take my word for it; Let John Bogle, founder of Vanguard Funds and the man who revolutionized investing for Main Street, explain in this no-holds-barred indictment of the financial industry from a 2013 interview with the PBS program Frontline. (I highly encourage everyone to read this article, and pass it on)
Lastly, the Social Security Administration recently indicated it plans to resume mailing out annual statements again — perhaps SSA officials could also include a disclaimer stating:
“The Treasury Secretary of the United States has determined at current rates of expenditure, the trust fund portion of Social Security will be exhausted by 2034 at which time there will be little choice but to cut benefits for recipients….”
The government’s prescription for the 2008 financial crisis came with its own unique set of complications — that is, a large portion of Americans are still struggling even as the economy prospers. The top 10% of wage earners have done very well while many in the middle class have enjoyed a modest but increasingly uneasy bump in their standard of living. Unfortunately, lower wage earners have seen little improvement to their bottom line and most remain stuck on the side of the tracks as the wealth train passes them by.
Trillions of dollars in new debt, a series of quantitative easing (QE) programs, and low interest rates are proof an economy can be saved from almost certain destruction by implementing extraordinary monetary measures, but the unintended consequences (side-effects) are a reminder not everyone can be saved.
In a country where millions live with the anxiety of long-term economic uncertainty, there needs to be far more transparency in the financial products sold to those hoping one day to retire comfortably, and mandating Wall Street and other members in the financial sector highlight the consequential side effects of the products they promote may be a very good way to start.
But don’t hold your breath —the wheels of progress, especially when it comes to something that truly benefits the middle class, turn exceptionally slow in D.C.
In the meantime, you might want to consider embracing the sage wisdom of simply saying “NO” to the side effects and ramifications of Washington’s unproven, experimental economic policies.