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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 1/27/12

January 30
00:11 2012

1020805_25983300_Trending_Topics_2012.01.30_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. But, note this well, we avoid press releases masquerading as news stories (even though they might be reported by journalists) as well as mass media pabulum that merely mouths investment myths and mistakes.

FiduciaryNews Lead Story:
Benchmarking: The Key to a 401k Plan Sponsor’s Fiduciary Compliance Review,” (Fiduciary News, January 25, 2012). Reviewing the history of your 401k plan creates a foundation for a good fiduciary compliance review – but may reveal cracks that need to be filled in first. This article was the first of three in a series that appeared last week, including “Are 401k Plan Sponsors Making the Fiduciary Grade?” and “The Best Way 401k Plan Sponsors Can Benchmark Their Plans.”

Fiduciary – Life goes on as the battle rages:
The lobbyists honed their knives and appeared to gain the upper hand in killing the fiduciary standard. Meanwhile, key advocates moved to a new arena. While the politicos are business winning the battle between the Avenues in Washington D.C., those in favor of the fiduciary standard understand the war can only be won – or lost – on the streets of marketing.
Battle Over a Broker’s Duty Reaches a Standstill,” (Wall Street Journal, January 24, 2012) This is a more balanced article than the editorial that appeared last summer against the fiduciary standard. The author makes it clear the brokers are not duty-bound to act in the client’s best interest.
FSI OneVoice leaders call for membership, advocacy as Washington identifies fiduciary definition,” (Financial Planning, January 24, 2012) Rarely are lobbyists to brazen with their agenda.
Industry Groups to DOL: Fiduciary IRA Request ‘Difficult’,” (AdvisorOne, January 24, 2012) The bad news is the industry remains with its heals dug in. The good news is the DOL is just as adamant to get something out.
Key rule for brokers and advisers is broken,” (MarketWatch, January 25, 2012) Author Chuck Jaffe bluntly blames the SEC for failing to follow through on its decision last year to adopt the fiduciary standard. This article is only for those who can handle the truth.
How plan sponsors can create a fiduciary report card,” (BenefitsPro, January 26, 2012) Get it? Got it? Done! It’s that simple. And that helpful.
The Blame Game: Protecting Fiduciary Advisors From Unreasonable Liability,” (AdvisorOne, January 24, 2012) If investment advisers are like doctors, will they get sued like doctors? Yes, but the outcome has been much more reasonable for advisers compared to doctors. Also, it would help if Bob used the “er” ending when he’s talking about advisers acting in a fiduciary capacity.

Fees – Sometimes you get what you pay for:
A big industry player plans to roll out a new low-cost product that raises more questions than answers. On the other side of the coin, we learn the true cost of saving money might be greater than the money saved.
Low-cost entries shake up small retirement plan market,” (Reuters, January 25, 2012) Looks like Vanguard is planning to charge 32 basis points for servicing 401k plans under $20 million. The article doesn’t make it clear what services they are providing.
What it could cost to not buy advice,” (BenefitsPro, January 26, 2012) Too many 401k fee articles seemed to write the adviser out of the equation (mostly because so many advisors are conflicted, they want to toss our advisers with the bath water). This article shows the consequences of this penny-wise-pound-foolish idea.

Investments – Does anyone remember the root cause of 2008?:
“The secret of investing is products.” Proving once again the art of marketing trumps the science of investing, we’re starting to see the broader consequences of a financial industry focused more on the delivery system instead of the goal itself.
ETF bubble may be about to burst,” (CNN, January 23, 2012) This is really two stories. One revolves around the idea the ETF index market may be saturated, which was long considered a risk. The other is, while actively managed ETFs have been slow out of the gate, none have come from brand name managers with track records. That may be about to change.
Target-Date Funds Beat Q3 Returns, End 2011 Down: Ibbotson,” (AdvisorOne, January 23, 2012) Another independent source blasts the investment performance of TDFs.
CNBC Trader Talk Blog — Pisani: When Will ETFs Break Into 401k Business?” (CNBC, January 24, 2012) CNBC’s Bob Pisani offers a counterpoint to the above CNN story, although, if you read the article, it sounds more like a PR piece for a specific business’s product. The premise is good – unbundling fees – but it appears the company, and Pisani, left the independent investment adviser out of the equation. He also omits the investment shortcomings of ETFs, making them seem to be a total solution.

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.
6 Critical Trends for Retirement Plans in 2012,” (AdvisorOne, January 19, 2012)
Americans remain committed to retirement with the 401k,” (Reuters, January 24, 2012)
401k Participant Transfer Activity Slowed in December,” (, January 24, 2012)
Overwhelming Support Shown For Defined Contribution Retirement Plans,” (Financial Advisor, January 24, 2012)
54% of DC plan participants think they can retire comfortably,” (Pensions & Investments, January 25, 2012)
Retirement in America is ‘endangered’,” (MarketWatch, January 26, 2012)
How Much Do 401k Plans Cost the Treasury?” (SmartMoney, January 25, 2012)
Employers working to help employees save for retirement,” (BenefitsPro, January 25, 2012)
Retirement Plan Participants Want Simple Guidance,” (, January 25, 2012)
State Street study finds retirement plan participants want direction from employers,” (Financial Planning, January 26, 2012)
401k plans to Overtake Pensions as Primary Retirement Vehicle in 2012: State Street,” (AdvisorOne, January 27, 2012)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: 2012 State of the Union address
fi360 Blog: 2012 State of the Union address recap

Hot Tips from Popular Web Resources:
Society of Actuaries: Big Question: When Should I Retire?

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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