Posts Tagged ‘401k fiduciary’
A Model for 401(k) Advice, Pt. 2 – Must be Ongoing
A fiduciary relationship is one which is ongoing, in which the fiduciary is responsible for conducting ongoing due diligence on the various provisions for which they are responsible. A company fiduciary is charged with the responsibility of ongoing due diligence of the various fees, investment options, and vendor capabilities of the plan for the benefit of the participants. An ERISA fiduciary, regardless of the “flavor,” is hired to provide ongoing advice to the employer specific to investment due diligence and advice, vendor benchmarking, etc. Both of these more traditional fiduciary roles are ongoing relationships. Why isn’t employee fiduciary advice?
Read MoreFiduciary360 on Fox Business Regarding Financial Regulation
Our friend Blaine Aikin of Fiduciary360 was featured today on Fox Business regarding Senator Dodd’s financial regulation bill. While the bill is not all it could be, it is viewed as a step in the right direction by Blaine.
Read More18 Minutes on the New DoL 401(k) Advice Proposal
Our friend Jason Roberts, Partner at Reish and Reicher, has been closely monitoring the regulatory developments of 401(k) advice since the passage of the Pension Protection Act of ’06. The link below provides a brief, yet detailed overview of the regulations and what employers and advisors should take into consideration when it comes to the advice 401(k) investors receive. It is definitely worth the time.
Read MoreNew on LinkedIn: The 401(k) Fiduciary Advice Group
LinkedIn has been something I have been active on for over two years. It’s Groups feature has helped it evolve into a resource in which busy professionals can learn or get free guidance and feedback on various topics of interest. Personally, our company has benefited from other’s experience and expertise to the tune of saving thousands of dollars on various projects.
That being said, with the recent developments in 401(k) advice, we decided to create a group to help keep employers and advisors apprised of the regulatory and market developments that result from the clarifications. We launched the 401(k) Fiduciary Advice Group on Wednesday morning, and since then, there have been over 70 employers and 401(k) industry professionals join. Interested? Simply click the link below to join.
Read MoreBrokers Win, Investors Lose Key Reform – WSJ
Every investor working with a financial planner/wealth manager/financial advisor/stockbroker…whatever title is used…should read at least the following quote. In Jason Zwieg’s article on WSJ.com, he provides one of the easiest to understand summaries I have read on the responsibility that person has to you:
As of now, the roughly 630,000 brokers, bankers and insurance agents registered to sell securities must determine whether investments are “suitable”—based on how wealthy you are, what else you have invested in, your tax status and your investment objectives.
Securities salespeople generally aren’t obligated to act in your best interest. They needn’t tell you that they make extra money pushing one particular investment or that cheaper alternatives might provide you a higher return.
Suppose two mutual funds are “suitable,” but one of them pays the broker a fatter fee. You may well end up in that one—without finding out that your broker had an incentive to favor it.
On the other hand, financial advisers—who are regulated as “fiduciaries” under the federal Investment Advisers Act—are obligated to put you first. They must explain their fees, disclose conflicts of interest and disclose past infractions. If they get paid extra to recommend a fund or sell an insurance product, they have to tell you.
Read MoreNew 401(k) Advice Proposal Available for Comments Until May 5th
As promised, the new 401(k) advice proposal has been delivered before the end of the month. While I admit to not having read it in its entirety, the following has been reported by the Wall Street Journal:
Read MoreA 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.
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:
Read MoreAnother Study Shows 401(k) Advice/Help Improves Participant Outcomes
A recent study by Hewitt and Financial Engines found that people getting “help” outperformed those that did not by about 2%, after analyzing the performance of roughly 400,000 investors across seven retirement plans. The findings compliment the study by Charles Schwab in Nov. ’07, which found those that got help outperformed those that did not by nearly 3%. The studies compliment each other by the fact that each were conducted during different market cycles, the Schwab study during a bull market, the Hewitt study during a bear market. Thus, regardless of the market’s direction, studies show proper portfolio management superceded normal investment behavior (chasing performance, emotion based investing, etc.).
Read MoreMore Plan Sponsors Crossing the Line from Education to Advice – CFO.com
Since 401(k) plans were created, education was seen as a way of “moving the needle” to help participants make better investment decisions and improve plan participation. Does education help make investors investment managers?
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