Retirees won’t be getting any protection from our billionaire president. He is moving quickly to get rid of an Obama administration plan that would have required financial advisers to put clients’ interests above their own.
The Obama fiduciary rule, which was to take effect in April, would have required financial advisers dealing with retirement assets to avoid conflicts of interest when possible, be transparent about compensation and fees, and get the best deals possible for their clients.
In addition, President Trump is pushing to gut the Dodd-Frank Wall Street Reform Act of 2010, which seeks to curb the excessive lending practices that led to the housing market collapse and the ongoing pain of home foreclosures.
My goodness – a wealthy president surrounds himself with Wall Street elites and goes back on campaign pledges to protect the interests of the little guy. Who could have seen that coming?
At times like this, I am grateful that I was raised to be a bit wary of the human race. “You can’t expect everybody to be your friend” was the way my parents phrased things. The Irish-Catholic priests at my church said: “Eyes heavenward and feet on the ground.” Before absorbing that lesson I got conned out of $10 by a hustler at Coney Island on a grammar-school outing.
I didn’t give much thought to my financial future until I was in my mid-30s. I was a late arrival to the middle-class lifestyle because of the cultural upheaval of the 1960s. When I started work at the Sacramento Bee in late 1977, I had $200 in my bank account, a shaky Datsun 510 and a renter’s mentality. Talk in the Bee cafeteria was heavy on housing, mortgages and toddlers. I was a stranger in a strange land.
A mere three years later, I had stockpiled enough money to put a down payment on a three-bedroom, 1,100-square-foot house. I was able to qualify for an FHA mortgage — with what now seems like an astounding interest rate of 15 percent – by agreeing to paperwork containing the phrase “negative amortization.”
Before encountering that phrase, I was a neophyte in the money world. By the time I fully understood the concept, I was on my way to becoming a self-reliant financial investor. In between I learned that doing my own research was the safest way to fully understand the risks of signing such a mortgage agreement.
Here was the deal: Because I didn’t make enough to pay off the hefty monthly interest and small amount of principal on my mortgage, the unpaid balance would be added to the total amount of my loan. Instead of the loan amount declining over time, it would grow, perhaps outstripping the value of the house. If home prices declined, I could be really stuck.
On the other hand, I would be making relatively small payments to control an asset worth big bucks. If home prices climbed, this leverage would pay off nicely, in addition to having provided me with considerable tax deductions.
Happily for me, home prices in Sacramento shot up through the 1980s and interest rates declined, enabling me to refinance at a “modest” 12 percent. When I sold the house after seven years, I made an 80 percent profit on the deal.
In the new era we are entering, retirees and home buyers will lose protections they could surely use to try to achieve financially stability. “Buyer beware” should become their mantra. Quick lessons in financial planning will help. Check out this starter kit from CNN Money.