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Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 11/26/10

November 29
07:44 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, 401k fiduciaries and 1020805_25983300_Trending_Topics_2010.11.26_stock_xchng_royalty_free_300those in the business of supporting these fine folks. If you smile when you read these entertaining snippets, well, that’s the idea.

Fiduciary News Lead Story:

How to Nudge 401k Participation Higher,” (Fiduciary News, November 23, 2010). Recent studies suggest employees are better off with 401k plans than with tradition pensions. Here’s how plan sponsors can take advantage of behavioral economics research to make 401k plans even better.

Funds of all sorts:

Active ETFs: The Next Big Thing – or the Next Big Bust?” (DailyFinance, November 20, 2010) Compare this piece with Jason Zweig’s over-the-top hyperbole (yes, this is redundant, but read the comments on the final link in this section and you’ll know why). This report asks fair and balanced questions. And it doesn’t promise unsubstantiated answers.
Fund Track: Mutual-Fund Flows Tell Tale of Two Share Classes,” (Wall Street Journal, November 22, 2010) Most readers probably already know what this story’s focusing on. It’s all about the difference between retail share classes and institutional classes.
ETFs’ growth fuels fear of ‘flash crash’ repeat ETF Investing,” (MarketWatch, November 22, 2010) At first this looks like a typical hit piece, but it suggests some fascinating questions (and rather disappointingly fails to provide the answers we know are out there – somewhere).
Actively managed ETFs likely to surge,” (Investment News, November 23, 2010) Like the Jason Zweig piece below, this article is a bit too “cheerleaderish” to be taken seriously. As with any new product, (actively managed ETFs weren’t legal until 2006), financial advisers know its value can’t really be determined until we go through a complete market cycle – not the three years Morningstar as said is sufficient.
The Intelligent Investor: The New Supercharged Index Funds,” (Wall Street Journal, November 27, 2010) Where to begin here? How about the last sentence in the second paragraph: “Even so, the Dow Jones U.S. Total Stock Market Index is up 10.3% thus far this year.” Funny thing, but that edition of the Wall Street Journal says this index is up only 9.2% year-to-date. Odder still, the WSJ’s flagship benchmark – the Dow 30 – is up only 6.4% YTD slightly trailing the more popular S&P 500’s YTD return of 6.7%. This is right there on page B6 of the same section as Zweig’s article. And why pick that particular index and not the actual return of the world’s most popular mutual fund (Vanguard Index 500) which is up 8.5% (according to B17), nearly a full two points behind the average Large Cap Growth fund (per Lipper on the same page). Sorry, but this kind of statistical shenanigans is why the public doesn’t trust the financial industry. Worse, this lack of obvious fact checking might cause one to question the credibility of the Wall Street Journal as a whole.

Fiduciary Standard – Big Media Joins the Fray:

We can give thanks the self-proclaimed paper of record enters full bore into the battle for the fiduciary standard. As we’ve asked previously, “who speaks for the investors” in this debate? Apparently, that would be the New York Times. One might have preferred this to have come from the Wall Street Journal.

Dear S.E.C., Please Make Brokers Accountable to Customers,” (New York Times, November 18, 2010) OK, OK, it’s easy to pile on to the New York Times, but every once in a while it connects with the common folk. Indeed, except for referring to the “Fiduciary Standard” as the “Fiduciary Duty” (which is only a minor snipe and the author corrected the error later in the piece), the op-ed piece does ask some compelling questions. I wonder if the SEC will enter this into their record.

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.

Child Loses Battle over 401k Distribution Taxes,” (PLANSPONSOR.COM, November 24, 2010)
Are You Too Wealthy for Your 401k Plan?” (Wall Street Journal, November 20, 2010)
Are young investors too cautious?” (, November 22, 2010)
Special Report: A Far From Random Walk From Wall Street,” (ABC News, November 19, 2010)
How to Bring 401k Plans Into the 21st Century,” (Advisor One, November 18, 2010)
401k Plans: Balances Increase, But So Do Loans Outstanding,” (Financial Planning, November 22, 2010)
401k Investors Rode 2009 Market Advances,” (PLANSPONSOR.COM, November 23, 2010)

Wisdom from Some of Our Favorite Blogs:

401kBasics: Plan Sponsor Quick Tips: Preparing For Year End
fi360 Blog: The Wall Street films and the fiduciary ethic
401kBasics: Keep the Course: Investments 101—Bond Funds

Hot Tips from Popular Web Resources:

FreeErisa: Consumer Corner: Boomer retirements loom
FreeErisa: EBRI/ICI 401(k) Database Update: Average 401(k) Account Balance Among Consistent Participants Rose Nearly 32 Percent in 2009
Employee Benefits Update: 2010 End of Year Plan Sponsor “To Do” Lists

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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