Thursday, April 07, 2016

Are We Entitled To Be Sure The Government Will Protect Us From Licensed Financial Predators-- Ask Elizabeth Warren


Because of the systemic corruption of careerist pols like Chuck Schumer, Debbie Wasserman Schultz, Steny Hoyer, Steve Israel, Chris Van Hollen, etc, many Democrats have become so fed up with America's politicians that some are coming around to the Republican position that government is hopeless and useless. But then you see the exceptions-- real public servants like Alan Grayson, Donna Edwards, Ted Lieu and-- as you can see in the video above-- Elizabeth Warren. Watch her just hammer a former Bush-era Federal Reserve (anti-)regulator, now is a crooked Wall Street lawyer, someone the Senate Republicans had called as a witness to complain about the CFPB. As you can see, she showed him no mercy, the reason why Wall Street has insisted that they will cut the Democrats off the gravy train if Schumer doesn't "balance her out" by getting Wall Street lackeys Patrick Murphy (FL), Ted Strickland (OH), Chis Van Hollen (MD), Katie McGinty (PA), Baron Hill (IN) and Patty Judge (IA) into the Senate. As a friend of mine put it so eloquently after watching Warren's questioning, "There is no one else in public life right now who can so effectively take down the smooth, arrogant operators working for corporate America. I’m glad she is on our side."

Yesterday she released a paper her office had prepared about conflicts of interests inside the financial services industry.
Many Americans rely on retirement investment advisers for guidance on how to save towards retirement, and most advisers have their customers’ best interests at heart. But because of loopholes in the law, it is perfectly legal for some advisers to steer customers into complex financial products that will earn the highest rewards, perks and prizes for the advisers-- even if they are bad options for their customers. Research suggests that this loophole costs Americans an estimated $17 billion every year. That’s $17 billion taken out of the pockets of retirees by unscrupulous advisers who are more interested in collecting fees and prizes for themselves than helping families build real security. In order to protect consumers from these types of abuses, the Department of Labor has proposed a draft rule to put an end to these conflicts of interest by closing these loopholes.

Kickbacks pose an especially danger-ous problem. When companies can offer kickbacks to agents for recommending high-cost financial products, and when those kickbacks are hidden from the customers, the likelihood that consumers will be duped into buying bad products increases sharply. To explore the prevalence of this type of conflict of interest, in April 2015 Sen. Elizabeth Warren (D-MA) opened an investigation, asking fifteen leading annuity providers for information on whether they offered non-cash incentives such as lavish cruises, luxury car leases, and other perks to annuity sales agents to promote their products and whether their customers were aware of the agents’ compensation arrangements.

While none of the companies questioned by Sen. Warren provided complete answers to the questions in her April 2015 letter, the responses nonetheless reveal a widespread practice of offering agents kickbacks in exchange for promoting certain annuities and other insurance industry products and that such kickbacks are effectively concealed from customers. Kickbacks may benefit the agent and the company, but they do so at the expense of their customers. And loopholes in the law make these kickbacks perfectly legal.

Overall, thirteen of the fifteen companies-- 87%-- admitted to offering kickbacks directly to agents, indirectly through third party gift payments, or both.

Other key findings of the investigation include:
• The majority of companies admitted to providing rewards and inducements, such as expensive vacations and other prizes, to annuity agents in exchange for sales. While financial industry rules to restrict non-cash compensation have been in place for over a decade, significant loopholes in those rules still allow companies to provide perfectly legal, non- cash compensation to sales agents. Nine of the fifteen companies that responded to Sen. Warren’s request letter indicated that they provide non-cash compensation to annuity agents. One company described these kickbacks as “common in the industry.” The most frequently offered incentives involve all-expense-paid trips to expensive vacation destinations such as Aruba, the Bahamas, and other resorts. The companies also admitted to providing items such as golf outings, dinners at restaurants, tickets to sporting events, sports memorabilia, theatre tickets, gift cards, and other rewards-- to agents who sold their products.

• Companies also create conflicts of interest by offering perks and inducements to annuity sales agents through third party marketing organizations. Even companies that do not provide non-cash compensation awards directly to agents frequently provide incentives to the third-party marketing organizations that then pass these awards on to the agents. Ten of the fifteen companies indicated that they provide such indirect payments. These payments are then used to provide kickbacks to agents, including expensive vacations, golf outings, iPads, jewelry, and other items. One expert described these third party marketing organizations as “the primary culprits of this type of agency perks.”

• Current disclosure rules are inadequate to ensure that customers are informed about the incentives agents receive for selling them specific financial products. Companies are required to provide certain information about non-cash compensation in their prospectuses, but the information provided to Sen. Warren and other publicly available information indicates that no company that offers payments or kickbacks to agents or third parties provides annuity purchasers with a clear, accessible, specific, and easy to understand explanation of their agent reward system, their third-party payments to marketing organizations, or the way these payments may be structured to encourage agents to sell the company’s annuities and other products without regard to whether they benefit the customer.

Existing rules and regulations to deter conflicts of interest are completely inadequate. Companies that responded to Sen. Warren’s request for information pointed out that they were regulated under federal, state, and industry rules and guidelines and emphasized that they followed these rules quite carefully. However, this investigation reveals that those rules still left these companies with ample room to build a business model in which annuity providers could offer a wide range of perks and kickbacks to annuity agents irrespective of the quality of the financial products sold. As a result, many consumers continue to receive investment advice from sales agents who have incentives to put their own interests ahead of their customers, which may help explain how consumers lose an estimated $17 billion every year relying on the advice of conflicted advisers.
Federal and state regulations are designed to curb kickbacks illegal for certain advisers and certain products, but loopholes in the law permits many companies to continue to offer these rewards and many agents to continue to take them. Thirteen of the companies investigated (87%) admitted providing kickbacks to sales agents-- either directly or indirectly-- for selling their financial products. Giveaways such
as expensive vacations, sports tickets, golf outings, and electronics present a conflict of interest for many agents and create incentives to sell products that are not in the consumers’ best interest. Conflicts of interest like these are not restricted to the annuity industry; throughout the financial industry they cost families an estimated $17 billion every year.

The Department of Labor has proposed a new Conflict of Interest rule that would eliminate some of the worst sales practices in the retirement investment advice industry. This rule, if finalized, would provide important and necessary protections for people who entrust their life savings to a retirement adviser.

So... more important than ever to elect progressives to Congress, not just garden variety Democrats, at least half of which are likely to be as bad-- or almost as bad-- as Republicans. How do you know which is which since these days even the worst, most corrupt and most conservative Democrats called themselves "progressives," Florida "ex"-Republican Patrick Murphy being the worst this cycle. So what do you do. Support carefully vetted Democrats and eye with suspicion anyone being pushed by Chuck Schumer, Debbie Wasserman Schultz, Harry Reid, Jon Tester, Steve Israel or by the DCCC, DSCC or DNC. They tell Obama and Biden who to endorse so chances are if someone is endorsed by Obama or Biden, it's at best a transactional Democrat and at worst... well, someone like Patrick Murphy. Where do you find the good candidates who will be part of the Bernie Sanders/Elizabeth Warren wing of the party? Two places are on either of these thermometers:
Goal Thermometer
Goal Thermometer

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