An Open Letter to Senator Elizabeth Warren

Dear Senator Warren,

We desperately need your help in righting a great wrong. Many of our nation’s public school teachers are being fleeced in their retirement accounts by excessively greedy insurance companies and brokerage firms. This is not hyperbole. Here are the facts:

According to The Wall Street Journal, the average 401(k) participant paid 0.67% in fees as of 2015. According to The New York Times, the average public school teacher coughs up an astounding 1.81% to 2.63%! Many teachers pay much more.

If we do the math, the costs to society due to this unjust wealth transfer are astounding. There is about $123 billion held in K-12 public school 403(b) plans. In addition there is $137 billion held in 403(b) accounts of employees of churches and other non-profit organizations.

The reason I am focusing on these two groups is they often are not regulated under the much stricter ERISA standards and contain the most egregious cases of price gouging.

Numbers do not lie. If you take the sum of these two sectors, the total amount invested in these overpriced plans comes to about $260 billion.

Let’s make a conservative estimate and say these individuals are being overcharged by 2%, compared to their counterparts in the more regulated 401(k) universe.

This means some of our most service minded members of our society are paying a minimum of $5.2 billion in unnecessary investment fees ($260 Billion x 2%)!

I am not including the additional $610 billion held in the health care and large public university space. Often these plans are covered by ERISA, so the fees are not as egregious.

I recently watched and enjoyed your public castigation of former Wells Fargo CEO, John Stumpf. You rightly called him out on his bank opening close to 2 million unauthorized accounts.

You stated, “This is about accountability. You should resign. You should give back the money that you took while this scam was going on. And you should be criminally investigated by both the Department of Justice and the Securities and Exchange Commission.”

You were 100% correct and he eventually followed your advice. Here is what concerns me.

Wells Fargo created a culture guided by perverse conflicts of interests which did not make their clients’ interests a priority.

It turns out 85,000 accounts incurred about $2 million in unnecessary fees for Wells Fargo’s customers, which have since been reimbursed.

This number is a mere drop in the bucket compared to the $5 billion annually which is currently being siphoned out of the retirement accounts of charitable workers, public school employees and the clergy.

Where is the outrage over this injustice? If Wells Fargo deserved public congressional hearings, what should be done to the firms who loot public service employees’ retirement accounts to the tune of billions each year?

This has been going on for decades, so the real cost runs into the hundreds of billions of dollars.

There are a small amount of dedicated advisors out there trying to right this wrong. We are outnumbered and outgunned but we refuse to surrender.

Tara Siegel Bernard and Ron Lieber of The New York Times have given us the best shot at reform in decades by publishing a scathing five-part series on this topic.

I am very proud to have been a contributor to their extensively fact- checked research.

The only way this injustice can be fixed is by an act of Congress.

The same fiduciary rule, that you have been a strong proponent of, does not cover public school 403(b) plans.

These plans are not under the jurisdiction of the Department of Labor, who sponsored this legislation.

I find it amazing that a country that has figured out a way to send an unmanned space ship to Mars, land it by remote control using a parachute, and have it send pictures back to Earth cannot come up with a rule to fairly regulate teachers’ retirement plans?

We are better than this.

You once said, “There are thousands of advisors who put their clients first.”

It is time for you to help us as we wage this battle against forces that believe high commissioned products and excessive conflicts of interest are justified because, as they so often say, “this is better than nothing.”

Being a former public school teacher for over 20 years, I have seen the personal devastation to teachers that comes from salespeople posing as real financial advisors.

I also know you, too, taught in public schools. You worked with children with disabilities, so you understand how hard this job can be.

Why are people who have taken up such a noble and vital profession forced to pay 300-400% more in retirement plan costs than those with 401(k) plans in the private sector?

Why are high-cost variable annuities allowed in 403(b) s when they are forbidden in 401(k)s?

I am not sure if we can achieve a decisive victory in this battle without your help.

The clock is ticking and we cannot sit back and let another $5 billion disappear from the pockets of honest public servants next year.

In the words of President John F. Kennedy: “If not us who? If not now, when?”

You have always prided yourself as being the champion for the little guy against the vested interests that conspire to keep them down.

This can be your finest hour.

Sincerely yours,

Anthony Isola





This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Please see disclosures here.