In today’s world of ever-expanding communication channels, both formal and informal, the lines between journalism, opinion and entertainment are increasingly becoming blurred. The Public Broadcasting System (PBS) television “documentary” The Retirement Gamble, aired on April 23rd on many PBS stations, is a good example of this.
“Documentary” is in quotes here because in my opinion this presentation did not live up to the standards of the balanced journalism one would expect of PBS. Rather than a presentation of information and facts, which is what a documentary is generally thought to be, this was an uncharacteristically simplistic, soap opera-like, and—least pardonable—unbalanced and biased program with an apparent agenda. Two of its primary sources of information were academics who are well-known foes of 401(k) plans, and of plan participants being responsible for directing their own investments. While Frontline did present interviews from some highly-placed persons at several investment firms that are significant players in the retirement industry, it seems they chose very small portions of the interviews to televise that were intentionally designed to make these individuals look unsure and ill-informed. We also know that others in the retirement industry were interviewed at length but Frontline chose not to present those interviews and that side of the retirement story. It appears that interviews that presented ideas, suggestions or conclusions contrary to the program’s agenda, were not included. Definitely not an unbiased or balanced approach.
A main take-away for the typical viewer is likely to be that American workers will have inadequate retirement assets because they are being fleeced by the mutual fund industry, through fees charged for their investments. Another impression may be that there is no meaningful oversight by regulatory agencies charged with protecting the interests of workers who save for retirement, something that recent DOL and IRS regulatory history would tend to refute.
It would be unbalanced on my part to claim that there are never conflicts of interest in the retirement plan investment, service and administration environments. We live in a largely for-profit, capitalistic world, where personal gain is a driving force in the economy of our country and other nations. Human imperfection being what it is, there are occasional abuses.
Sometimes, however, what one man portrays as abuse may be another man’s reasonable reward for his efforts, time and talent. Portraying issues in black and white terms is convenient when trying to win a debate, support a thesis, or sway audience opinions. But such clear distinctions are not so common in the real world. As journalist and essayist H. L. Mencken put it, “For every complex problem there is a simple solution, and it’s wrong.”
That said, there is certainly a place for seeking—for mandating—honesty and fair dealing, especially in environments where the in expertise of others—such as a retirement investor—makes them vulnerable to being misled and taken advantage of. But, rather than the unregulated, exploitative plan administration and investment environment that Frontline presents, we and others in the industry believe we are moving steadily in a direction that protects the retirement plan participant. This is happening through regulations addressing fee disclosure, investment performance, investment advice, automatic employee enrollment, and more importantly, a genuine desire on the part of many retirement professionals to help participants achieve a secure retirement.
Some may argue that in a perfect world a retirement plan participant would be able to invest his or her retirement plan contributions without any sales charge, advisory fee, marketing fee, surrender charge, or expense of any kind. But that world does not and cannot ever exist. In such a world there would be no incentive for professionals in the investment and retirement industries to provide the services and support that plans and plan participants need.
Also not stated by Frontline was the fact that there are fees associated with investments outside of retirement plans, whether they are mutual funds, annuities, or some other investment vehicle. Charges are not unique to retirement investing. The reality is that investing through one’s retirement plan often results in lower charges due to the types of investments, share classes, and volume of dollars being invested. No less important, there can be equally great—or greater—undesirable long-term consequences for not investing at all, or investing too conservatively.
Are 401(k) plans as they exist today the perfect solution to a secure retirement for all Americans? Perhaps not perfect, but they are an extremely valuable and beneficial tool. A secure retirement, like employment, health, personal happiness, and many other things, has never been a guarantee. In the absence of a government-mandated or operated retirement system, American workers must use the tools available to them. Can we sharpen those tools, or add new ones to our tool kit to do the job better? Yes. But it’s important that we not fail to appreciate and properly use those tools available to us now, as we work toward perfecting them.
