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Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 9/10/10

September 12
22:31 2010

Welcome to Fiduciary News Trending Topics. Each Monday, we’ll give you a quick synopsis of the major news events and trends impacting ERISA plan sponsors, the 401k fiduciary and those in the business of supporting these fine folks. You 1020805_25983300_Trending_Topics_2010.09.10_stock_xchng_royalty_free_300might immediately notice the sparseness of this week’s inventory. It seems the week of Labor Day trails only Christmas Week as the week that isn’t. Hope all those reporters (and readers) away last week had a great last summer fling!

Fiduciary News Lead Story:

Celebrate 401k Day! Exclusive Interview with PSCA’s Robert Benish,” (Fiduciary News, September 7, 2010).  Explore the story behind 401k Day and the organization promoting it.

Hooray for 401k Day!:

During a slow news week, we usually get digestible pabulum to sustain us and 401k Day fits that recipe. Ironically – and you thought Hurricane Earl closed all the beaches – these stories don’t write themselves, and with everyone taking the last train for the coast, well, what you see is what you get.

The Principal Recognizes National 401k Day by Encouraging Saving at Any Stage,” (, September 8, 2010) OK, so this is really a promotional piece distributed by BusinessWire that picked up a week later. This is what happens during a week with precise little real news. Still, it gives a couple of good examples of what companies planned to do on 401k Day.
401k Changes Worth Celebrating,” (CBS, September 8, 2010) The trouble with most op-ed pieces is they usually score on 80% of the content, but that annoying 20% just grates at you like fingernails on the chalkboard. Here, author Carla Fried suggests four great ideas, but the fifth makes one wonder if she really is fried. It’s up to you to guess the culprit.

Who knows? The Target Date Fund knows!:

Poor, poor TDF, we hardly knew ye. And, for a product that is fast dominating the world of the 401k, that might be a scary thing indeed. Maybe it’s time to give up and go back to the drawing board.

The Hedge Fund Lurking in Your 401k,” (Wall Street Journal, September 4, 2010)
The Hedge Fund Lurking in Your 401k,” (MarketWatch, September 6, 2010) They look the same, they sound the same, they ARE the same! The first refers to the WSJ print piece while the second (identical) article appears on the WSJ’s sister site. You only need to read one of these and the WSJ article has the cooler graphics. If you thought TDFs were scary before reading this article, you’ll be horrified after you read it. Never, NEVER, watch as the sausage is being made!

“Fiduciary?! We don’t need no stinkin’ fiduciary!”:

If a tree fell in the forest and no one was there to see or hear it, did it really fall? More importantly, do we really care? The fiduciary discussion is ripe to degrade into one of arguing how many angels can dance on the point of a needle. If clients don’t care, should regulators? Whoa. That’s deep.

The Smart Advisor: What Could a New Fiduciary Standard Mean for Advisors?” (Financial Planning, September 2, 2010) An excellent overview of the reality of practicing the fiduciary standard, this article reveals fewer than half of the wirehouse brokers feel they are “very well prepared” to act as a fiduciary. Fortunately, that same survey confirms about three-quarters of investors have no clue what being a fiduciary means. Whew! And you thought we had something to worry about. Too bad they didn’t survey the trial lawyers.

Here an Annuity, there an Annuity everywhere an Annuity:

Just to be straight here, let me repeat what I’m hearing. First, investors don’t understand what a great deal 401k plans are, so we need to create a special holiday to drive home the point. Second, investors don’t understand TDFs, so we’ll make them a default option in the plan they don’t understand. Third, investors don’t know anything about the fiduciary standard, so we’ll let them decide if they need it. Now you’re telling me investors don’t know anything about annuities, so we’ll force them to use these critters? But, I thought we forced TDFs on them so they would avoid lower yielding stable value options? Confused? Pay it no mind – the room really is spinning!

Despite Desire for Guarantees, Americans Keep Old Attitudes about Annuities,” (, September 8, 2010) If TDFs are the Edsel of 401k plans, are annuities the Castor Oil? Even when told “annuities are good for them,” more than half of Americans aged 44-75 didn’t like them. Oddly (although not-so-oddly if one grasps the psychological term “self-justification”), three-quarters who have purchased annuities are satisfied with them. Maybe it was the exhilarating fee disclosures.
Most Investors Clueless on Annuity Guarantees,” (Financial Planning, September 8, 2010) A different take on the same (insurance company sponsored) survey. My favorite line: “With respect to liquidity and the much-criticized limited access to funds, 54% said they would prefer a product with a 7% return even if it limited access to funds, to one paying 5% with complete access to their money.” Nowhere does it say how many would prefer a product with a return of 100% even if they had no access to their money – ever.

Following the “Leader” – a Cautionary Tale (or not):

Yale’s Chief Investment Officer road his more than 15 minutes of fame on the tail of a mega-sized endowment. This meteoric flash made the Beardstown Ladies PR campaign look like, well, the Beardstown ladies. When his “amazing” investment prowess crashed and burned with the real estate and credit markets in 2008 and 2009, Yale suffered considerably (the University had to announce a moratorium on building). That Yale was not alone in this debacle (Harvard and others left bigger holes in their endowments) maybe cooled some potential criticism. Yet, here we are.

You Are Not Yale,” (Financial Advisor Magazine, September 2010) Readers lured to this article by the headline may be in for a bit of a disappointment. For years, investment professionals knew what Yale CIO David Swenson was selling wasn’t appropriate for most investors, but a lot of them bought it anyway. While the author does insinuate the much vaulted Swenson’s style might have suffered a little more than others in the recent downturn, the piece’s real intent is to convince anyone with less than several billion dollars in their portfolio to avoid illiquid assets. And for good measure he takes a swing at those devilish hedge-fund-running quants who have simply destroyed the integrity of the markets. The story would have best been told as a modern day tragedy where hubris does in the anti-hero.

Major Plan Sponsor Moves and News:

What are other plan sponsors and fiduciaries doing with their plans? And how are participants responding? The latest in legal proceedings involving plan sponsors and fiduciaries.

Court Dismisses FA Suit over Merrill WealthBuilder,” (, September 3, 2010) Yet another example of why it’s hard to win these suits. It all depends on the judge you get.
Employers on the hook for 401k fees,” (Philadelphia Business Journal, September 7, 2010) Yet another example of why it’s easy to lose these suits. It all depends on the judge you get.
Roth 401k Feature in 29 of Plans,” (, September 8, 2010) This is an interesting trend that appears to be starting.
Court Clarifies ERISA Benefits Disputes Discovery Rules,” (, September 9, 2010) Judge rules against discovery – or only limited discovery – in conflict-of-interest situations on account of a right to a “speedy” trial, which appears to be more important than a “fair” trial.
Northern Trust SecLending Suit Plaintiffs Survive First Challenge,” (, September 10, 2010) Judge gives plaintiffs go-ahead to move forward with a securities lending case.

Wisdom from Some of Our Favorite Blogs:

401kBasics: Plan Sponsor Quick Tips: Maintaining a Fidelity Bond
fi360 Blog: Target date fund due diligence
401k Basics: Keep The Course: Autopilot For Your 401k

Hot Tips from Popular Web Resources:

Finance The Evolving Standards of Fiduciary Care [Don’t let the “uk” in the url fool you, this is all about the DOL, ERISA and the difference between 3(21) and 3(38).] Employees clamoring for basic workplace financial education

Miss anything? Feel free to add a comment below.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA


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