The Derivative Project

Trending: Are Bloomberg, Huff Post, Rolling Stone Promoting Phony Consumer Retirement Advocates?

Trending: Are Bloomberg, Huff Post, Rolling Stone Promoting Phony Consumer Retirement Advocates?

Trending: Are Bloomberg, Huff Post, Rolling Stone Promoting Phony Consumer Retirement Advocates?

Summary of Issue – January 13 White House Memo on Conflicts of Interest -StockBroker or “Fiduciary” Advisor Registered with the SEC

On January 13th, a five page White House memo, “Draft Conflict of Interest Rule for Retirement Savings”, by Jason Furman and Betsey Stevenson, argued that the costs of conflicted advice are costing Americans over $8-17 Billion for retirement investors.  However, the White House proposal allows Wall Street to continue to use these conflicted business models, if the sales force distributing product and questionable advice will simply say they will act in the best interest of the consumer.

There is a very strong push by Wall Street to save their sales distribution system for financial products that evolved with the advent of defined contribution plans and IRA’s in the early 1980′s.  This was and is a flawed, costly distribution system for retirement investors.  The largest profit centers for financial services firms today, that are expanding with the $11 trillion market of retirement assets in IRA’s and 401k’s, is the “advice” business.  Costs and uncertainties will be greater for Wall Street with the proposed DOL changes, but additional investor protections will be zilch.

Fact:  The “advice” business is simply a euphemism for the sales and marketing channel for investment product distribution.  Financial services firms make money either by originating product (money manager – like a mutual fund) or selling product/advice.  Mutual funds and managed accounts are distributed by a sales force, called “advisors”.   For these distribution efforts, financial intermediaries account for about 50-100 basis points additional cost on the product sale. In addition, the sales force is conflicted; they will naturally put clients in whatever product gives them the greatest commission or charge an annual advice fee for their product sales, yet by small print disclosure, have no ongoing duty required for the product sale, despite the annual fee!

However, what the White House and the SEC fail to reveal to the public is the so-called fiduciaries, those that charge a fee for investment advice, those registered under the Investment Advisers Act of 1940 and FINRA, regularly breach their fiduciary duty under existing securities laws.  These security beaches are not investigated by the SEC, so making brokers like the current fiduciaries is a flawed proposal. That is the story.

The fact that media will not cover the real costs to American’s retirement nest eggs and product/distribution cycle – is the real story.

The fact that so-called consumer advocacy groups are promoting flawed solutions that will provide greater harm and losses to American’s nest egg is the real story.  The fact that consumer advocacy groups are proposing solutions that favor Wall Street is the story.

The fact that so-called consumer advocacy groups will not work with retirement investor advocacy groups that promote full transparency or seek to understand bona-fide private sector solutions, such as Not On My Nickel’s tools and platforms, that provide disruptive, cost-effective solutions to put billions more money into retirement investors hands at retirement is the real story.

There is A Conflict of Issue Costing American Retirement Nest Egg’s Billions- Yet so-called “Advocates” are presenting a Solution that Causes Greater Harm to Retirement Investors

Main stream media is pushing a Wall Street agenda that harms the retirement investor, despite other available alternatives – separate the distribution of product and its associated costs from the notion of “advice”.  The real story is the proliferation of advice models and fees that do not require any performance filed at the SEC.  The GAO warned the Department of Labor of their concerns with the costs to retirement investors last June.

Bloomberg fails to present true costs and issues to retirement investor

Bloomberg, “Billions Lost in 401K Savings, Abusive Brokers…”  stated:  “The Labor Department’s draft rule won’t ban sales commissions, Furman’s memo says. The proposal will be a “middle ground” that requires brokers to guard against conflicts and avoid “certain self-dealing transactions,” the memo said.”

Bloomberg presented no comprehensive assessment of the situation for retirement investors.  Bloomberg has on staff “financial advisors” who regularly write articles that are not marked “sponsored” content, despite indirectly promoting their financial advice services.  Bloomberg has a conflict that they have not disclosed.

