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by JIM AGOSTINI
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South Carolina is full of quiet investors… the teacher on James Island who puts part of every paycheck into a retirement account, the retired couple near Myrtle Beach living on income from funds they spent decades building, the young couple in Greenville trying to build something for their family.
None of them think of themselves as Wall Street players, but all of them depend on the same financial markets to build and protect what they’ve earned.
U.S. senator Tim Scott leads the committee that could help every one of them.
By prioritizing a capital formation package similar to the INVEST Act which passed the U.S. House in December on a strong bipartisan vote, our leaders can make it easier for working Americans to build wealth and for businesses to find the capital they need to grow. By including multiple bills in one grand package, Senator Scott can deliver big wins to his constituents in South Carolina.
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Start with our teachers. Public school employees, nonprofit staff, and hospital workers usually save for retirement through a 403(b) plan. These plans face a less extensive menu of investment options than the 401(k) plans most private-sector workers use.
Senator Scott must support legislation to allow 403(b) savers opportunities to leverage the same low-cost investment funds that private companies already offer. For a teacher in Spartanburg or a nurse in Greenville, that’s real money staying in a retirement account instead of leaking out in fees.
The bill also shuts down a Wall Street scheme most people have never heard of. A lot of South Carolina retirees rely on closed-end funds for steady income. In recent years, activist hedge funds have learned to target these funds: buy up the shares, take over the board, and force a quick payday for themselves. Sometimes that means liquidating the fund, sometimes it means dumping safe, income-producing holdings for speculative bets like cryptocurrency. The retirees who chose those funds for security are left holding the bag.
A capital formation package must include language that closes the loophole that makes these raids possible – and protects the everyday investors trying to save for the long-term.
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Another area that must be prioritized in a capital formation package is making it easier for investors to receive their financial information. Fund companies are still required to mail paper statements and disclosures unless an investor specifically asks for digital ones. Legislation to make the electronic delivery of documents the default, while keeping paper available to anyone who wants it, can save investors hundreds of millions of dollars a year in printing and postage that now come straight out of their returns.
None of this is abstract. It comes down to whether a teacher keeps more of their own paycheck, whether a retiree’s savings are safe from people looking to make a fast dollar, and whether South Carolina’s businesses can raise the money they need to grow and hire. The House did its part through their own capital formation package. Now it is up to the Senate and Senator Scott’s leadership.
Senator Scott has spent his career arguing that opportunity should reach every corner of South Carolina, not just the well-connected. It’s time for a capital formation package that will deliver benefits to every saver across the state.
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ABOUT THE AUTHOR…
Jim Agostini, CFP, ChFC, is a Certified Financial Planner and the principal and owner of DaVinci Financial Designs LLC.
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