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Fiduciary News Trending Topics for ERISA Plan Sponsors: Week Ending 8/26/11

August 29
00:17 2011

1020805_25983300_Trending_Topics_2011.08.26_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 401k Plan Sponsor’s Dilemma – What’s Wrong with ‘Risk’” (Fiduciary News, August 23, 2011). How a simple pub game destroyed the nearly two generations-old foundation that built a Nobel-Prize winning investment theory.

Compliance – Preparing for the Fiduciary Standard:
It’s coming. Don’t know if it’s a Cat 1 or Cat 2, but it’s headed our way.
Fiduciary Exception to Attorney Client Privilege Extends to DOL Audit,” (, August 23, 2011) This is very interesting, and appropriate. It turns out any legal advice given to a plan sponsor isn’t for the benefit of the plan sponsor but for the plan participant. This actually derives from trust law where any legal advice given to the trustee accrues to the benefit of the beneficiary, not to the trustee.
Adviser SRO teams with fi360 to ready its fiduciary exam,” (InvestmentNews, August 23, 2011) This is what marketing folks call an “assumed close.” The story involved an idea that assumes the SEC will defer RIA regulatory scrutiny to an SRO and that the SEC will actually embrace a uniform fiduciary standard.

Fiduciary – Keeping an Eye on the Ball:
The eye of this storm is Washington, D.C. Is that a good thing or a bad thing?
Fiduciary Standard Gets New — And Influential — Advocate,” (InvestmentNews, August 22, 2011) While the Committee for the Fiduciary Standard exists more as an ad hoc tool, the Institute for the Fiduciary Standard seeks a more permanent place at the table.
New Institute to Educate, Advocate on Fiduciary Standard,” (Advisor One, August 23, 2011) More details on the above.
New Institute for Fiduciary Standard Elevates the Conversation,” (Advisor One, August 23, 2011) Still more details on the above, including, for the first time, word of a September 9th meeting in Washington DC to discuss the issue of the ineffectiveness of disclosure.
DOL Officials Draw Battle Lines Over IRA Changes,” (Financial Planning, August 24, 2011) Finally, the entrepreneurial advisers are coming out of the woodwork claiming they’ll gladly take those “7 million” IRA holders who will be forced to leave brokerage houses that can’t handle the new fiduciary rule.
Despite Fiduciary Critics, Schapiro and Borzi Charge Ahead,” (AdvisorOne, September 2011) A hopeful piece that both the SEC and the DOL will stand tall against critics. Makes sense for the DOL, but, as far as the SEC is concerned,… here’s to hoping…

Fees – Surging Ahead:
Don’t get too complacent. It’s not the winds that get you, it’s the storm surge. When the new 401k fee disclosures blow in, that won’t be the only thing to hit the fan.
Providers Get A Jump On Retirement Plan Fee Disclosure,” (InvestmentNews, August 21, 2011) The DOL’s new fee disclosure requirements are fairly comprehensive as they pertain to disclosing fees to plan sponsors. Plan participants, on the other hand, don’t get the pleasure of seeing all these fee disclosures.
Impact of fee disclosure on retirement industry,” (BenefitsPro, August 25, 2011) A good summary overview of the topic, including this classic warning: 401k plan investors are under the impression they’re getting their services for free.

Investments – The Big Wind Dies Down:
The slow unraveling of Modern Portfolio Theory, long quashed in academia, continues its sluggish demise in the eyes of the industry as its awful side effects earn more recognition.
Father of Index Funds Slams ETF Speculators,” (Institutional Investor, August 18, 2011) John Bogle, the Dr. Frankenstein of the index fund world, suddenly realizes he’s created a monster.
Risk and the 401k Plan Sponsor,” (BenefitsPro, August 24, 2011) An excellent overview of all that is wrong with the fundamental building block of Modern Portfolio Theory – and a hint on how to make everything better.

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.
401k Plans Hang On As Ride Gets Rough,” (InvestmentNews, August 21, 2011)
For Many Seniors, There May Be No Retirement,” (Wall Street Journal, August 22, 2011)
6 key trends for DC retirement plans,” (BenefitsPro, August 23, 2011)
4 Tips for 401k Participants,” (, August 24, 2011)
5 retirement tactics in a low-interest-rate world, (MarketWatch, August 25, 2011)
When Not to Invest in Your 401k,” (Forbes, August 25, 2011)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: Proxy decision could have effect on fiduciary rule; analysis of SRO situation

Hot Tips from Popular Web Resources:
American Academy of Actuaries: Retirement Account Newsletter
Wolters Kluwer: Fiduciary exception to attorney-client privilege extends to documents subpoenaed in DOL audit
IRS: Master and Prototype Plan Sponsors – Responsibilities and Tips
Wagner Law group: Case Suggests That RFPs May Be Necessary to Fulfill Fiduciary Duties
401khelpcenter: Early 401k Withdrawal Penalty

Miss anything? Feel free to add a comment below.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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