A Model for 401(k) Advice, Pt. 1 – Must be Conflict-Free

Many 401(k) sponsors, providers and advisors eagerly await the DoL’s new advice proposal, which is due to be released within the next 30-45 days. In an effort to put in our two cents, we thought we would share our hopes for the proposal based on our experience in delivering advice, our understanding of other options in the marketplace, and the feedback we have received from employers and investors alike. Keep in mind most of our clients exist in the top end of the small market (250+ employees) to large sized employers (1,000+ employees).

Goal #1 – Advice Must be 100% Conflict-Free
We believe advice for 401(k) investors must be start with being conflict-free. If there are conflicts in providing participants advice, then 401(k) advice is doomed to fail. So, let’s look at how to ensure this holds true for participants and the employers that are required to do their due diligence on service providers, including advice providers.

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New 401(k) Advice Rules Set By End of February

The Department of Labor has declared their hopes for releasing the provisions for 401(k) advice by the end of February. Fair warning: The PPA was passed 4 1/2 years ago, and they still have not finalized said provisions. However, after the DoL was a bit embarrassed by the industry backlash by the legal, consumer protection and fiduciary experts, I actually feel optimistic they will get it right this time. In reading Phyllis Borzi’s comments below, we are hopeful the provisions will look something like this:

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W MI Fiduciary Forum Ruffles Feathers of Local Brokers

Last October, we organized the West MI Fiduciary Forum, a follow up to the ’07 Fiduciary Roundtable, a highly successful fiduciary education event that over 70 professionals attended, including 401(k) and 403(b) plan sponsors, investment providers, TPA’s, brokers and advisors. While the name Fiduciary Roundtable has been changed to Fiduciary Forum (Fiduciary RoundTable has been trademarked), the purpose of the event did not.

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401(k) Participants Need Credible Advice, and Quickly

It’s no surprise to anyone that 401(k) investors need help, or should I say NEEDED help during the historic volatility we have experienced since the fourth quarter of ’07. During that time, mutual fund companies, insurance companies, and the broker dealer world has been fighting over providing advice to those investors.

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Grand Rapids 401(k) Expert is Featured Panelist at ’09 CFDD National Conference

The lingering and wide-reaching impact of the economic crisis and impending financial planning/services industry regulatory overhaul were at the forefront of this year’s fifth annual Center for Due Diligence, or CFDD, National Conference in Scottsdale, Ariz. Chad Griffeth, an Accredited Investment Fiduciary designee from BeManaged | Actium, was among those attending the three-day educational event, focused on lessons learned from the uncertain times, more ways to implement fiduciary practices and what to expect going forward with the current efforts to make rules, regulations and enforcement more consistent and create greater safeguards for investors.

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Conflicting Interests – DoL 401(k) Participant Advice Rule May Not See Light of Day 1/29/09

“The controversy exists in that the person delivering the advice must adhere to specific fiduciary criteria, but their affiliated firm, whether that’s a broker-dealer, mutual fund company, insurance company, or bank, does not,” said Griffeth. The new rule “opens the door for conflicts of interest to exist on the part of brokerage firms and mutual fund firms at the sake of participants, whom I fear wouldn’t know what questions they should ask to ferret out conflicted advice.”

“…In essence, he said the broker- dealers, insurance companies, banks, and mutual fund companies could play “puppeteer” with the advisers that are meeting with participants to benefit their own pocketbooks, not the participants.” – Chad Griffeth, BeManaged | Actium

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