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Does myRA breach fiduciary duty?

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There’s something awfully suspicious about this newfangled “myRA” everyone keeps talking about.

They say it’s “new” and desperately needed by the thousands of workers not currently covered by an existing corporate retirement plan.

Of course, that’s the government talking.

Experienced financial professionals, on the other hand, suggest the myRA is not as unique as its creator claims.

Still, that’s not what’s fishy (OK, maybe it is, but I’ll leave that part of the discussion for next week).

Here’s what keeps gnawing at me.

Let’s say you’re a retirement specialist working for a regulated firm. A client comes into your office.

He wants to set up a retirement plan. His employer doesn’t offer one, so he’s figuring he needs to take responsibility for his own retirement savings program.

You have several options to choose from, all of which the client qualifies for. You scan your list, and the plan you recommend has the following characteristics:

1)      The client can only save a maximum of $15,000 – that’s in total, not just one year;

2)      The client is limited to only one investment option;

3)      That investment option is a risk-less (ergo, low return) fixed income security;

4)      Your firm underwrites and distributes those securities;

5)      The retirement plan itself is a product created by and distributed by your firm.

Does anyone else see the red flags one this one? Each and every one of these characteristics would create breach of fiduciary duty.

Now, if you’re not a fiduciary, then I guess that doesn’t matter.

But if you’re placing yourself in a position of offering “objective” and “unbiased” advice, especially as opposed to other “greedy” and “self-serving” firms, doesn’t that imply you are holding yourself out to the highest of standards–that of a fiduciary?

And if you are claiming to serve the client’s sole interests, the conflicts-of-interest inherent in the above scenario would have the Pavlovian Bells ringing in the ears of class-action attorneys across the land.

Unfortunately, this is precisely the position is in vis-a-vis the myRA product. And before we get going too far, understand this: myRA is a product, not a plan.

It is not an IRA, which is a generic retirement plan that can be used by private investors and free market providers in any one of a number of ways.

No, myRA is a specific product sold by the government, just like an annuity is a specific product sold by the insurance company.

If you are the kind of person who always looks for the humorous side of things, the oozing irony of myRA just begs for a laugh track.

Imagine, at the same time the DOL is putting forth gestures implying financial firms should eliminate their conflicts-of-interest and serve the “best interests” of retirement savers, here we have the very same government peddling a retirement product so blatantly ill-suited for retirement savers that it could have only been designed by life-long bureaucrats.

I mean, this is the stuff Donald Trump eats up!

But this brings up something even more ominous.

If a government is so callous as to punish private industry with one hand, yet commit those same sins on its own behalf with the other, does that government have the moral authority to render judgment at all?

Hmm, that does sound like a juicy tidbit for a certain presidential candidate.


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