“The purpose of life is to contribute in some way to making things better” — Robert F. Kennedy
In the time since Obamacare took effect in March of 2010, we, as a nation, have spent countless months — and gazillions of dollars — debating the pros and cons of a healthcare law the new administration has vowed to repeal from Day One.
However, one thing is certain: regardless of where you position yourself on the political spectrum and on the healthcare debate, you certainly agree, along with millions of Americans, patients and healthcare practitioners nowadays have greater awareness of medication, especially the side effects of drugs.
The U.S. Food and Drug Administration mandates pharmaceutical companies label their products, informing consumers of everything from the bimolecular makeup to the 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 saves the livelihoods of millions every year.
So, why wouldn’t we just copy this policy and apply it to the financial industry, mandating companies, brokers, and financial advisers, among others, be required to display a disclaimer on each product they sell or recommend to clients?
Now, don’t get me wrong — I’m not naïve; I know adopting such a policy could take time and would likely be an uphill battle, especially given the power of the financial lobby. That said, it’s noteworthy to remember that people made the same claims about the might of the pharmaceutical industry or the tobacco lobby, back in the days when legislators were considering far-reaching laws — which, I might add, ultimately passed.
Retirement is an issue affecting too many people and touching on too many aspects of our economy to be treated lightly. The Harvard Business Review indicated recently that retirement planning was in crisis in this country. The crisis is real, and millions of people are at risk.
Requiring the financial industry to indicate the potential downside (side effects) of their products will help make the investment process more transparent, so that no American has a retirement plan on steroids — meaning, a plan that includes products whose prices are artificially inflated and can crash at the minutest hint of a hypothetical stock-market crisis.
The concept of retirement as we understand it today, is completely opaque.
Wait, did I say completely opaque? I meant to say, utterly and ridiculously opaque.
Of course, some in the financial sector wanted it that way, so that American workers and retirees would not have a better understanding of the investment process — which stocks to pick, which product to buy, what fiscal strategy to employ, when to sell, when to buy, and so on and so forth.
And don’t even get me started on the complicated fine print and disclaimers that even lawyers sometimes don’t understand. Instead of attaching a sample of legal arcana to financial products, why not break it down and summarize the key points to better assist people in making an informed decision?
Finance can be complicated, but so is medicine and prescription drugs. Yet, big pharma found a way to highlight the key elements, especially the side effects, of any drug or solution it sells. If the pharmaceutical industry can do it, so can the financial sector.
Ease of Implementation
Displaying all the side effects of financial products won’t require extra effort, since the content is already there…buried in the fine print. All we really need is a summary or recap that’s transparent, easy to read, and emphasizes the most salient points.
And the results could be quick.
If we go back to the pharmaceutical-industry analogy, we all know some of the medications advertised on network TV and in newspapers and magazines are downright frightening. But that hasn’t stopped some from buying them anyway — at least now they have a far better idea of what they’re getting themselves into.
Having a similar “code of side effects” is overdue in the investment sector.
Dry mouth, Dizziness, and Constipation
Various sectors and products could benefit from a clear display of the side effects.
For instance, with interest rates hovering near zero, it might be instructional to provide a HI-VIS warning label next to the signature box stating something like, ‘By purchasing this CD you should know the bank agrees to pay you almost nothing in exchange for the privilege of holding your money for the next year, (two, three, etc.) If this is a retirement account and you spend down your savings by just 5% per year, your account will be exhausted in approximately two decades, meaning you could potentially run out of money some time in your mid-eighties….’
Something like that would be a real attention-getter, don’t you think?
The same thing could be said for stocks: ‘Should the stock market experience another large-scale sell-off (crash) like in 2008 and the government finds itself unable to provide another multi trillion-dollar bailout for Wall Street and the banking industry, you could lose a substantial portion of your retirement savings and may never have the time or opportunity in which to recover those losses…’
A 401K plan disclaimer might reveal: ‘The cost structure includes fees, expenses, and in some cases hidden charges that, added together, can transfer as much as half the value of your account to the fund management company in a little over three decades. ([1.5% x 30 years = 45%] and you will still owe taxes at the time of withdrawal.
But, don’t take my word for it; listen to John Bogle, founder of Vanguard and, according to some, the man who revolutionized investing for Main Street accounts.)
Lastly, the Social Security Administration recently indicated it would start sending out annual statements again — perhaps SSA officials could include a disclaimer stating: ‘Ongoing mismanagement of the disability benefit portion of this fund led to a depletion of funds in 2015, and new claims are now debited from the (income) benefit account, meaning, this portion of the fund will likely now run out much sooner than expected….’
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% have done exceptionally well while the middle class enjoys a modest but increasingly uneasy bump up in their standard of living. Unfortunately, lower wage earners have seen little improvement to their bottom line and remain stuck at 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 the economy can be rescued from almost certain destruction by taking extraordinary monetary measures, but the unintended consequences (side-effects) are a reminder not everyone will 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 who hope 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 could be a very good place to start.
But don’t hold your breath — the wheels of progress, especially when it comes to something truly beneficial to the middle class, turn exceptionally slow in D.C.
In the meantime, you might want to consider embracing the simple wisdom of just saying “NO” to the consequential side effects of Washington’s unproven, experimental economic policies.