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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 6/14/13

June 17
03:08 2013

1020805_25983300_Trending_Topics_2013.06.17_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:
Is the Fiduciary Liability of Self-Directed Brokerage Options Too Great for 401k Plan Sponsors?” (, June 13, 2013). If you give 401k investors enough rope, are you responsible if they hang themselves?

Compliance – Gotcha!:
Who says regulators never regulate?
DOL, SEC Enforcement: CEO Steals Detroit Police, Firefighter Pension Cash to Buy Strip Malls,” (AdvisorOne, June 13, 2013) Plan sponsors often ask, “Regulators have all these rules, but why should I bother paying attention to them? I never see them arrest anyone.” Well, this time they arrested someone. The best advice we’ve ever heard for plan sponsors: “Act as if Big Brother is watching, because he eventually will and it will be at the most inopportune moment.”

Fiduciary – Spilling Ink While the Engine Idles:
Another week of a lot of talk and no action. Sometimes it’s only three yards and a cloud of dust and sometimes it seems like a sack. If only we can get a better idea of what the refs are thinking.
Barry Glassman Takes Advisors Behind the Scenes of the Fiduciary Standard Debate,” (Financial Planning, June 12, 2013) What if “leveling the playing field” doesn’t mean requiring brokers who offer advice to operate under the current fiduciary standard, what if it means investment advisers currently operating under the fiduciary standard no longer operating under that standard but, instead, operate under the same rules as brokers? This could be the outcome of harmonization. It would give the “edge” to advisers who wish to continue operating under the fiduciary standard, but it would add operational and compliance costs to RIAs while leaving brokers unscathed.
Do 401k plan sponsors give employees too much rope?” (BenefitsPro, June 13, 2013) More on the dangers of self-directed brokerage options in 401k plans.
CFA’s Barbara Roper Discouraged as Fiduciary Standard Debate Lingers,” (Financial Planning, June 13, 2013) Roper’s comments are consistent with what she told in last month’s exclusive interview.
80 Years of Fiduciary in 15 Minutes: TDAI Fiduciary Summit,” (AdvisorOne, June 13, 2013) A good overview of the overview.
Advisor Debate Over Fiduciary Standard: Marathon, Not a Sprint,” (Financial Planning, June 14, 2013) This is a report from TDAmeritrade’s Fiduciary Summit in Palm Beach, Florida. It’s interesting because it’s a conference in Florida, but not during the winter, and it’s main topic is “fiduciary” while being sponsored by a broker. A broker that just happens to be in favor of a rigorous fiduciary standard. That’s a lot of interesting things going on at once.

Fees – Lies, Damned Lies and Statistics:
Numbers are cruel mistresses. You just never know what you can turn up from them. And you can pretty much turn up anything you want if you’re creative. It doesn’t change reality, but it makes for good copy.
Mutual fund costs for 401k plans still dropping,” (InvestmentNews, June 12, 2013) The title is a bit confusing. Among the thing the article highlights: 1) There’s a movement away from load funds to no-load funds; 2) Assets in mutual funds are growing; and, 3) as a result, the average expense ratio is dropping. What this all has to do with “costs” is not clearly explained (except for maybe Item #1).
Disclosure rules help bring down 401k fees,” (BenefitsPro, June 13, 2013) The title says a lot more than the article. In fact, there’s nothing in the article to support the title. Even the actual data from The 401k Averages Book, which does show a year-over-year decline, shows no causation between fees and 408(b)-2 (and may reflect longer-term trends unrelated the DOL’s new rule). Still, it’s a free country, so you can think whatever you want to think.

Investments – The Picture Changes:
Sacred cows are falling one by one as respected pundits dish their drivel. How soon before the rest of the world catches up to these thought leaders? Before or after you retire?
Why Many Retirees Could Outlive a $1 Million Nest Egg,” (New York Times, June 9, 2013) This is ostensibly about your asset allocation when you retire. It goes with the assumption you should have bonds as you get older and how that’s a problem given current interest rates. So far so good, but that’s just page one. Page two is OK, too. But, once you get to page three, that’s where you’ll find the kind of problems you’d expect to find with an article from this paper. Bottom-line: It’s all about working later, retiring later and, oh, living on $150,000 a year. Wait, you don’t live in New York City? You can get by on much less than that? Oh…
Rethinking how 401k Plans Invest,” (Fox Business, June 10, 2013) Here’s a piece that blames DC plans’ underperformance vs. DB plans on asset allocation. It says DC plans have too much invested in equities. Wow. We always thought the problem was 401k investors were too conservative. Well, bonds do have the advantage of outperformance recently, but does anyone think that will continue? Also, DB plans don’t have the same expense overhead as DC plans (and we’re not talking high fees, we’re talking actually operational expenses – even if they are low fees).
Vanguard’s John Bogle Questions Usefulness of Target-Date Funds,” (On Wall Street, June 13, 2013) We already know the problem with Target-Date Funds is they point people to a date which has little relevance in the total picture (and this doesn’t even get into the “to” or “through” glidepath problem). Bogle adds another twist of the knife into the heart of these marketing darlings when he states the obvious “other” problem – target-date funds’ asset allocations assume all of the participants retirement assets are in the target date fund. This simply cannot be done for anyone expecting to receive Social Security; hence, Bogle believes TDFs are underweighted in equities and will only lead to disaster for investors.
What’s Stopping ETF Growth in 401k Plans,” (, June 14, 2013) Two things: technology and the fact that the much-trumpeted tax advantages of ETF just don’t translate to the tax-exempt investment environment.
Redesigning a Plan Investment Menu,” (, June 14, 2013) One again, imitation is the greatest form of flattery, but because Russell didn’t put a publication date on their white paper (they only referred to the month of June), we’ll never know of our series of articles on this subject (published June 4, 5 and 6th) inspired them or if it was merely a coincidence.

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.
More 401k Participants Turn to Professionals,” (Financial Planning, June 11, 2013)
Retirement Planning Myths Busted,” (, June 11, 2013)
Senior Citizens Underfunded for Retirement,” (, June 11, 2013)
Employees must change retirement mindset,” (Employee Benefit Adviser, June 12, 2013)
The 3-legged Stool Needs Another Leg,” (Employee Benefit Adviser, June 12, 2013)
Small-business owners worry about nation’s retirement security,” (BenefitsPro, June 13, 2013)
Retirement Planning Rules and Realities,” (Financial Planning, June 14, 2013)

Wisdom from Some of Our Favorite Blogs:
fi360: Fiduciary Links: Most financial planning clients wish they’d had a plan sooner |
The Chicago Financial Planner: Is a $100,000 a Year Retirement Doable? |
fi360: How the SEC and FINRA Can Strengthen the Fiduciary Standard Now |
The Chicago Financial Planner: The Retirement Savings Crisis: An Illustration |
Boston ERISA Law Blog: A Very Good Read: PLI’s ERISA Benefits Litigation Answer Book 2013 |
Squared Away Blog: Retirement Tougher for Boomer Children |

Hot Tips from Popular Web Resources:
NAPA Net: Dealing with Decision Overload |
NAPA Net: ETFs Have Yet to Take Off in DC Market |
NAPA Net: New Retirement Toolkit from Uncle Sam |
NAPA Net: Small Business Owners Want Simple, Risk-free, Low-cost Plans |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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