“Pension detective” Ted Siedle, a former SEC lawyer who now runs Benchmark Financial Services, was awarded a record $78 million for blowing the whistle on JPMorgan Chase’s JPM, +0.97% failure to inform wealthy clients about conflicts of interest that drove the bank’s investment advice.
Furthermore, Siedle’s firm has taken the lead in over $1 trillion in forensic investigations of the money management industry and he’s testified in front of Congress as an expert on mutual funds, so he knows a thing or two what goes on behind closed doors in the financial services industry.
That’s what makes this take on today’s public pension system so troubling:
‘We are on the precipice of the greatest retirement crisis in the history of the world.’
He pointed to an aging U.S. population that’s “woefully unprepared” for what comes next.
“In the decades to come, we will witness millions of elderly American’s, Baby Boomers and others, slipping into poverty.” he said in a podcast this week with the Peak Prosperity blog. “‘Too frail to work, too poor to retire’” will become the new normal for many elderly Americans.”
Siedle threw out some startling numbers to show just how much pensions are underfunded, a pervasive problem made worse by their inability to reach performance targets, which is typically set around 7%.
“Warren Buffett BRK.A, +0.97% himself has said that is an unrealistic return,” Siedle said in the interview. “Wall Street’s solution to every investor problem is, and will always be, pay us more fees.”
Investors then pay those higher fees for “ever riskier rolls of the dice,” in an effort to chase returns, which “has resulted, predictably, in worse performance.”
Siedle also said oversight boards making allocation decisions are staffed by people — think policemen and teachers — with no experience managing portfolios. Many of these pensions are rarely audited and heavily influenced by politics.
“Pet projects, such as sports stadiums, get funded to disastrous results,” he said, “while making local politically-connected ‘friends of the pension board’ rich.”
And that, he says, is where we stand today.
Listen to the full interview:
