Linda’s retirement cake

This is Harold Pollack. I teach social service administration at the University of Chicago. The opinions expressed here and in the film are mine alone. If you haven’t see the above video, “Linda’s cake,” please watch it now.  It’s about a serious issue, though we try to present things in an accessible fashion.

If you are wondering what more to do on this issue, you can click here. If you just want to jump straight to contacting your Senator or Representative, click here.

And oh yeah. Here is a terrific cake recipe.

I financed the short video you just watched, and I’m responsible for the script and everything in it. I’m grateful to Frey Hoffman, who co-wrote the script with me, and skillfully directed, filmed, and edited the video. Frey has helped me before in making other videos you may have seen. His expertise at Freydesign productions makes these possible.


The film is roughly based on Chapter 6 of  my new book, with Helaine Olen, The Index Card: Why Personal Finance Doesn’t Have to be Complicated. Helaine and I would obviously be gratified if you bought it. You don’t need to buy our book to grasp the basic personal and policy issues presented in that this video. The fine print that scrolled across the screen is from real Fidelity paperwork, and can be found here. This 2012 New York Times article by Tara Siegel Bernard provides valuable additional information.


I should make something clear, too. I’m convinced that many people can benefit from sound advice from a financial professional: What are the different retirement savings options available to me? How can I sensibly save for my child’s college? Are we ready to buy that dream home when the mortgage payments may stress our monthly cash flow? Personal finance is scary and complicated. It never hurts to have another pair of eyes to examine what we are doing.

Yet the very anxieties and consumer ignorance that lead us to seek financial advice make us vulnerable when advisors face financial incentives to steer us towards overpriced or unwise investment products.

It’s not that financial professionals are defrauding people or are criminals on the Bernard Madoff model. They are simply steering people into investments that are notably more costly than they need to be.

Audit studies in which actors pose as young couples seeking financial advice indicate that biased advice is ubiquitous within the industry. The study published here is quite depressing.

This behavior is also quite costly. That 20% number cited in the video comes from the White House Council of Economic Advisors. It reflects the accumulated differences in return between actively-managed mutual funds and low-cost index funds.


There’s Frey at work, with actors Linda Bright Clay and TW Miller.

I pursued this video project to highlight these issues.

I wanted to address another basic challenge, too. Many crucial personal and policy issues are complicated and boring. Let’s face it. Fiduciary vs. suitability…  The words induce narcolepsy right away.

Precisely because the policy issues are complicated and boring, only two groups pay close attention. A small group of consumer advocates and economists are on the case, inside and outside of government. This is the group that has pushed hard for more stringent Department of Labor regulations governing retirement savings.

The other watchful constituency is the financial industry itself, particularly the small and large firms that have the most to lose from more stringent consumer regulations.

These firms have been intensively lobbying congressional Democrats and Republicans to water down proposed regulations. There’s even a “Harry-and-Louise“-style astroturf ad campaign that seeks to reverse or weaken the Department of Labor’s fiduciary rule. These commercials are put out by an organization called

You’ll be surprised to learn that this organization “is a partnership of America’s financial advisors, life insurance agents, and life insurance companies that is dedicated to educating policymakers about the role our products play in the financial lives of 75 million American families.” You’ll be equally surprised to learn that the educational efforts of their advertisements don’t use the word “fiduciary” or actually explain what this fight is about.

The industry has been stymied–so far–in its lobbying efforts. There are many reasons why–not least the involvement of Senator Elizabeth Warren and other liberal Democrats who have highlighted the issue. The rather surprising political story reflects the populist tenor of our times. Millions of Americans remain angry about financial industry abuses exemplified by the subprime mortgage crisis.

This story also reflects bipartisan consensus among Democratic and Republican retirement experts that conflicts-of-interest among financial professionals advisors lead ordinary people to lose serious amounts of money in overpriced or dangerous investment products.

The new government rules are particularly concerned about retirement savings. These incentive issues are actually important across the board, which is why we suggest that you hold a cordial but direct exchange with whatever financial professional you deal with to ensure that they are obligated to a fiduciary standard in all their dealings with you. You want to be the only person paying them on matters that pertain to your money, even if this means that you have to pay them a bit more explicitly and up-front for their time and expertise.

You may have to pay something like $250 for an hour of someone’s time. Paying is a little painful when we’re used to advice being nominally free. It’s worth it. Remember the old bromide: If it’s free, you are the product.

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