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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 9/7/12

September 10
00:34 2012

Welcome to 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:
Three Outside-the-Box Tips for 401k Plan Sponsors,” (, September 5, 2012). Is the call for “harmonizing” the SEC and DOL versions of the fiduciary standard merely a ruse to thwart the entire effort?

Compliance – The Cost of Babysitting:
States and municipalities are discovering they can no longer afford to provide pension plans for their workers. Time to let the children out of the house and learn what their private sector counterparts have about fending for themselves. This, of course, leads to an interesting question: If the state no longer acts as a fiduciary, shouldn’t we require the adviser to therefore act as a fiduciary?
When duty clashes with public policy,” (InvestmentNews, September 2, 2012) State run pension plans currently require fiduciary oversight. Will laws that allow an opt-out provision, like the one being proposed now in Michigan, expose investors by removing that fiduciary protection?

Fiduciary – A Rising Tide:
Just as it seemed the cause of “Fiduciary” would melt into the sunset, from the morning dawn comes the charge of the right brigade. A veritable who’s who of veteran industry pros has marched on the landscape in defiance of the Evil Eye of largess. Who will remain standing once the dust settles?
Fiduciary Rule Backers Renew Critique of Oliver Wyman Study,” (AdvisorOne, August 31, 2012) The study has all the charm of Oliver Cromwell.
Why Focus Only on the Surface Costs of Fiduciary Advice?” (AdvisorOne, September 5, 2012) Said another way, “What is the cost of ‘free’ advice?” Or still another, another way, “Since when is a salesman considered an adviser?”
Surprise! Fiduciary advocate calls FINRA best hope for progress,” (InvestmentNews, September 5, 2012) Only because the SEC is acting with the speed of a turtle. Not all fiduciary advocates agree that FINRA is the best option.
Fiduciary advocate Rostad plods along, despite gridlock,” (Reuters, September 6, 2012) Good interview with Knut Rostad. All is not lost. And welcome to “Fiduciary September.”
Kicking SEC’s Fiduciary Efforts Back Into Gear,” (AdvisorOne, September 5, 2012) More on “Fiduciary September.” Plus an expectation that the SEC will issue its ruling in November.
An Obama win could hurt retirement plan advisers, some say,” (InvestmentNews, September 7, 2012) The article assumes the DOL will only change its Fiduciary Rule if Obama wins. It further assumes such a change would hurt advisers. Number 1: The DOL is less political than the SEC and has demonstrated it’s less dependent on politics (we’d say “partisan” but both Republicans and Democrats have asked the DOL to slow down). Number 2: Some say adopting the rule will help investment advisers by leveling the playing field. And Number 3: The last time we had an administration change, the DOL went ahead and issued its new rule anyway (that one had to do with individual advice for 401k participants and was immediately rescinded by the incoming administration).
Schapiro still married to idea of single fiduciary standard,” (InvestmentNews, September 7, 2012) We’ll venture a guess: The job was a lot more complex than expected and she’ll need another four years to complete it.

Fees – KISS – not!:
You’d think service providers would make things easy, or at the very least legible. You’d think wrong.
Americans: Five-Minute Fee Disclosures, Please,” (AdvisorOne, August 29, 2012) Make it short, make it simple. Interesting tidbit from the article: almost 90% of participants didn’t realize they were paying a fee.
Sponsors Need Help Following Fee Disclosure Deadline,” (, September 7, 2012) The article highlights 5 tips: Manage Plan Sponsor Expectations; Address Participant Confusion; Explain Fees and Services; Help Sponsors Piece It All Together; and, Ensure Brokerage Windows are not Broken.

Investments – Step Right Up!:
Come see the latest elixirs, guaranteed to be more sizzle than steak, but also guaranteed to help line retirement plans – of the product salesmen. In an investment world filled with the razzle dazzle of “the latest thing,” its best to remember this piece of advice from a dead language: caveat emptor.
New 401k Fee Disclosure Rules Would Give Low-Cost ETFs an Edge,” (ETF Trends, September 5, 2012) Look, you’ve got to not get mad when you read the beginning of this article and you get the usual “ETFs are lower cost than mutual funds” mantra. First, the author admits the lower cost is due to the fact most ETFs are index funds, which ought to be cost lower. Second – and this is the juicy part – the article suggests the primary advantage of ETFs (and index funds in general) is the tax savings, which is irrelevant to 401k investors. The article then goes on to explain why ETFs haven’t necessarily fit well with 401k plans.
Jumping Out The 401k Brokerage Window,” (Forbes, September 24, 2012) Before you think you’ve just seen a typo, this article was released on the internet in advance of its print date, which is the date you see here. In what starts out as an apparent promotion of 401k brokerage windows, the article ends with the serious concerns fiduciaries should have about them. It doesn’t provide answers, which is probably good at this point in the discussion, but it does raise questions. These questions are similar to the ones raised in the early years of 401k – how much control should a plan sponsor cede to the employee? Back then, it was “daily switching” – the ability to change investments on a daily basis. This feature was both advocated and made possible by the mutual fund industry. Yet, even today, some fiduciary advisers – particularly those familiar with behavioral economics – consider this “giving participants enough rope to hang themselves.” Is the 401k brokerage window just more rope?

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 ‘Savings Gap’ Exaggerated, Says New Report,” (Institutional Investor, August 27, 2012)
3 Common Retirement Mistakes,” (AdvisorOne, August 31, 2012)
The worst retirement investing mistake,” (CNN, September 4, 2012)
Retirement account balances rose in August,” (BenefitsPro, September 4, 2012)
The best age to retire? Check the list,” (InvestmentNews, September 4, 2012)
And now a few words from our 401k plan sponsor,” (BenefitsPro, September 5, 2012)
Doing your part on National 401k Day,” (BenefitsPro, September 7, 2012)

Wisdom from Some of Our Favorite Blogs:
fi360 Blog: Fiduciary Links: Public pension plan fiduciaries don’t have the luxury of being political with their dutiesBoston ERISA Law Blog: On the Problem of Remedying Errors in Providing Plan InformationThe Chicago Financial Planner: Lessons From the Groupon and Facebook IPOs

Miss anything? Feel free to add a comment below.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA


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