Podcast Center
Video Center
Webcasts
Resource Center
Events
August 13, 2015 at 08:45 AM
While the Labor Department holds a marathon of hearings on its proposed fiduciary rule for financial advisors involved in retirement accounts, Bobby Monks, entrepreneur and former chairman of proxy firm Institutional Shareholder, says the DOL’s proposal doesn’t go far enough.
“If someone is giving you advice they should probably put your best interest first,” says Monks. “The [DOL] rule is very important. It ought to be broadened … to beyond retirement assets.”
Monks is the co-author of a new book, “Uninve$ted: How Wall Street Hijacks Your Money and How to Fight Back,” with Justin Jaffe and Bree LaCasse, and he visited ThinkAdvisor’s New York offices recently.
Monks says the U.S. financial system “is broken,” filled with intermediaries whose fees are borne by investors but not clearly disclosed and who don’t have to put the interest of their clients first, before their own.
“The individual investor is being taken advantage of by the financial services industry,” says Monks.
He attributes the problem to what he calls the “financialization of America” where tens of millions of households are invested in mutual funds and other financial assets through 401(k) and IRA plans but have “outsourced” the responsibilities of ownership to a “monolithic financial intermediary complex.”
Financial intermediaries such as mutual funds and pension funds controlled roughly 75% of U.S. equities, or more than $37 trillion worth in 2010, according to Monks.
While Monks would like to see financial intermediaries, including financial advisors, put their clients’ interests first and disclose more about fees, he says investors also need to step up and take responsibility.
“For the average investor the biggest risk is not being engaged, not paying attention,” says Monks, noting that mindset would cost them in the long run.
Monks gives the example of an investor who pays a 1% fee to invest $25,000 over 35 years, earning an average 7% per year. At the end of that 35 years the investor has given up $65,000 due to fees, says Monks.
