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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 2/1/13

February 04
00:20 2013

1020805_25983300_Trending_Topics_2013.02.04_stock_xchng_royalty_free_300Welcome 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:
Morningstar Star Ratings: Do They or Don’t They Predict?” (, January 29, 2013). If you thought Shrödinger’s cat had it tough, wait to read this.

Compliance – The Sleeping Giant Stirs:
Though not quite awake, he’s certainly getting there. This sort of thing excites fiduciary reporter like the pre-dawn hours of Christmas excites a seven-year old.
ASPPA Asks for Clarity About MEP Reporting,” (, January 28, 2013) File this under “Oops!” It appears the DOL demand that individual companies in certain MEPs file individual 5500s is contrary to what the IRS says.
Retirement reform a likely target for Obama’s second term,” (BenefitsPro, January 28, 2013) Marcia Wagner, respected ERISA attorney, explains what she sees as the retirement reform agenda for this year. It’s actually not as bad as you might expect.
FSI Officials ‘Not Hopeful’ About Ultimate DOL Decision,” (Financial Advisor Magazine, January 29, 2013) Much to the chagrin of the brokerage community, the DOL is likely to allow brokers to provide only brokerage services under their brokerage license. It appears if brokers want to call themselves “advisers,” they’re finally going to be regulated like any other registered investment adviser – at least as the service pertains to retirement plans. Until the SEC catches up to the DOL, brokers can still get away with calling themselves “advisors” (notice the “-or” as opposed to the “-er”); thus, continue to confuse unaware non-retirement investors.
Retiring Senator Harkin plans to introduce in February a bill to advance his USA Retirement Funds initiative,” (AdvisorOne, January 29, 2013) Before extinction, this dinosaur pledges to do his best to revive another extinct dinosaur.
Emboldened Borzi Is Back,” (AdvisorOne, January 31, 2013) This is a great article about a great lady. When all her peers succumbed to politics, Phyllis Borzi stayed above it, willing to take on both parties to do the right thing. And now, expectations are she is about to take the first step towards an honest adoption of a true uniform fiduciary standard.
Fiduciary proposal seen coming, adviser SRO seen slipping into oblivion,” (InvestmentNews, February 1, 2013) As if on cue, here’s news that the SEC is promising to come out with its Uniform Fiduciary Standard in the summer.

Fiduciary – There’s a Storm a-Brewin’:
At least it appears that way from these series of articles, which were published prior to some of those above. If FSI does intend to battle the DOL (and, eventually, the SEC), they probably won’t have as much political cover as they did last year.
New regs leave 401k biz ‘wide open’ for advisers,” (InvestmentNews, January 28, 2013) Smart plan sponsors have realized the increasing regulation on the part of the DOL has increased their personal fiduciary liability. As a result, they’re turning to financial professionals to transfer – to the extent possible – as much of the liability as possible. Some service providers will be willing to take on that risk. Some won’t. Will the latter admit it, or will they continue to try to service the 401k market?
FSI Ready for Fiduciary Battle,” (Financial Planning, January 29, 2013) FSI believes the term “fiduciary” is not fixed but represents of “spectrum” of possibilities. Well that certainly makes things less clear. More colorful, but less clear. Hmm, come to think of it, maybe we’re too strict in our definition of the term “doctor.” After all, in medieval times, barbers did a fine job applying leaches.

Fees – Is This the Best They Got?:
Sorry, but no one has a right to enjoy the fruits of a business model when someone else can’t. It’s either free the RIAs (and let them plunder clients) or place the same restrictions on RIA-wannabes (and startle clients by making fees transparent).
Advisors May Still Lose Right to Earn Commissions on IRA Advice,” (AdvisorOne, January 30, 2013) “To every client (Churn, Churn, Churn)/There is a reason (Churn, Churn, Churn)/And a self-dealing commission for every purpose…” Yes, sports fans, prohibited transactions are for the Byrds! “Advisers” won’t lose the right to charge commissions – they never had it – but, to level the playing field, brokers might have to give up the conflict-ridden practice. Needless to say, this article presents the counterpoint to this argument, almost as if it came straight from FSI’s marketing arm.

Investments – “What Does It Matter?”:
This might be hard to swallow for anyone who has made their career in the investment business, but there appears to be a growing meme that it all just doesn’t matter. Soon, we’ll have to start asking the obvious questions. And that will be hard.
What’s the story behind Morningstar’s Star Ratings?” (BenefitsPro, January 30, 2013) Ever wonder what happens when a reporter writes a story. Here’s an example, one that might be of interest to 401k plan sponsors, their vendors and ERISA regulators.
Retirees and stocks: Sell now or hold on?” (MarketWatch, January 31, 2013) A surprising array of contradictory answers, all of which, believe it or not, can be correct. The simple answer: discipline.
Analysis: Rate pressures on pensions wipe out billions in profits,” (Reuters, January 31, 2013) Here’s one of the problems of asset allocation – one of the asset classes, we’ll call it “fixed income” isn’t just about income, it’s about safety. Sometimes, there’s such a huge demand for safety, there’s no reason to pay for it. That is why we have low interest rates. Now, marry this reality to a traditional balanced portfolio – say, a pension – and you see the conundrum. The “fixed income” portion of the asset allocation just isn’t paying its weight, and plan sponsors are forced to deal with it in one of two ways: increase risk or increase corporate contributions (and decrease profits).

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.
When tapping your 401k early is okay,” (MarketWatch, January 28, 2013)
The Pros and Cons of ESOPs,” (, January 28, 2013)
Many Unprepared for Retirement, but Still Hopeful,” (, January 28, 2013)
The decumulation debacle, (BenefitsPro, January 29, 2013)
Savers snub new Roth 401k perk,” (MarketWatch, January 29, 2013)
Don’t Make These Five 401k Excuses,” (, January 29, 2013)
Stern Advice: The $19.4 trillion minute,” (Reuters, January 30, 2013)
Americans Rip Up Retirement Plans,” (Wall Street Journal, January 31, 2013)
Gens X and Y Need to Make Retirement Savings a Priority,” (, January 31, 2013)

Wisdom from Some of Our Favorite Blogs:
Boston ERISA Law Blog: A Belated Discovery and a New Blog to Recommend: ERISA Pundit |
The Chicago Financial Planner: Choosing the Right Financial Advisor – Key Considerations |
fi360 Blog: Fiduciary Links: IOSCO report not approved by SEC |
The Chicago Financial Planner: ETFs – 4 Factors to Consider Before Buying |
Boston ERISA Law Blog: A Football Story for Super Bowl Sunday, or Why Alex Smith Would Make a Great Fiduciary |
fi360 Blog: Birth of an Industry Leads to Need for Specialization |
The Chicago Financial Planner: Friday Finance Links February 1, 2013 – Super Bowl Edition |

Hot Tips from Popular Web Resources: Tax Incentives for Retirement Plans: Lessons from Denmark? | The Annuity Puzzle Picture |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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