Bloomberg promotes consumer advocates that work hand in hand with Wall Street in this article, Wall Street Gears Up as White House Pushes Retirement Rules, while ignoring the real advocates, like The Derivative Project, that would cut into their very own profit model that feeds off of the hundreds of thousands of advisors skimming from American’s retirement nest egg.

“A smaller lobbying effort is mobilizing in support of the Labor proposal. The collection of consumer groups, investor advocates and organized labor recently created a website,, to educate the public on the issue and encourage them to write to Congress and the White House backing the plan.”

Rolling Stone endorses Bloomberg’s writing on the White House Memo, with no facts to back it up:

Rolling Stone’s Matt Taibbi, also endorsed Bloomberg’s article and implies the situation of abuse is just a “particular corner of the financial services industry teeming with loophole-permitted conflicts of interest,” as opposed to revealing ready available information that it is a widespread issue in 401′s and IRA’s.

“Bloomberg’s Dave Michaels and Margaret Collins did an excellent report on the topic. They wrote that back on January 13th, Jason Furman, the Chairman of President Obama’s Council of Economic Advisors, issued a scathing memo about shady broker practices and how they impact ordinary savers, especially working people who use brokers to manage their retirement funds.

Specifically, the White House investigation concluded that this particular corner of the financial services is teeming with loophole-permitted conflicts of interest. Brokers can legally and in most cases undetectably grind their clients for fees and/or put them into plans that offer fat commissions for the brokers themselves, while offering lower returns for the client.”

Matt Taibbi fails to acknowledge and report that Bloomberg has a vested interest in perpetuating the advisor model, without presenting the pros and cons of the value of a true disruptive model, offered by The Derivative Project’s private sector solution, Not On My Nickel.

Huff Post Money publishes a conflicted Paladin Registry account, simply pushing more costly services for retirement investors:

Huff Post posted Paladin Registry’s OP-Ed “What Wall Street Does Not Want You to Know About Financial Fiduciaries”, where Paladin Registry pushes their “true fiduciaries” and links to their registry that advisors pay to be part of:

“What About You?

You should know this issue exists. You should only select acknowledged financial fiduciaries who have the specialized expertise to help you plan your future and invest your assets.

This is the safer choice for all investors. But, you have to know this choice exists.”

The Role of the Consumer Advocates:  Better Markets, Americans for Financial Reform, Consumer Federation of America, AARP

Tweet From Save Our Retirement

As the Tweet above shows, Better Markets tweeted Paladin Registry’s Op Ed in Huff Post Money, linked to above.  Has Better Markets investigated what Paladin Registry, “fiduciaries” charge retirement investors?  Better Markets is well aware that Paladin Registry advisors, dual registrants, charge greater fees than brokers and are a more confusing, conflicted and costly structure for retirement investors.

The Derivative Project has had emailed correspondence with all three “advocacy” firms, Better Markets, Americans for Financial Reform and the Consumer Federation of America, about the financial services’ firms structures that allow both commissions and fees, Wrap Accounts.  Wrap accounts are far more costly and confusing to retirement investors.  They also ensure that an IRA investor has absolutely no recourse in the courts when their fiduciary duty has been breached.  The IRA has no private right of action; so the concept that a fiduciary advisor, regulated under the Investment Advisers Act of 1940 would offer a retirement investor any more protection is an outright misrepresentation.

Wall Street’s sideshow is brilliant.  Use consumer advocacy groups to confuse Congress and the public to continue the real gravy train 

The Derivative Project has lobbied Congress and the SEC to resolve the actual issue that permits a worse solution than simple brokers— dual registrants, or advisors that act both as broker and SEC registered investment advisor, that charges both fees and commissions in Wrap Accounts.

Here is a link to a Petition for Rule Change to the SEC.  Wrap Accounts and advisors registered as both at the SEC and FINRA is the cause of the greatest costs and conflicts to retirement investors.

