The ETF As A Political Weapon

ETFs could make retirement savings and investing in general a campaign issue.

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Reviewed by: Drew Voros
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Edited by: Drew Voros

Every presidential campaign, Wall Street, bankers and the “1%-ers” are familiar targets to rev up the Populist vote. Both Clinton and Trump do it (insert joke here).

The banks, Wall St., rich people, Tahoe mansions, golf courses ... they’re all conspiring against you—the worker, the taxpayer, the mother, the father, the orphaned and widowed—or so candidates make it seem.

While it makes for good stump speeches, it never does really unify the masses in a personal way.

We all have different credit card rates. We bank differently—I use a credit union. We get different mortgages than our neighbors with similar homes. What is the “Wall Street Is Bad” unifier? What are Clinton and Trump and every politician missing?

Here’s Your Answer

There is the saying that “everyone complains about the weather, but no one does anything about it.” You can replace “weather” with “Wall Street” just as easily, or at least that has been the case. But when it comes to employee-sponsored retirement plans, there is a new wind a’blowin’, and it is manmade: awareness.

Employee: “How much am I getting charged on my 401(k) that earned me 4% last year?”

401(k) call center: “2% of your assets and other fees”

Employee: “What; every year? What other fees?”

That’s a great conversation for an employee to have with their 401(k) administrator … and this is something new to the masses. 401(k) fee awareness by the masses started a few years ago when new federal rules were issued to make fees for investment products more transparent.

That has led to a bevy of lawsuits by employees against employer-sponsored 401(k) plans alleging that plan participants were gouged by excessive fees. The legal snowball is just getting rolling.

ETFs As A Campaign Topic

A few weeks ago, I was having a pleasant conversation with Ben Fulton at my San Francisco go-to business hangout, Caffe Bianco. He is the founder of new ETF issuer Elkhorn Investments. In addition to the three ETFs he launched this year, Elkhorn also has a new line of innovative ETFs in the regulatory pipeline, ranging from midcap sector ETFs to commodity funds.

Ben is also a pioneer in the ETF field, serving at Invesco PowerShares for nearly 15 years as managing director, as well as leading new product development there. He has some insight, to say the least.

During our chat, we veered into politics a bit, and Ben said something then that has been resonating with me on the heels of the 401(k) lawsuits that have proliferated this summer: “At some point, the politician who wants to reduce cost, improve transparency and be anti-establishment will embrace the concept of the ETF over the mutual fund for U.S. retirement investors.”

Saving For Retirement A Common Thread

Think about it: What better way to portray how Wall Street has taken more than its fair chunk out of Americans’ savings for retirement than outlining the benefits of the ETF over mutual funds when it comes to cost, among other positives? Nearly all Americans saving and/or investing for the future use a mutual fund; it is the unifying element.

Maybe someday we will see a political candidate spread the ETF gospel as part of a campaign platform, but for now, Fulton thinks that concept is not on anyone’s radar.

“I still think it is an unknown, but I may be wrong,” he said.

However, Trump does own ETFs, according to Bloomberg. In fact, he owns more than plain-vanilla funds. He owns currency-hedged ETFs that reflect some understanding of the ETF space, or it’s possible that he isn’t aware of what his financial advisors built into his portfolio.

Nonetheless, a campaign weapon that would relate directly to most Americans is sitting right in front of him, and Clinton as well.

Imagine a presidential campaign where there is a debate on what the best ways are to save for retirement and investing in general. Yea, yea, I know, it is a bit far-fetched.

Drew Voros can reached at [email protected].

 

Drew Voros has nearly 30 years' experience in financial journalism. He was a longtime business editor for the Oakland Tribune and sister papers of the Bay Area News Group, and finance writer for the Hollywood trade publication Variety. Voros' past roles have also included editor-in-chief at etf.com and ETF Report.