Speaking Plainly About Who Is Robbing You

Politics as racketeering.

Aug 13, 2024

Take it and run (for Congress). Photo: Getty.

People who are saving money for retirement often seek out professional financial advice. Why would you pay someone to give you financial advice? Because you expect them to tell you how to make the best financial decisions. Pretty straightforward.

What many professional financial advisers do instead, however, is to advise people to do things that will benefit the financial adviser. For example, instead of telling you to invest in a low-cost fund that would make the most money for you, they will instead tell you to invest in an expensive fund that pays high fees to financial advisers. This will cost you more money, leaving you with less money for retirement, but will make more money for your adviser. In other words, the professional financial advice that you paid for will be bad, not to your benefit, and geared specifically to rob you.

There is no social value to such advice. It is a form of legalized robbery, of polite fraud. It amounts to hanging up a sign that says “I WILL TELL YOU HOW TO MAKE GOOD FINANCIAL DECISIONS” and then telling you, instead, how to make bad financial decisions. It is false advertising, it is the act of surreptitiously selling the opposite of what it claims to be selling, it is an entire industry that exists to extract the maximum amount of money from unsuspecting customers while telling them that it is helping them maximize their own wealth. It is a con, a lie perpetrated upon people not savvy enough to understand they are being robbed. It is a dishonorable way to make a living, and, unfortunately, a multibillion-dollar business.

The Biden administration tried to make this illegal. In April, the Labor Department finalized a rule that would require retirement advisers to be fiduciaries, meaning that they would be legally required to act in their clients’ best interests. As fiduciaries, these advisers would no longer be able to tell their clients to make foolish financial decisions that would cost them money but benefit the firms advising them. It would make it illegal for advisers to rip their clients off. Many people probably assume that it is already illegal for their financial advisers to rip them off. It is not. If it were, a huge part of the retirement advice industry would crumble into dust. As I said, it is the part of the industry that offers no redeeming social value. It is the part of the industry that exists only to transfer money from the pockets of retirement savers into the pockets of financial firms. Unambiguous robbery. Getting rid of this part of the industry and ensuring that your adviser is giving you beneficial advice rather than robbing you is one of the most straightforward examples of “the government working for you” that I can imagine.

Of course, the Retiree Robbery Industry was quite opposed to this new rule that would prevent them from robbing you. And now they have succeeded in blocking it. The Washington Post reported this weekend that the rule is on hold thanks to lawsuits filed by the industry, suits that will likely reach the Supreme Court. One federal judge has already cited the recent Supreme Court Chevron ruling to block the rule. Powerful House Republicans have also come out against the rule. “The lobbying group ACLI — whose board of directors includes executives from Prudential, Lincoln Financial and New York Life — argued in January that the government threatened to create an ‘impermissible barrier’ between savers and advisers,” the Post reports. “An allied industry group — the Federation of Americans for Consumer Choice, or FACC — argued that the rules would be ‘potentially devastating for the insurance industry,’ particularly because they could restrict agents’ commissions.”

“For Americans who choose to invest in annuities, the rules could save them about $32.5 billion over the next 10 years,” says the Post. That $32.5 billion can either go to you or to the advisers ripping you off. That is what this is about.

To sum up: the Biden administration’s attempt to stop this predatory industry from skimming money from Americans’ retirement savings is being blocked because the predatory industry itself has paid money to politicians in Congress to help it keep robbing the public. It is also being assisted by a Supreme Court that was purchased at great expense by business interests funding decades worth of right wing legal and lobbying groups. Because this issue touches on issues that can be made to seem esoteric and hard to understand—as soon as you say the word “fiduciary,” it sounds like you are talking about something that requires some serious financial expertise—it has flown under the radar of the general public. That could be remedied somewhat if we just spoke about this issue in plain and direct terms. Republicans who have been paid off are trying to ensure that an industry that exists to rob you can continue robbing you. That is what is happening here.

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This is one of the best examples you will ever find of a common thing: An outrage that persists only because people don’t really understand it. And why don’t people understand it? Because keeping it obscured is a key to its continued existence. It goes without saying that no one would pay money for financial advice if they understood that the advice offered would not be to their benefit. “Pay me to rip you off!” is not a compelling advertisement. This is why the discussion around these matters is always laden with emotionless language designed to seem difficult for any non-expert to parse. Certainly, the advisers who make money by steering your savings into less-than-optimal investments are not going to do anything that might help you grasp that fact. This is a case where the media can actually be helpful. We can speak plainly about what all of this is. This is a scam where Wall Street takes a piece of your savings for nothing. They are robbing you. Politicians who are in their pockets are helping them.

It is perfectly possible to make money selling people good and honest financial advice. It is just not as lucrative as selling them dishonest financial advice and robbing them. The motivation of the industry trying to block this rule is that they want to continue to make more money by robbing you. The motivation of the politicians helping them is that they are getting paid off by the crooked industry. The judges ruling in the industry’s favor have been carefully vetted and selected based on their willingness to rule correctly in such cases. The intellectual and political institutions that trained and vetted and supplied these judges are also paid for by the industries that want to rob you.

All in all it is a pretty good picture of How Things Work. The mechanisms of oppression are easy to see here. The way that money is made dishonestly and then invested back into a system that protects the continued operation of the scam is shown here in stark relief. Notably, nothing at all would be different about this story if we were discussing instead racketeers running numbers who paid off the police and politicians to protect themselves, except for the legality in question. Morally and operationally, it is the same.

It is common for people to think of contentious political issues as things that people differ on due to deep in unbridgeable ideological divides. Abortion, gun control, LGBTQ rights, racism—these are things that people have strong feelings on, but we assume that those feelings are products of our upbringings and cultural experiences and you can see how, if your life had been different, and you had been brought up differently, you might have landed on the other side. Much of the tendency of people to call for “civility” in politics is due to the implicit belief that most political beliefs are just natural outgrowths of our own life experiences and therefore we should be understanding of those whose experiences happened to be different from our own.

This is not that. This is, instead, an example of the entire universe of political issues that hides itself underneath that obscuring blanket of relativism. This is just power. This is material politics. The division of spoils. Powerful groups use their power to get money and they use their money to protect their grift. In this case, the grift is ripping off people’s retirement savings. When clearly understood, there are not two equally legitimate sides to this issue. There is only, on one side, the robbers, and on the other side, the people who are getting robbed. The government will ultimately weigh in on one side or the other.

The next time you get tempted to bow to the politesse of “We may disagree but we must all respect one another,” please remember this. This is the bulk of what happens in politics. Interest groups looking out for their own interests. All interests are not equally righteous. For example, one interest may be “Skim money away from regular people’s savings by posing as advisers who will help them,” and one opposing interest may be “Protect people from being ripped off.” There is a right and wrong answer here. It is not so much that the politicians on the other side of this issue think differently about the path to economic prosperity for all; it is that they are corrupt. They are okay allowing you to be ripped off because the continuation of that grift can be in their own personal interests. Again, we all benefit from speaking plainly about this. Acquiescing to speak about things in bullshit word salad is a primary reason why this corruption can continue for so long.

Should this make you cynical? No, it should make you demand campaign finance reform. In order to stop this mechanism we must cut off the flow of money from the Ripoff Industries to the politicians. Until then, this goes on and on and on. Campaign finance reform. It’s a term that makes everyone go to sleep. But it is the answer here. I’ll write more about it here one day, and you must promise not to fall asleep.

How Things Work

Speaking Plainly About Who Is Robbing You

Politics as racketeering.

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