It's a well done article, but I wonder if we know that "the headwind of rising interest rates will soon be over".I might make the argument that:
We have been spoiled by low inflation over the last thirty or so years but those days might be over. Capital was cheap.
Onshoring might drive up wage costs.
We've never quite seen so many people drop out of the labor force and jobs are still quite plentiful.
Remote work is relatively brand new and we don't know the long-term ramifications on productivity and labor costs.
Housing shortages will continue and higher mortgage rates will keep many locked into their current homes. Rents thus increase.
We haven't really seen a long-term bad stock market like 1966-1982 in a 401(k)/IRA structure. Perhaps individuals (non-Humble Dollar) end up bailing on stocks? Sequence of return risk coupled with high inflation will be disastrous on retirees.
We've never experienced student loan debt at the level it is now and this is bound to impact the economy where everything costs more due to inflation and higher interest rates
With many retiring without adequate savings, what happens when baby boomers and the rest outlive their savings.
What if Russia's war against Ukraine is just the start? What if oil and other types of energy soar in cost?
Shouldn't that change though given PTE 2020-02 if there is a rollover from a 401(k) to an IRA? The DOL is indicating that every financial advisor is acting in a fiduciary capacity when the rollover is recommended... and it must be in the client's best interest.
Allan - Thank you for your article where you have humbly pointed out where you feel you may have come up short. In my view, your points pale in comparison to all the great work you have done to turn a spotlight on AUM fees and high commission products. While the industry has been slow to change to flat fees or hourly fees (for obvious reasons), your contributions have likely helped thousands make better decisions if they didn't need to sign up for "wealth management" but rather just needed some help along the way. I've submitted a working paper to the Journal of Retirement (where I sit on the Editorial Board) showing how even 1% in fees reduces annual safe withdrawal rates by 15% and generates a median cost in legacy values of 23%. Of course, average "all-in" costs are much higher when all the TAMP fees, separate account fees, wrap fees, active management fees, custodial fees, etc. are considered. The long-term cost in terms of income, late life wealth to pay for healthcare, and future inheritances is staggering unless financial advisors can somehow make up for these drawdowns with superior advisory contributions. You, Rick Ferri, and a couple of others have spearheaded this attention to fees and it's vitally important in my opinion to brighten the spotlight even more as we've now moved primarily to a 401(k) world.
Comments:
It's a well done article, but I wonder if we know that "the headwind of rising interest rates will soon be over". I might make the argument that:
Post: Almost Done
Link to comment from October 17, 2022
Shouldn't that change though given PTE 2020-02 if there is a rollover from a 401(k) to an IRA? The DOL is indicating that every financial advisor is acting in a fiduciary capacity when the rollover is recommended... and it must be in the client's best interest.
Post: Striking Out
Link to comment from May 4, 2022
Allan - Thank you for your article where you have humbly pointed out where you feel you may have come up short. In my view, your points pale in comparison to all the great work you have done to turn a spotlight on AUM fees and high commission products. While the industry has been slow to change to flat fees or hourly fees (for obvious reasons), your contributions have likely helped thousands make better decisions if they didn't need to sign up for "wealth management" but rather just needed some help along the way. I've submitted a working paper to the Journal of Retirement (where I sit on the Editorial Board) showing how even 1% in fees reduces annual safe withdrawal rates by 15% and generates a median cost in legacy values of 23%. Of course, average "all-in" costs are much higher when all the TAMP fees, separate account fees, wrap fees, active management fees, custodial fees, etc. are considered. The long-term cost in terms of income, late life wealth to pay for healthcare, and future inheritances is staggering unless financial advisors can somehow make up for these drawdowns with superior advisory contributions. You, Rick Ferri, and a couple of others have spearheaded this attention to fees and it's vitally important in my opinion to brighten the spotlight even more as we've now moved primarily to a 401(k) world.
Post: Striking Out
Link to comment from May 4, 2022