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Top Fiduciary Stories in 2009

December 22
23:50 2009

In a year that started on the cusp of the second Great Depression and ends on a quite different note, Fiduciary News asked a few of its special friends to take a look 1123225_69546459_2009_royalty_free_stock_xchng_300at this topsy-turvy year that was to pick out the biggest fiduciary stories of the year. We posted several queries on various LinkedIn groups catering to fiduciaries and 401k plan sponsors and here’s what we got: Our list of the top ten stories (listed in rough chronological order) for 2009. Be sure to stick around to the end to discover the new and exciting interactive part of this article.

  • The Fall of Target Date Funds – Pitched as the be-all-end-all of 401k investors, these funds fell flat on their collective face as the down market exposed them a more sizzle than steak and left the DOL – which approved their use as default investments in a 2006 ruling – a bit red-faced. Shareholders – red-faced in another way – clamored and Congress, in response to these irate investors, set up several hearings on this relatively new product. Congress has yet to take definitive action, but the industry is not waiting. Roger Wohlner, CFP, recently listed by the Wall Street Journal as the #1 financial blogger in the country, summarizes the issue when he told “The fact that there is such disparity between the holdings of various target funds with the same target year (say 2010 for instance) is a problem.”
  • Brightscope Hits the Big Time – Although created in 2008, this San Diego-based 401k plan data and analytics firm really exploded into the arena in 2009. Their web-site lists no fewer than 100 mentions in major news outlets since January of this year. (Maybe they’ll count this at #101!) Their unique and objective rating techniques have caught fire among plan sponsors. With their recent ranking of the top 30 best 401k plans among the top stories in December, who knows what the future holds for this innovative company.
  • The Great Fiduciary Standard Debate – Should brokers be held to the same fiduciary standard as registered investment advisers? First Congress, then the SEC and then Congress again finally began a serious discussion regarding leveling the playing field between RIAs (subject to the fiduciary standard) and brokers (subject to the lesser threshold of the suitability standard). Again, nothing transpired, prompting Jim Geld, President at Retirement Targets, Inc., to suggest, “The delay in implementing the single standard is the biggest fiduciary news event in 2009.” Mr. Geld feels providing advice puts the adviser on the same side as the client; hence, creating a fiduciary relationship. Still, the broker vs. Registered Investment Adviser debate wages on.
  • High Court Hears Mutual Fund Fee Case – In October, the Supreme Court heard arguments in the case of Jones v. Harris. A month before, D. Bruce Johnsen, a professor at George Mason University School of Law, issued a study refuting the mutual fund fee “myths.” He explained in an exclusive interview:  “Economic theory clearly suggests paying high fees is justified in a world where the average shareholder doesn’t have the wherewithal to monitor the adviser to assess the quality of services.”
  • The Death of the 401k (Time Magazine Cover) Fresh on the heels of Newsweek’s writing the obituary to capitalism early in the year (another infamous cover story), Time declares the 401k – and defined contribution plans in general – the root of all evil. These smart journalists seem to ignore many states now face severe financial strains in part because of pension plan liabilities – something the 401k plan has removed from many private companies. Still, with the fall in the market through March of this year, many 401k investors were left wondering if retirement was even a possibility.
  • Caterpillar Settlement – In November, this Fortune 100 company agreed to a $16.5 million settlement in a case alleging its 401k plan charged employees unreasonable fees. Mike Alfred, co-founder and CEO of 401k rating company Brightscope reveals to that he’s “talked to a handful of the largest plan sponsors in the country in the last couple weeks and the Caterpillar settlement has been a topic of conversation several times. Plan sponsors can really see the ramifications of that case affecting them here and now.”
  • The Department of Labor’s Abrupt Shift on 401k Advice – In 2006, the DOL allowed financial advisers to provide advice directly to 401k plan participants. As one of its last acts, the outgoing Bush administration set out the ground rules for such advice. Later in the year, the Obama administration abruptly reversed those guidelines, leaving not only financial advisers, but also plan sponsors wondering if they are now in violation of compliance regulations. Nevin Adams, Editor-in-Chief at PLANSPONSOR, feels this is the biggest story, although “like the 12b-1 comment, or the looming regulatory changes on target-dates, we’re still looking at previews of ‘coming’ attractions.”
  • New Research Reveals When Active Beats Passive – When William R. Thatcher published his article “When Indexing Works and When It Doesn’t in U.S. Equities: The Purity Hypothesis,” in The Journal of Investing, (Fall 2009) little did he know of the excitement it would generate among readers. His exclusive interview was the second most read story in the month of November.
  • The SEC’s Statement on 12b-1 fees – Long a controversy, the SEC, through its Chairman Mary Shapiro, finally acknowledged 12b-1 fees represent a conflict of interest. While he can see how such payment might have a useful purpose, Roger Wohlner feels “revenue sharing, if left unmonitored, is a ‘rat hole’ and a source of abuse by custodians, recordkeepers, and fund companies.”
  • 401k Plans Recover Significantly by YearEnd – Although still far behind their 2007 peak, the market boomerang has allowed many 401k participants to recover most, though not quite all, of their losses. Nothing calms the litigious nerves like a soaring market, and maybe this is perhaps the best news of all for the typical 401k plan fiduciary.

Now comes our favorite part: He’s your chance to vote for your Top Three Fiduciary Stories of 2009! Go to this link: Top Fiduciary Stories of 2009 and pick you top three stories. Voting will be open from now until January 3, so hurry and choose, before you take your holiday vacation. And invite your friends, too. Let’s close off the year with some fun!

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


  1. Roger Wohlner
    Roger Wohlner December 29, 09:42

    Chris, good article and good summation of top 2009 Fiduciary stories. When viewed like this there was a lot going on in 2009. My hope for 2010 is that Congress, the SEC, the DOL and other agencies involved in these issues takes thoughtful, deliberate action that is an improvement vs. just a reaction to the horrific results in the financial markets from Sept. 2008 through March 2009. Also as you point out kudos to Mike and Ryan Alfred and the whole team at Brightscope for creating a mechanism to rank 401(k) plans and for their role in keeping this issue on the front burner.

    Looking forward to more posts from you in 2010.

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