Page 13 - Investment Advisor June 2022

“In filings and commentary refer- ENCOURAGE INVESTORS TO RELY make informed investment decisions is
enced, FINRA has suggested everything ON ADVISORS completely unworkable. Any attempt to
from structured notes with knock-out Edelman, founder of Edelman implement would create havoc in the
features all the way down to the simplest Financial Engines who now leads the marketplace, disrupt the entire asset
Target Date Fund would be scooped up,” Digital Assets Council of Financial management industry, and materially
Nadig continued. Professionals, or DACFP, told FINRA harm millions of Americans who are
“I agree that some products are com- in his letter that while the regula- striving to save for retirement.”
plex, however modern markets are com- tor is “correct to acknowledge that The better, easier way: “FINRA
plex,” he added. “The role of the SEC is investment-product complexity has should encourage investors to rely on
to determine what products are avail- exceeded the knowledge base for most the services of a professional finan-
able to investors under what rules. Just a investors, and that efforts are indeed cial advisor,” Edelman said. “Advisors
few years ago, after 20 years, they finally needed to reduce this gap,” requiring are already required to pass an exten-
codified what is and isn’t an ETF under investors to pass a competency exam is sive battery of exams, at both the
rule 6C11. I believe the SEC is the appro- “fatally flawed.” federal and state levels, and are obli-
priate jurisdiction to continue to define Said Edelman: “Testing investors gated to complete ongoing continuing
and maintain any kind of classification before they invest so they can prove education requirements to maintain
of products by type or structure.” they have the knowledge required to their proficiency.”

Sen. Warren Presses Fidelity on Bitcoin 401(k) Move
Fidelity is facing pressure from Washington to explain its ally making a lot of money,’” they wrote.
decision to allow investors to put Bitcoin in their 401(k) Following this announcement, Warren and Smith continued,
accounts. Sens. Elizabeth Warren, D-Mass., and Tina Smith, “Fidelity expanded its crypto activities, ‘add[ing] a link on
D-Minn., pressed Fidelity Investments CEO Abigail Johnson retail customers’ accounts to Coinbase, the crypto exchange,
on May 4 in a letter to answer questions on the “risky” move. to track their holdings’ and ‘open[ing] its own crypto fund for
“We write to inquire about the appropriateness of your wealthy customers.’”
company’s decision to add Bitcoin to its 401(k) investment Now, Warren and Smith continued, “Fidelity has become
plan menu and the actions you will take to address ‘the sig- ‘the first to offer employers exposure to Bitcoin for the core
nificant risks of fraud, theft and loss’ posed by these assets,” lineup of 401(k)s.’”
Warren and Smith wrote. Said Warren and Smith: “Despite a lack of demand for
“In short, investing in cryptocurrencies is a risky and specu- this option — only 2% of employers expressed interest
lative gamble, and we are concerned that Fidelity would take in adding cryptocurrency to their 401(k) menu — Fidelity
these risks with millions of Americans’ retirement savings,” has decided to move full speed ahead with supporting
the lawmakers said. Bitcoin investments.”
Ali Khawar, acting head of the Labor Department’s To better understand Fidelity’s move, Warren and Smith
Employee Benefits Security Administration, told The Wall asked Johnson to answer the following questions by May 18:
Street Journal on April 26 that Labor has “grave concerns • Why did Fidelity ignore the Department of Labor’s “seri-
with what Fidelity has done.” Fidelity’s plan to allow investors ous concerns regarding the prudence of a fiduciary’s
to put Bitcoin in their 401(k) accounts risks the retirement decision to expose a 401(k) plan’s participants to direct
security of Americans, Khawar said. investments in cryptocurrencies”?
Fidelity announced on April 26 that, starting later this • What risks does Fidelity assess that Bitcoin presents to
year, the 23,000 or so firms that use Fidelity Investments to its customers?
administer their retirement plans will have the option to offer • What fees will customers incur if they decide to invest
Bitcoin through Fidelity’s core 401(k) plan lineup. in Bitcoin?
Warren and Smith said they also were concerned about • How much has Fidelity earned from cryptomining activi-
Fidelity’s “potential conflicts of interest” and the extent to ties since the establishment of its mining operation?
which they may have affected the decision to offer Bitcoin. • When Fidelity made its decision to allow sales of Bitcoin
“In 2017, you announced that Fidelity had been min- in retirement accounts, how did the company address its
ing cryptocurrency, stating ‘We set up a small Bitcoin and own conflicts of interest, given that the company is now
Ethereum mining operation … that miraculously now is actu- both a Bitcoin miner and a purveyor of Bitcoin?

JUNE 2022 INVESTMENT ADVISOR 11