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Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 6/3/11

June 06
00:16 2011

1020805_25983300_Trending_Topics_2011.06.03_stock_xchng_royalty_free_300Welcome 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 those in the business of supporting these fine folks. If you smile when you read these entertaining snippets, well, that’s the idea. If you think we’re missing something important, then please let us know.

Fiduciary News Lead Story:
The Best Way 401k Plan Sponsors can Offer Total Return Options,” (Fiduciary News, May 27, 2011). Data here reveals the amazing truth about the success of total return investing. So, what’s a plan sponsor to do? This article – part of a series of five articles detailing the 1st Deadly Sin (“Income Matters”) – goes beyond the typical theoretical analysis of time diversification and shows the practical impact of real-life withdrawals.

ETFs – Did You Order the Code Red?:
Oops! The slip again shows on the folly of the infallibility of index investing.
Adviser Says Actively Managed Funds Are More Attractive Than ETFs Now,” (Wall Street Journal, June 3, 2011) An interesting take which really doesn’t focus only on ETFs, but the problems of investing in index funds (i.e., lack of flexibility in building a diversified portfolio). It’s only a hop, skip and a jump before you realize the same could be cited as the primary advantage of private portfolio management over mutual funds.

Fiduciary – You Want the Truth?:
Things haven’t gotten rather interesting, with leading brokers seemingly resigned to the idea of a universal fiduciary standard while Congressional blowhards still blather about watering it down.
Merrill adjusts to the F(iduciary) word,” (Reuters, May 31, 2011) Did the other guy just blink? Here’s the killer quote from the article: “‘I can’t compete when someone’s willing to be a fiduciary,’ said a Merrill Lynch adviser, who spoke on condition of anonymity. ‘It’s our biggest Achilles’ heel.’”
Text of DOL’s Tibble Amicus Brief, in Support of Plaintiffs-Appellants on Whether Plan Fiduciaries Acted Imprudently,” (Department of Labor, June 3, 2011) “…the district court held that the plaintiffs proved that the defendants breached their duty of prudence by including three retail mutual funds in the Plan when otherwise identical institutional funds were available at a much lower fee.”
Barney Frank to SEC: Respect B-D model in fiduciary-duty rule,” (InvestmentNews, June 3, 2010) The co-author of Dodd-Frank continues to not understand he is now part of the minority and that his views are his alone and not representative of Congress. Still, his comments could further fire the partisan flames and erode any effective meaning of fiduciary duty. There remains one out – let brokers be brokers and advisers be advisers, and never the twain shall meet. Frank insists the broker exception should remain; thus, proving he has no concept what “fiduciary duty” means.

Fees – I think I’m entitled:
The mantra sings “You can run but you cannot hide.” Regulators seem intent on pushing forward despite the pushback from the industry.
Labor Dept. to delay plan fee disclosure rules,” (InvestmentNews, May 31, 2011) The only real surprise here is that the DOL didn’t push the deadline back even further. January 1, 2012 still remains the magic date.
Schapiro Says SEC to Focus in July on Fiduciary, 12b-1,” (Advisor One, June 1, 2011) Forget talk of harmonizing with the DOL, the SEC is determined to harmonize with itself – dealing with the fiduciary standard, 12b-1 fees and broker/dealer reform all in one swoop. Is this the end (finally) of dual registration?

Investments – You Can’t Handle the Truth:
When it comes to investing for income, will investors believe their lying eyes or years of financial evolution?
How 401k plan sponsors can help employees avoid the 1st deadly sin,” (BenefitsPro, June 2, 2011) This is a good summary of last week’s complete series of articles on the perils of investing for income instead of for total return.

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.
Retirement Plan Sponsors Prepared to Comply With Regulatory Changes,” (Advisor One, May 23. 2011)
403b plans evolve amidst change,” (BenefitsPro, June 1, 2011)
Can You Save Too Much for Retirement?” (, June 1, 2011)

Wisdom from Some of Our Favorite Blogs:
401kBasics: Plan Sponsor Quick Tips: Plan Changes
The 401k Fiduciary Advice Blog: When Investing, Trusting Your Gut Can Be Bad For Your Health
fi360 Blog: Fiduciary Links: A shift in culture trumps reform
fi360 Blog: Selecting a QDIA is a fiduciary decision

Hot Tips from Popular Web Resources:
Verrill Dana, LLP: DOL Officially Proposes Delay in Application of Fiduciary Fee Disclosure Rules
Nixon Peabody: The Supreme Court weighs in on ERISA cases premised on erroneous or misleading plan communications

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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