April 3, 2012 4-658 Request for rulemaking to reestablish the original congressional intent for a clear dichotomy between “Salesperson” and “Investment Adviser” under the Investment Advisers Act of 1940 

The more costly and confusing solution to retirement investors, wrap accounts, is what most advisors from Charles Schwab Private Client to Paladin Registry advisors are- both broker and “fiduciary” RIA registered with the SEC.  This is by far the most costly, confusing and conflicted solution for every retirement investor.  This situation has yet to be covered by Better Markets, AARP, Consumer Federation of America or Americans for Financial Reform, they work hand-in-hand with Wall Street.

Is it not concerning that none of these supposed retirement advocates will not address the source of enormous costs to retirement investors – the real culprit- wrap accounts?

Paladin Registry Promotes a Misrepresentative Role of their “fiduciary” advisor registry – Endorsed by Better Markets

Paladin Registry promotes a deceptive role on Twitter, based on investigation of their Advisor’s SEC ADV filings: Paladin Registry


Paladin RegistryHere is a photo, to the left, of what one randomly selected Paladin Registry fiduciary advisor discloses at his Paladin Registry website, where ongoing costs are far greater than a simple transaction fee by a stockbroker.  Further, Paladin publicly pushes a false narrative to consumers, as represented by this ad from this November 14th article:

Paladin Registry Misleading Ad to Consumers


Paladin Registry concluded their article with this statement, linked to above:

“Unfortunately, the solution will not be a Fiduciary Standard but the solution should instead focus on ensuring investors understand the difference between an advisor truly giving advice and a representative selling a product.”  The irony, Paladin Registry advisors are both broker and SEC registered investment advisors and promote and sell Wrap Accounts, the most costly and confusing product sold to retirement investors today.  This Paladin Registry advisor sells insurance products, annuities, real estate, mutual funds, etc. and “advice.”

We checked at the SEC Advisor Disclosure data base as to what fees this Paladin Registry advisor actually charged clients, which is not indicated on his website, show above to the left.  This advisor may charge up to 3% of assets under management fee, annually, as disclosed in his SEC filings.

Here is how Paladin Registry markets their Advisors to retirement investors:

Paladin Registry Market Positionning


In addition to the potential 3% annual assets under management fee, with this Paladin Registry Advisor’s wrap account, there are potential sales commissions, brokerage trading fees and an assortment of other undisclosed goodies that benefit the advisor, as disclosed to the SEC, but not to the potential retirement investor at Paladin Registry:

SEC Filing for Paladin Registry Advisor

Well, according to Paladin Registry, they have “researched the credentials, ethics and business practices” of their advisors.  Here is what The Derivative Project found on this randomly selected “fiduciary” advisor endorsed by Paladin and from the Advisor’s website, a Five Star Paladin Advisor:

Screen Shot 2015-01-30 at 12.27.04 PM


What do the clients think of this Five Star Paladin Registry Quality Advisor and Dave Ramsey Financial ELP highlighted at the registry promoted by “consumer advocate” Better Markets?  There is a pending civil case in a District Court and FINRA arbitration,  revealed at this Paladin Registry Advisor’s SEC filings:

Screen Shot 2015-01-30 at 12.23.45 PM


The Derivative Project’s experience with these “consumer advocacy’ groups for retirement investors has demonstrated time and time again these so-called advocates work for Wall Street.  The recent flurry of articles about protecting retirement investors is but a side-show to detract from the real issue of getting to the bottom of the skimming from American’s retirement nest eggs, which by our estimates amounts to around $300,000 in lost savings for the average American’s retirement nest egg.

Without media providing Americans with the real information on what the underlying issues are and the true role of “consumer advocates”,  there cannot be an informed electorate to influence their Congressional representatives on what is in society’s best interest.  Phony advocates, such as, educating the public and promoted by media, presents a serious ethical issue for the White House.

With “consumer advocates” working along side Wall Street to decide how much money is acceptable to continue to pay Wall Street for archaic distribution systems and worthless “advice”, there will be no reform.  The middle class will continue to shrink as the bulk of their hard-earned savings goes directly to Wall Street.

There is indeed a huge story here about the true causes of America’s “retirement crisis” and the root causes of the incredibly shrinking middle class.