Empire of the Fund
William.Birdthistle at gmail dot com
TITLE: Empire of the Fund: The Way We Save Now
AUTHOR: William A. Birdthistle
PUBLISHER: Oxford University Press
DATE OF PUBLICATION: June 29, 2016
RETAIL PRICE: $34.95 US (Hardcover)
PAGES: 264 pages
Empire of the Fund is an investigation of the way we save now. With the rise of the 401(k) and the demise of the pension, the United States has embarked upon the richest and riskiest experiment in our financial history. Over the next twenty years, nearly eighty million baby boomers will retire at a pace of ten thousand per day. The hypothesis of our experiment is that millions of ordinary, untrained, busy citizens can successfully manage trillions of dollars in a financial system dominated by wealthy, skilled, and powerful financial institutions, many of which have a record of treating individual investors shabbily.
The key tools in our 401(k) plans and individual retirement accounts are mutual funds, which have ballooned to hold more than $16 trillion. But these funds pose dangers to our savings in three ways: through structural vulnerabilities that give money managers the incentive to focus on marketing over investing; through the all-too-human challenges of managing our savings decades into the future; and through the peril of financial professionals behaving badly, to our economic harm.
Though Americans often hear of the importance of low fees in fund investing, few are aware of the panoply of ways that some financial advisers have illegally diverted money out of mutual funds: from abetting hedge funds in trading after the legal deadline, to inflating the assets on which they are paid a percentage, to paying kickbacks for brokers to sell their funds. This book forewarns and forearms Americans by illustrating the built-in flaws, perverse incentives, and litany of scandals that have bedeviled mutual funds.
And by setting forth a pair of policy solutions to improve Americans’ financial literacy and bargaining power, it also attempts to safeguard our individual financial destinies and our nation’s fiscal strength.
Empire of the Fund is an investigation of the way we save now. The United States has embarked upon the riskiest experiment in our financial history: to see whether millions of ordinary, untrained citizens can successfully manage trillions of dollars in a system dominated by skilled and powerful financial institutions. The experiment is not going well -- but Empire of the Fund offers proposals to improve our financial health.
Controversial thesis: This book argues that our entire system of saving is deeply flawed.
Vivid illustrations of illegality: Several chapters describe the creative array of diabolical ways fund advisers can pilfer our savings.
Provocative solutions: The conclusion pushes for two concrete plans to improve our system by requiring financial licenses to invest outside of standard investment options and by giving ordinary investors far greater bargaining power by granting them access to the federal Thrift Savings Plan.
Thesis: The thesis is noteworthy because, at a time when many are pushing to expand individual accounts (by cutting pensions for public employees or privatizing Social Security), this book argues for caution and, indeed, solutions that would grant investors greater knowledge and bargaining power.
William Birdthistle is Professor of Law at Chicago-Kent College of Law, where he specializes in investment funds and corporate law. Previously, he served as a law clerk to the Honorable Diarmuid F. O'Scannlain of the U.S. Court of Appeals for the Ninth Circuit and practiced law at Ropes & Gray LLP. Birdthistle was born in Cork, Ireland and raised in Libya and Malaysia. He came the United States to attend Duke University and Harvard Law School, where he served as managing editor of the Harvard Law Review. Birdthistle lives in Chicago with his wife and children.
Advance praise for Empire of the Fund:
Possible topics for interviews and op-eds
- What will be the impact of new fiduciary rules on retirement investing?
- What are the biggest dangers for investors saving in 401(k)s and IRAs?
- What does the rise of fund investing mean for American savers?
- Why can't Social Security or guaranteed accounts solve our problems?
- How can we protect the financial future of American investors?
Excerpts & Advanced Copies
For selected exerpts or an advance copy, please contact me at William.Birdthistle at gmail dot com