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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 11/15/13

November 18
00:02 2013

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:
The One Single Most Important Investing Concept a 401k Fiduciary Must Teach Every Employee Investor,” (, November 12, 2013). Like a car’s top-end gear, in the big picture 401k investing decisions are less powerful than most think.

Compliance – Does She or Doesn’t She?:
We’re not saying only your hairdresser knows for sure, but it seems there are enough million dollar retirees who can thank their lucky fortunes on their 401k to suggest that maybe this much maligned retirement vehicle actually works.
Pension Plans Scramble to Shed Risk,” (CFO, November 12, 2013) The high market is tempting pension plans to take their gains now as a way of reducing risk.
The 401k of the Future Could Save Retirement,” (TIME, November 13, 2013) Why do people continue to look to Europe when it’s obvious that system is in failure mode? Maybe the last really innovative thing from across the Pond was William Shakespeare. After all, he’s the one who said, “A rose” – or was it a “defined benefit plan” – “by any other name is still a rose.” This “401k of the Future” is really a reconstituted Ponzi Scheme – er – defined benefit plan. This movement towards defined benefits is all predicated on the false premise the 401k has been a failure. Our next article tells us something different…
‘How I Saved $1 Million’,” (Yahoo Finance, November 12, 2013) This article interviews a handful of people, most who make less than $100,000 a year and who range in age from the 46 to 64 (most are in their fifties). They all earned at least $1 million in their 401k plan. While some say it’s because of index funds (we presume the others are in actively managed funds), the real reason isn’t their investments. It’s their ability to save early and to maximize their contribution. Says one, “I learned to live on less.” Now that’s a maxim for success.

Fiduciary – Return of the Wild West:
We don’t know where Robert Conrad stands on all this, but we’ve always been a fan. It certainly looks like things are heating up.
Don’t expect a fiduciary proposal for retirement advisers until next spring, expert says,” (InvestmentNews, November 11, 2013) This is consistent with what an ERISA attorney based in Washington D.C. told us a few weeks ago at a FIRMA session in New York City.
Advisors Warned of Department of Labor’s Coming Fiduciary Rules,” (On Wall Street, November 11, 2013) It seems to have come down to this: will the DOL allow fiduciaries to engage in “prohibited” transactions or not?
Beware a Fiduciary ‘Wild West’: Graff,” (ThinkAdvisor, November 11, 2013) This third take on the same event comes up with yet another story-line. This time, the focus is on the conundrum known as “Dodd-Frank” may actually force us into two different fiduciary “standards.” Only in Washington.
White: No Time Frame for a Fiduciary Standard,” (On Wall Street, November 12, 2013) Although it’s a “high priority,” it’s apparently not high enough to merit a deadline date.
“$1B cost to harmonize adviser-broker rules would land on clients, Schwab’s Bernie Clark says,” (Investment News, November 12, 2013) OK, let’s go with this assumption and say the brokerage industry will pass on a one-time $1B cost to its clients. Academic studies have shown non-fiduciary brokerage accounts are costing clients $1B a month. So, at the end of the year, the broker-housed clients should – collectively – be $11B ahead. Sounds like a good deal to them.
Ketchum latest to urge brokers to embrace fiduciary duty,” (InvestmentNews, November 12, 2013) A smart editor would have put an asterisk at the end of this title. What Ketchum really meant, as he clarified his comments later in the article, is brokers should call themselves “fiduciaries” be still engage in the normal self-dealing brokers engage in and true fiduciaries normally are prohibited from doing.
Retirement advisers: DOL fiduciary rules still coming,” (Employee Benefit Adviser, November 12, 2013) The article mentions the oft-heard complaint that advisors will leave the small plan market if the DOL moves forward but fails to mention Borzi’s retort: For every industry player that makes this complaint, several of their competitors are telling the DOL they’d gladly take those clients. Once the playing field is level, we’ll see what the free market decides.
There is a reason we hate the word ‘fiduciary,’ Helck says,” (InvestmentNews, November 13, 2013) It’s not the word they hate. It’s the incredible amount of case law that stands behind that word. That case law effectively inhibits the industry from redesigning the word for its own devices.
Schwab Impact: Fiduciary Rule Changes at SEC, FINRA and the Department of Labor,” (Financial Planning, November 13, 2013) A pretty good synopsis of where things stand and where things are headed.

Fees – “Cuts 401k Fees…”:
“…just not our 401k fees.” We think it’s funny when the middle man shouts about high fees – as if they have nothing to do with it.
Schwab CEO: Slash 401k Fees To Aid Workers,” (Financial Advisor, November 11, 2013) Oddly enough, he doesn’t suggest removing the platform fees Schwab charges mutual funds (and which are generally passed on to investors). Rather, he suggests cutting fees by investing only in index funds. That’s like buying a cheap car that needs to be replaced in two years versus buying a moderately priced car that won’t need to be replaced until five years. As the Fram man said, “you can pay me now or you can pay me later.”

Investments – But, but, the theory says so!:
Sometimes the theory doesn’t work because, well, the theory doesn’t work. ‘nuff said.
‘Puzzle’ pieces,” (BenefitsPro, November 12, 2013) Nevin Adams take on the infamous “Annuity Puzzle.” Like the equally renown “Equity Premium Puzzle,” it’s a puzzle only because people don’t behave according to theory. Rather than thinking the problem is with the people, maybe we should consider the problem is with the theory.
4 ways 401k plan participants should respond to the great rotation,” (Employee Benefit News, November 12, 2013) Strangely, while accepting the idea of the “great rotation,” the article then tells investors how to not accept it.
Shifting gears in your 401k investments,” (BenefitsPro, November 14, 2013) Surprise! All that focus on 401k investments doesn’t amount to a hill of beans if you first don’t pay attention to these things.
One-Third of Fidelity 401k Customers Are All-in on a Target-Date Fund,” (Barron’s, November 14, 2013) This is probably telling you more about the attractiveness of a default option in general than in the attractiveness of Target Date Funds specifically.

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.
Canadian DB Plan Sponsors Addressing Challenges,” (PLANSPONSOR, November 11, 2013)
6 Steps to the Retirement Lifestyle You Want,” (, November 13, 2013)
Workplace retirement plan participation fell last year,” (BenefitsPro, November 13, 2013)
A new-old model in retirement,” (BenefitsPro, November 14, 2013)
Retirement Account Automatic Withdrawals Increase,” (Financial Advisor, November 14, 2013)
Stock gains push 401k balances to new highs,” (MarketWatch, November 13, 2013)

Wisdom from Some of Our Favorite Blogs:
MainStreet: Retirement Is a Fantasy for Many |
fi360: Anatomy of a Fiduciary Vote |
fi360: Fiduciary Links: Being an Advisor Isn’t For You |
ERISA Lawyer Blog: Seventh Circuit Overturns Summary Judgment Finding No Breach Of Fiduciary Duty |
The Chicago Financial Planner: Do You Have a Back-Up Financial Plan? |
Frugal Fiduciary: 7 Pages of Retirement Plan Wisdom |
Squared Away Blog: Will Millennials Be Ready to Retire? | Use It or “Lose” It |
The Chicago Financial Planner: 1% a Small Number with Big Implications |
Pension Risk Matters: Some U.S. Senators Seek to End Traditional Pensions For New Federal Employees |

Hot Tips from Popular Web Resources:
NAPA Net: New York Investigating State’s Pension Advisors |
NAPA Net: How Are Larger Plans Innovating? |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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