Pension Documentary Exposes Mismanagement Of Investments Causes Retirement Plan Failures

A new documentary video by RealVision entitled Reversal of Fortune: Inside Pensions and the Erosion of Retirement exposes how mismanagement of pension investments is the least understood and generally ignored cause of pension failures.

I have spent virtually a lifetime studying pensions and with every new forensic investigation I undertake, I learn more. Pensions are extraordinarily complex and constantly changing. Not surprising, most people are intimidated when the subject arises.

You don’t want to spend your lifetime learning about pensions and I don’t want you to.

The goal of my new book, Who Stole My Pension? is to teach all you need to know to protect your retirement security.

Fortunately, the fundamentals of pensions you need to grasp are easy to understand.

There are three components to the health of a pension:

1.   Money In: How much money goes into the pension “pot” (contributions);

2.   Money Invested: How the money in the pot is managed or invested over, say, a worker’s 30-years of employment; and

3.   Money Out: How much money is paid out of the pot (benefits).

If any one of the above three drivers of pension health is amiss, then the pension may falter or fail.

The primary focus of Who Stole My Pension? is the least understood, least discussed cause of, and fix to, the pension crisis: mismanagement of the investments.

In every forensic investigation of a dead or dying pension I’ve undertaken, I have concluded:

Had the money in the pot been prudently managed, the pension would not have failed.

That is, enough money had been put into the pot to pay out all the benefits promised—had the money been managed properly.

Likewise, in every case I’ve witnessed where a so-called pension “fix” or “reform” has been undertaken, mismanagement of the investments was neglected and, not surprising, the “fix” flopped. That is, within a few years the pension was no better off than pre-fix. (So-called “reform” of the Rhode Island state pension in 2011 is a prime example of savings generated from slashing workers benefits, subsequently squandered through speculative hedge fund investing.)

Management of pension investments globally today can most aptly be described as “gross malpractice generally practiced.”

If you are depending upon a pension for your retirement security, you need to fully understand what I mean by “gross malpractice, generally practiced.”

I am referring to the fact that the people responsible for overseeing your pension—who, without your consent, have been entrusted with your retirement savings—are utterly lacking relevant financial experience. They either don’t know or don’t care about what’s best for your pension.

Worse still, they have hired well-known Wall Street firms—household names—who are grossly mismanaging your money. You should presume that these firms are solely interested in profiting from your pension. To paraphrase a recent tweet by my co-author, Robert Kiyosaki of Rich Dad, Poor Dad fame: “Asking a financial adviser “What should I invest in? is like asking a cannibal “What’s for dinner?”

Looting pensions is general practice.

Wall Street looting has already, or will cause, your pension to falter, i.e., underperform or fail—unless you do something about it.

Finally, I am not alone in concluding that gross mismanagement is a widespread problem globally. 

For example, in Australian, the $2 trillion pension industry is under pressure to improve its performance after a series of government reviews found persistently underperforming funds, excessive fees and zombie accounts.

The Australian Prudential Regulation Authority recently warned the nation’s worst performing pensions to improve or shut down. Some 15 plans had issues with net cash flow or growth that jeopardized their future survival, 28 funds were found to be charging excessive fees, and 9 had net returns significantly below a reference portfolio of passive, low-cost and liquid investments.

A new documentary video by RealVision entitled Reversal of Fortune: Inside Pensions and the Erosion of Retirement exposes how mismanagement of pension investments is the least understood and generally ignored cause of pension failures. Says RealVision:

How did the promise of a stable pension and a happy retirement, once the pillar of the American dream, become a threat to the solvency of state governments across the U.S.? Over the past decade, the funding-gap for public pensions has exploded to record levels. While blame is often placed on politicians short-changing contributions, hardline union leaders, and a host of other factors, one largely misunderstood and ignored component is the management of the pensions themselves. As many of their assets failed to deliver expected returns, pensions doubled-down on high-risk, high-fee investments, hoping to shore up more money. That shift in investments has eroded transparency, which has made it increasingly difficult to follow the money – not only putting at risk the retirement of millions of Americans, but the funding of state budgets and the health of the entire economy.

View the RealVision video.