Regulation Best Interest is “a disaster for investors” because it “creates fake fiduciaries,” argues Jane Bryant Quinn, the veteran personal finance journalist and advocate for consumer rights.
In a recent interview with ThinkAdvisor, she offered candid opinions on the Securities and Exchange Commission’s Reg BI, zero commissions, the Secure Act, certain annuities and financial advisors.
The bestselling author has just released a revised, updated edition of her 2016 “…treasure chest of…financial advice…” as Forbes calls it. “How to Make Your Money Last: The Indispensable Retirement Guide” (Simon and Schuster- Jan. 7) covers recent changes in tax laws, health insurance, Social Security and much more.
Ever a tough critic of brokers, Bryant Quinn doesn’t hold back in the updated guide. Brokers “call themselves wealth managers, financial consultants, investment planners, etc. — hiding the fact that they’re salespeople,” she writes.
Later in the chapter — which includes a section labeled “The New Fiduciary Muddle” — she goes even further: “It’s safest to assume that anyone working at a brokerage firm or insurance company isn’t a true fiduciary.”
In the interview, however, she praises the financial services industry for having introduced products such as IRAs and 401(k) plans, which, she notes, have made retirement planning easier.
Last year, Bryant Quinn herself retired and relocated, with husband Carll Tucker, retired founder of DailyVoice.com, to Rome for a year.
In our conversation, she reveals answers she sought from finance professionals before making the big decision to exit the labor force.
After beginning in 1963 as a reporter, she later conducted a column in Newsweek for 30 years and wrote for The Washington Post, Bloomberg News and the AARP Bulletin, among other publications. An Emmy winner, she hosted her own PBS program and was a regular correspondent on CBS-TV.
Here are highlights from our interview with the long-trusted journalist, 80, who phoned from her apartment perched on the highest hill in Rome:
THINKADVISOR: What do you think of the SEC’s Regulation Best Interest?
JANE BRYANT QUINN: It creates fake fiduciaries. It’s a disaster for investors because now a salesperson can basically say, “I have your best interest at heart — I put your interest ahead of mine.” They’re allowed to use exactly the same language that fiduciaries use but without actually being fiduciaries.
Any other downside that you see?
If [FAs] have disclosed conflicts of interest in the contract, the assumption is that if you’ve read the disclosures and buy the [product] anyway, you think it’s in your best interest — which of course is nuts. It’s just wrong. Also, the salesperson could be a [real] fiduciary with one transaction and not a fiduciary with another. How does [the average person] understand things like that! It’s insane!
Fixed indexed annuities may be getting hot again. I know you don’t approve of them. Your thoughts?
They’re getting hot because of the BI regulation. They fell off sharply when [FAs] thought they would have to be fiduciaries when dealing with retirement accounts. But as soon as it turned out you don’t have to be a fiduciary — that you can be a “ha-ha” best-interest fiduciary — sales went up again.
Why do you dislike fixed indexed annuities?
People don’t realize that they’re priced to compete with bonds. But they have this apparent link to stocks — that you have an equity investment of some sort. So with a fixed indexed annuity, you’re basically buying a bond and paying a high annual price for it.
Anything else that you think is a big negative?
They’re supposed to be annuitized. People are told: You’ll be paid 5% for the rest of your life. But of course you aren’t earning 5% on your money. They’re parceling out 5% of your own money to you.
You do like immediate-pay annuities, however. Please explain.
I make a case for people buying them when they’re living longer than they expected. They give you a better lifestyle. They’re low-cost, simple, and you’re not dreaming that your payments will go up because stocks go up.
What’s your broad view of annuities?
If people who are afraid of stocks don’t want to be invested, annuities are a good idea. For people who don’t want to pay attention to investing whatsoever, they’re a good idea; [that is] a plain single-life annuity. It’s like having a pension. People shouldn’t get involved with those fancy lifetime benefit annuities that cost them more than they realize and whose benefits they may not actually want in the end.
What’s your take on the trend to zero commissions for online trading?
The whole industry is [being] driven toward zero. Buying and selling stocks and bonds is a commodity, not a service, and they should be at commodity prices. What’s interesting is that fees for financial planning have not [been] driven toward zero. But if you’re doing true financial planning and getting advice on whether you should, for example, buy an annuity or when you have lots of questions that deal with your finances, that’s worth paying for. Simply working with index funds is basically not worth paying for — and that’s what the market is telling you.
What do you think of the aspect of the Setting Every Community Up for Retirement Enhancement Act of 2019 (Secure Act) that all but killed the Stretch IRA? The new rule requires beneficiary heirs to pay taxes on distributions within a shorter time frame — 10 years — and typically at higher rates.
IRAs were intended for your own retirement and that of your spouse. They weren’t intended to enrich the next generation. So I think it’s perfectly reasonable to give the next generation a more limited time to take the money out. Ten years is [still] a pretty good deal. Cutting off the ability to postpone paying taxes practically indefinitely was the right thing to do.
What about the part of Secure that makes it easier for employees to own an annuity inside their 40l(k) plan?
Depending on your age, if you’ve got the option of a low-cost annuity that would be a better deal than taking the money at the end and buying an annuity, that would be fine.
You’ve been covering personal finance for quite a while …
Since the early Pleistocene Age!
Well, do you feel that the financial services industry has changed for the better or worse over the years?
It’s changed for the better in that there are good options you didn’t have when I first came up — like money market funds, index funds, IRAs, 401(k)s. Prices for the annuities that I like were much higher when I came up. These options have vastly improved the ability to save for retirement. So for people who manage costs, choose wisely and keep things simple, things have vastly improved.
Anything negative that’s occurred?
There are lots of bad investments out there and brokers who sell you bad stuff. But bad brokers are no more prevalent now than they used to be. People just need to stay away from the bad guys.
Do you think that, with help of advanced technology, the next generation will be smarter about their finances than previous ones?
No. You can trade bad stocks with your watch just as quickly as you could trade bad stocks on the phone with a broker in the old days. Making the decisions to plan for your retirement doesn’t have anything to do with electronics. It’s entirely your own basic common sense. Once you make the decisions, maybe you’ll buy your mutual fund [for instance] with your watch or your eyeglasses or whatever new device there is. But all these decisions are human decisions that you have to think through logically. Technology doesn’t do that for you; technology just executes.
You retired last year and moved to Rome. How do you like retirement?
I’m having an absolutely wonderful time. We’re very happy. [But] we’re here for [just] a year and making no further plans right now.
How did you go about making the major decision to stop working?
My husband, who retired [in 2018], and I got opinions from both the firm that manages my pension fund — which is invested in index funds — and my accountant. I asked: “If the paychecks stop, how much do we have to live on as a couple? If I die immediately, how much would my husband have to live on? If he dies immediately, how much would I have to live on?” They gave us the answers, and we said, “We can do that!”
Why did you retire?
Making the decision was very difficult. But when you reach a certain age, you think: Maybe I don’t want to write one more book! Right now, I’m having such fun not writing. I have deadlines, but they’re for my Italian homework. I’m taking Italian lessons and working very hard at it.
You’ve phoned from home?
Yes. Our apartment is on the highest hill in Rome. We have big windows and views in three directions of all of Rome. It’s just thrilling!
— Related on ThinkAdvisor: