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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 7/12/13

July 15
00:14 2013

1020805_25983300_Trending_Topics_2013.07.15_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:

The Retirement Saver’s Secret (as in ‘Under Appreciated’) Weapon,” (, July 9, 2013). There’s the usual reason people say to save in tax-deferred retirement plans, then there’s this, much sexier, reason.

Compliance – It’s My Ball and I’m Going Home:
When you don’t win the verbal argument, you change the rules. That’s the credo of every poor sport.
Senator Aims to Strip DOL’s IRA Fiduciary Power,” (AdvisorOne, July 9, 2013) Here we go. It just shows how far lobbyists’ dollars can go. Ain’t bein’ a politician fun?

Fiduciary – From the Sublime to the Ridiculous:
The term “fiduciary: used to mean something good, something honorable, something beyond reproach. Now it appears it’s about to mean nothing. Well, it had a good run.
Brokers Willing to Pay Up for Fiduciary Standard: SIFMA,” (BenefitsPro, July 8, 2013) This is a reiteration of what we heard last week. The industry lobbyists claim a fiduciary standard will leave brokers paying an addition $8 million in compliance costs. But, hey, they’re cool about it. They’ll accept a uniform fiduciary standard – as long as it allows them to continue to violate the duties of a fiduciary.
Fiduciary duty boosts revenue, not compliance costs: FPC,” (InvestmentNews, July 8, 2013) Hear Ye! Hear Ye! This is based on actual market data, not on the theoretical gibberish spouted by the opposition.
SEC Warned Fiduciary Rule Would Confuse Consumers,” (Financial Advisor, July 8, 2013) This is a warning about “Fiduciary Lite,” where advisers would continue to operate under the more stringent standard while brokers would merely be labeled as “fiduciaries” but would actually remain able to enter into self-dealing transactions.
The Not So Uniform Fiduciary Standard,” (Financial Planning, July 9, 2013) Did we miss something? According to this article, Dodd-Frank requires any universal fiduciary standard to allow normally prohibited self-dealing like commission-based selling. We thought the gargantuan bill required any fiduciary standard to be “no less stringent” than that currently imposed on RIAs. We’ve said it before, it’s not the word “fiduciary” that’s at issue, it’s the words “adviser” and “advisor.” The best solution: If you engage in self-dealing you’re a broker and you cannot describe your business using the words “adviser” or “advisor.” Only a fiduciary can use the term “adviser” or “advisor.” There, we’re done. Oh, yeah, one more thing: no more dual registrations – you’re either a broker or you’re an adviser, you can’t be both.
NAIFA Responds: Fiduciary Costs Would Hurt Reps, Clients,” (AdvisorOne, July 12, 2013) Let’s see, fiduciary advisers are currently paying for regulatory costs brokers do not have to pay for, yet brokers are able to claim they are “advisors.” This is about leveling the playing field, making it clear to investors what service they are receiving and, in general, doing what’s right. Why should brokers not pay the same regulatory costs that registered investment advisers are currently paying? Why should brokers be allowed to have lower infrastructure costs while offering the same (i.e., competing) services?  And, who says the brokers aren’t already getting paid and the clients aren’t already paying these costs? Just because they don’t write a check doesn’t mean clients aren’t paying for the service. Or, is NAIFA saying there such a thing as a free lunch?

Fees – If I Only Knew Then What I Know Now:
401k fee disclosure is a flop. What better testament to that fact than this fact: only sophisticated fiduciary advisers know how to navigate its foggy waters.
After Fee Disclosure, Negotiating a Better Deal,” (, July 8, 2013) Normally we don’t cite podcasts (like this) – or videos or cartoons or non-text media – but, heck, we’re desperate for stories on fees. And the media world is changing.

Investments – From the Ridiculous to the Sublime:
Can it be? Can it be that things are really starting to make sense? Can it be that we finally understand why annuities are not the cat’s pajamas insurance companies would have us believe? Can we believe plan sponsors are finally seeing the light and simplifying menu options?
Retirement Savings: Higher Contributions vs. Higher Returns,” (Financial Planning, July 1, 2013) This is put in the investment category only because it is yet another study that confirms savings is more important than investment return. According to the article, the impact of investment return only beats the contribution rate when an investor starts investing at a young age, but the difference only means the employee is incredibly wealthy instead of merely wealthy.
CBO Finds Annuities A Bad Idea for Retirees,” (On Wall Street, July 9, 2013) Ever since 1965, academic models suggested retirees, especially those with no desire to leave anything for their heirs, should bet it all on annuities. Well, a recent study has just been released. It’s conclusion: “Whoops!” Turns out all those folks who avoided annuities have done the right thing after all. Good for those folks. Smarter than all those professors. Amazing.
Are annuities a bad idea for retirees?” (Employee Benefit News, July 11, 2013) A shorter version of the above story, but with an added “I told you so” thrown in for good measure.
Investment Menu Simplification on Sponsors To-Do Lists,” (, July 11, 2013) Once again, this article touches on a subject already addressed (several times) in articles. It’s good to know people are listening (or reading).

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.
DOL Files Brief in RJR Stock Drop Case,” (, July 8, 2013)
The hidden costs of 401k loans,” (MarketWatch, July 8, 2013)
401k outperforms pension in EBRI study,” (BenefitsPro, July 8, 2013)
Eli Lilly 401k gets a makeover,” (BenefitsPro, July 9, 2013)

Wisdom from Some of Our Favorite Blogs: “Better” Business? |
Boston ERISA Law Blog: To Boldly Go Where No Class Action Plaintiff Has Gone Before: Church Plan Class Actions |
fi360: Fiduciary Links: Comments related to the SEC’s Fiduciary Rulemaking have arrived |
fi360: Comments to SEC regarding fiduciary harmonization |
fi360: Fiduciary Comment Day Arrives |
Scholarly Financial Planner: Aunt Bea Testifies: “I AM ANGRY. I FEEL BETRAYED” (A Tale of Fiduciary Woe) |
The Chicago Financial Planner: Annuities: If You Aren’t Getting 2.5% on Your Investments … |
Scholarly Financial Planner: A Message to Congress: It’s Time to Employ a Little COMMON SENSE (2013) |
The Trust Advisor: Two Camps Weigh In on Uniform Fiduciary Standard |
Squared Away Blog: Retiree Paralysis: Can I Spend My Money? |

Hot Tips from Popular Web Resources:
NAPA Net: The Not So Uniform Fiduciary Standard |
NAPA Net: Infographic on Impact of Loans and Hardships |
NAPA Net: Should Auto-enrollment Be Mandatory? |
NAPA Net: Hatch Introduces Comprehensive Retirement Bill |
NAPA Net: The Post-Fiduciary Movement |
NAPA Net: Whose Revenue (Sharing) is it Anyway? |
NAPA Net: DOL Fiduciary Rule Slated for October |
NAPA Net: Helping Clients with Fiduciary Liability Concerns |
NAPA Net: The Hot Rod of Retirement Savings Vehicles |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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