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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 5/10/13

May 13
00:06 2013

1020805_25983300_Trending_Topics_2013.05.13_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:
Institute for the Fiduciary Standard Establishes Frankel Fiduciary Prize,” (, May 7, 2013). Let’s recognize the researchers, scholars, policymakers, regulators and tireless advocates who work to advance fiduciary principles.

Compliance – BO apes Ike:
First he did Reagan. Then he did Bush. Now he’s apparently doing Ike. Can Nixon be far behind?
IRA Proposal Could Create Administrative Headache,” (, May 3, 2013) Hmm, let’s do the math here: cut the benefits of doing something and increase the costs of doing that same something equals the average person (or, in this case, small business) doing that something a lot less. When it comes to retirement plans, things get a lot worse, as small companies shed their 401k “because the burden has become too much,” they’ll find it harder to compete with bigger companies for high quality workers. Wow. Sudden realization. No wonder we don’t see a lot of big companies complaining about this. Could Obama’s tax plan be just yet another example of the big government/big business complex in action?

Fiduciary – Orwellian Regulators Threaten to Dumb-Down Fiduciary:
A few lone voices saw this coming long ago, but we optimists insisted on the veracity of our rose-hued spectacles. Now, that the end is near, we face the final curtain. Let’s make this clear: There’s still time to do it our way.
Ruling Forces Advisors to Pick Appropriate Fund Share Classes,” (AdvisorOne, May 3, 2013) More fallout from the Tibble v. Edison International decision, as explained by Fred Reish.
PBS Frontline Nails It On How Wall Street Screws Main Street,” (Business Insider, May 5, 2013) This article is placed in this category because the author, Andrew Haigney is Executive Director of the Association of Independent Investors Corp, writes in the second and third to last paragraphs, “While it’s true that, in the purest sense, a fiduciary has to put the clients’ interests first, in the real world of financial services you don’t get a pure fiduciary, in fact it’s far from it. Fiduciary duty has become just another financial industry marketing gimmick.  Make no mistake, all the conflicts of interest are alive and well in the land of fiduciary advisers.  Once the fiduciary discloses the conflicts in the fine print, the conflicts are fair game.  On top of this, fiduciary advisers tend to be higher cost, which further erodes investor value.” Is this a fair and correct assessment?
No fiduciary rule better than bad one, NAPFA official says,” (InvestmentNews, May 10, 2013) Was this the intention of the SEC all along? Much has been written about the ill-conceived and down-right biased questionnaire from the agency that many fiduciary advocates, like NAPFA, feel it’s better the industry continue to wallow in the mud than have the SEC dumb down the Fiduciary Standard into the equivalent of the Suitability Standard. In this case, we could give new meaning to an SEC “no-action” letter.
For fiduciary advocates only,” (BenefitsPro, May 9, 2013) Fiduciary advocates are losing the war for the fiduciary standard because they’ve chosen to play on their opponent’s home turf. Here’s how to turn the tables on the lobbyists, the politicians and, yes, even the regulators.

Fees – The Gift that Keeps on Giving:
We’re in the lull before the storm coming this summer, when the DOL’s Fee Disclosure Rule reaches its first birthday and receives its inevitable mixed reviews. The more important question is: Why?
Fees Continue to Impact Retirement Assets,” (Financial Planning, May 6, 2013) More hyperbole stuff, this time from an industry publication. At least they’re just using the DOL’s numbers (1% reducing retirement balances by 28%) instead of John Bogle’s imaginary 2% eating up 67% of one’s retirement assets. Trouble is, what if those higher fees led to higher or safer returns. That’s the new twist on the DOL’s take and that’s the interpretation the DOL is holding plan sponsors accountable for.

Investments – Life During a Princely Market:
If we can redefine fiduciary to include self-dealing, then we can certainly redefine momentum stocks to being something different than growth stocks. Why not? The market’s at all-time highs. Everyone is happy and willing to party like it’s 1999… or 1969… or 1929… or 2007… or… Well, at least some folks are trying to warn us.
Momentum investing gains momentum,” (InvestmentNews, May 7, 2013) As it should when the market reaches record territory. The article claims “momentum” is not the same as “growth,” although decades of usage might disagree. In either case, it says momentum takes advantage of optimism while value takes advantage of pessimism. That’s one way to look at it.
Not All Index Funds are Created Equal,” (, May 8, 2013) This is a must read article for anyone considering investing in index funds. The piece highlights an issue long pushed aside by index advocates and helps explain why many index investors “don’t beat the index.”
‘Modern Portfolio Theory Is Dead’: Sierra’s David Wright,” (AdvisorOne, May 9, 2013) Old news. More than 15 years old. A best-selling book has already be written about it (several years ago). It’s so old, the new generations of finance professors don’t even bother discussing it. That this is news to some is what’s most disturbing.

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 Planning’ Is Old and Outdated: Elizabeth Jetton,” (AdvisorOne, May 4, 2013)
Saying No to the 401k,” (CNBC, May 5, 2013)
Why ‘lousy’ 401k plans are a good thing,” (Employee Benefit News, May 6, 2013)
Many Retirees Going Back To Work, Study Says,” (Financial Advisor, May 6, 2013)
Health care a retirement wild card,” (Employee Benefit News, May 7, 2013)
7 Must-Do’s When You Open a 401k,” (, May 8, 2013)
Retirement plans rebound at small businesses,” (Employee Benefit News, May 7, 2013)
Retirement Readiness Worries Persist Despite Record 401k Balances,” (Bank Investment Consultant, May 7, 2013)
Small-business retirement plan balances up 20% since 2007,” (LifeHealthPro, May 7, 2013)
Orphaned 401k accounts stacking up,” (BenefitsPro, May 9, 2013)
Student Loan Debt Could Affect Retirement,” (, May 20, 2013)

Wisdom from Some of Our Favorite Blogs:
Retirement Plan Blog: Marshmallows and 401k Plans  |
Boston ERISA Law Blog: Microblogging About ERISA on Twitter  |
fi360: Fiduciary Links |
The Chicago Financial Planner: Winning The Retirement Gamble: Step 1 Adjust Your Mindset |
Pension Risk Matters: Valuation and ERISA Fiduciary Liability: Traps for the Unwary Appraiser |
ERISA Lawyer Blog: Second Circuit Requires Specific Allegations To Establish A Claim Of Imprudent Investment |
fi360: Financial Planners as Fiduciaries |
Scholarly Financial Planner: “Professionalism” – Dick Wagner’s 1980 Article Relevant to Today’s Fiduciary Debates |
The Chicago Financial Planner: Stock Market Highs and Your Retirement |
ERISA Lawyer Blog: Third Circuit Upholds Penalty For Failure To Provide COBRA Notice |
The Chicago Financial Planner: Friday Finance Links May 10, 2013 – Happy Mother’s Day (and Final) Edition | (Un) Realistic Expectations |

Hot Tips from Popular Web Resources:
NAPA Net: Just Saying You’re a Fiduciary Destroys Trust Instead of Building it  | Are Men From Mars and Women From Venus on Retirement Expectations? |
NAPA Net: The Last Word on ‘Retirement Gamble’  |
NAPA Net: EBSA Proposes Changes to DC Benefit Statements Requiring Stream of Income |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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