Trump Reverses Foolish Regulation

Sendhil Mullainathan is a brave economist. I say that because the Harvard professor and recipient of a MacArthur “genius” grant admitted in a recent New York Times piece that until recently he had no recollection how he had invested his retirement funds, and that when he finally got around to checking he discovered to his chagrin that a substantial proportion was in cash—a big no-no for anyone saving money for the long run. He’s not alone: I know numerous economists who have made similarly boneheaded investment errors. One friend quit his job precisely one week before his employer’s matching contributions vested. Another worked at his job for five years without realizing there was a generous employer match—and had never bothered to put a dime into his retirement account. Still another put his retirement investments into low-interest government bonds his first decade on the job. The “economists as investment naïfs” club includes me in its rolls as well. I didn’t enroll in a retirement account the first year at my first job: It wasn’t until I chatted with a financial adviser that I was forced to confront my own stupidity. He also gave me some sage advice, gently suggesting I diversify my retirement portfolio in foreign stock funds, a strategy that has served me well. Such nudges may soon become rarer, as the Department of Labor has proposed new regulations that would overhaul the relationship between the investor and financial advisers. The regulations would make it all but impossible for investment advisers to put clients into funds from which they receive a commission. It would thereby drastically change how investors could compensate financial advisers and would likely increase the cost of most financial advice for middle-class investors, which ought to result in fewer middle-class savers receiving advice.