Clean, renewable, sustainable: what’s not to love?
Solar power in the U.S. has grown primarily trough the use of tax subsidy programs. Yet even after decades of these socially expensive tax credits solar power amounts to only about 1% of the energy we use today. Over the next ten years solar power is expected to grow by a factor of 10 but most of that growth will b outside of the U.S. in less developed countries not already served by an adequate power grid.
I became aware of the economic problem with solar industry a few years ago when I requested a quote on a system on behalf of a non-profit client. None of the local solar companies would even bid on the project. They knew that without the potential tax benefits, there was no way to justify the cost of the project based on the energy that would be produced. In other words, from an economic perspective, solar is an industry that exists only because of the artificial tax subsidy that we’ve created to help bolster it.
Since then, I’ve become aware of situations where the tax benefit was over-sold by solar sales representatives doubling as tax advisers. The fact is that many people do not fully benefit from the tax credit. Yet far to many gullible people have purchased solar power systems based on the sales presentation without a true understanding of the tax laws that govern energy credits.
Yesterday I read a social media post by another accountant that inspired this blog post: “Solar salesmen, in my opinion, are the new snake oil sellers of the 21st Century.” It’s bad enough that solar power is really expensive if you understand the economics. But having an industry committed to twisting the truth for its own gain puts a real blemish on solar energy.
Even as a business person with a deep commitment to environmental sustainability, I can not endorse the capital expenditures of most solar power proposals in light of so many alternative projects more worthy of funding.
I’ve been involved in some online discussions as to why Intuit apparently introduced this book-to-tax feature after I completed my tax filing last year but then removed the feature when I needed it this year! Intuit gave no explanation either online or when I called except to sat that it will be re-introduced after the end of tax season this year. I am left baffled by what value a tax software has that is only available outside of tax filing season. It seems so crazy that perhaps I’m misunderstanding something?
Here is a copy of the original e-mail advertisement in 2014:
This week President Obama’s administration gave a strong endorsement of the Department of Labor’s plan to impose fiduciary obligations on investment brokers and advisors working with retirement plans. The controversial proposal is based on a belief that new rules are a needed consumer protection to prevent billions in costs due to bad advice. Most consumer advocates support the proposal. My firm Freedom Benefits opposes the action not because we disagree with the intent but rather because the side-effects of the “cure” are likely to be worse than the current symptoms. As a result of the media play, investors and employers who sponsor 401(k) plans are taking a second look at their plans to see if there is room for improvement.
Where does all of this leave you with your 401(k) plan? Employers and investors who followed the news might well be left with the impression that their 401(k) plan is a disaster that needs to be addressed immediately. If you want to consider the subject further, consider these three basic points:
1) Find disinterested advice. Use of the terms “conflicted advice” and “unconflicted advice” as used this week to describe advice in this context and discussion might not actually be useful in helping you decide if you should take any action or make any change. If you are going to get advice it needs to be from someone who does not make a living in the retirement plan market. 401(k)s are complicated and the service contracts are often difficult to understand so third-party advice may be warranted. But make sure that advice comes from someone who does not have a role in the sales, investment management or administration of 401(k) plans.
2) Pay attention to bundling. A 401(k) plan is actually a collection of financial services that are bundled together. Legal services, enrollment, investment management, customer service, sales, electronic banking transactions and tax return preparation are just some of the components of a 401(k). It is possible, but not always practical, to un-bundle those services and reduce fees and/or increase performance. I prefer to use the term “re-bundling” as descriptive of the way to investigate ways to achieve these goals. It may or may not make sense to do so, depending on your own unique experience and requirements.
3) If it’s not broke, don’t fix it. Don’t be unduly influenced by the media coverage this week that implies something is wrong with your 401(k). If you like your plan service and investment choices then there is no reason to think that it is a rip-off just because of the wording of Treasury Department press releases. Your current plan’s cost structure may well turn out to be the lowest cost bid that provides an acceptable level of service and performance.
Today’s Wall Street Journal carries a sharp criticism of President Obama’s plan to reform retail investing. The piece called “Obama vs. Savers” highlights the restrictions that the proposal will place on investors. Since Freedom Benefits is focused on consumer education and charges neither commissions nor asset-based investment management fees, you would think that we support the proposed legislation. The bulk of social policy advisers we respect and follow on social media do support the President on this reform initiative. If the only intent of the reform is to take aim at broker’s commissions, then why would we be opposed? Certainly the President’s proposal has the potential to boost business for the relative handful of consumer financial advisory firms (like ours and other CPAs) that do not follow the two traditional compensation models that dominate retail financial services.
Freedom Benefits has always supported free market options that allow more consumer choice and promote higher level of consumer education. The Obama plan seems to concede that consumers can’t possibly match the wit and wiley of financial services firms to extort money so the government needs to protect them. It is a defeatist attitude.
There are two other more significant problems with Obama’s thinking:
1) everyone associated with investment service gets paid for their work in one form or another regardless of the rules or business model. There is no compelling case to show that one model is better than another.
2) I can’t cite a single example of when increased government regulation has actually had a net benefit for consumers. The unintended side-effects of regulation would almost certainly outweigh the intended benefits.
In this case, Obama would be best advised to follow the decisively non-executive Buddhist mantra “Don’t do something, just sit there“.