Wall Street has been plagued by scandals for the past decade, and each of them contains one common thread…
The banks win, and you lose.
The hubris displayed these past few years is legendary. Bernie Madoff’s Ponzi scheme… suspect mortgage bonds sold with AAA ratings… brokers trading against their major clients in the investment firms’ house accounts…
That last one really enrages me.
Brokers have been able to successfully transfer money – from their clients, the government, and many top companies – directly into their own pockets.
But their latest scheme could be the worst.
Now they’re targeting retirement accounts!
Is Your Retirement Safe?
Essentially, brokers are approaching retiring workers at major firms and convincing these unsuspecting people to roll their corporate 401(K) plans into speculative deals – with high fees and little chance of success.
According to an investigation by Bloomberg, unscrupulous brokers have targeted as much as $300 billion in retirement funds.
One of the firms leading the charge is Royal Alliance Associates, which is owned by AIG insurance. It targeted AT&T (T) employees who were on their way out, and the results were awful.
Maria Lew, a former AT&T employee, was convinced to roll over her 401(K) account to products suggested by Royal. And her account balance plummeted from nearly $400,000 to just over $100,000.
She told Bloomberg, “It’s scary; there are days when I go to sleep and I can’t stop thinking about it.”
Unfortunately, AT&T employees aren’t alone. Retired workers from the United Parcel Service (UPS), Hewlett-Packard (HPQ), and other major firms have also been targeted.
One schoolteacher was sold on a variable annuity that devoured 2.5% of her funds every year.
Another person went with a money market fund that charged a 1.5% annual fee – while paying less than 1%. Worse yet, the victim wanted to be in cash because she was fighting cancer. She didn’t even realize she was being fleeced as she struggled with chemo.
One valuable lesson to be learned from this is that brokers aren’t required to act in a customer’s best interest. What’s more, when regulators have tried to push such rules on Wall Street, the lobbying response has been furious.
In fact, Wall Street lobbying is the reason the Labor Department recently delayed new rules that would require brokers and other professionals to put their clients’ interests before their own. The proposed rules would’ve required brokers to act as a fiduciary, which would open them up to lawsuits for misbehavior.
In the end, no matter how the regulatory fight is resolved, it’s unlikely that it will help small savers deal with Wall Street.
The bottom line is that the system is rigged to fleece the unsuspecting.
How to Protect Yourself Going Forward
However, there are ways to avoid being victimized by the Wall Street schemers.
First, as Warren Buffett says, “Never invest in a business you can’t understand.” Same goes for shady financial products.
Second, if something sounds too good to be true, it probably is! End of story.
The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.
This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom