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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 4/11/14

April 14
00:03 2014

1020805_25983300_Trending_Topics_2014.04.14_stock_xchng_royalty_free_300Welcome to FiduciaryNews 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:
Employment Statistics, Fiduciary Duty and 401k Investor Angst,” (FiduciaryNews.com, April 8, 2014). Fiduciary Duty is more than just about fees.

Compliance – An Alternative Future:
It’s true we can learn from our mistakes, and that’s the only way things will be different.
Can Another Detroit-Style Pension Crisis Be Avoided?” (ThinkAdvisor, April 3, 2014) The short answer is “yes.” The reasons cited in the article stem from municipalities not contributing what they want to contribute and an overreliance on a single “pillar” when public employee retirement should comprise four distinct “pillars.”

Fiduciary – Both Sides Talking Past Each Other:
But it all comes down to this: Who will ultimately produce the most convincing marketing plan?
New flavor of outsourced fiduciary for retirement plans hits the market,” (InvestmentNews, April 2, 2014) Rather than a new type of service, the title simply refers to a renewed effort to promote an existing service – the 3(16) plan fiduciary. It is this service that comes in many flavors, so plan sponsors need to be exactly sure what they are getting. Also, as 3(16) services pertain primarily to administrative services, they are not provided by the usual financial professionals (who normally provide 3(38) services), but by third party administrators and recordkeepers. Bear in mind, a firm providing 3(16) services cannot provide 3(38) services and vice-versa. Well, given the current permissiveness of regulators pertaining to self-dealing conflicts-of-interest, who knows, maybe that’s one you can keep as long as you disclosure you’re setting your own fees with no independent oversight.
AARP: Plan Sponsors Strongly Favor Fiduciary Duty For DC Providers,” (Financial Advisor, April 7, 2014) We would have been more impressed if this came from the PSCA rather than AARP. After all, what’s AARP got to do with plan sponsors (plan participants, potentially yes, but plan sponsors is a stretch). Still, the numbers reflect a higher understanding “Fiduciary Duty” and the potential negative implications of “conflicts-of-interest” than many have previously suspected.
Did March Mark a Tipping Point in Fiduciary Rulemaking?” (ThinkAdvisor, April 8, 2014) Another great article by Knut Rostad giving you the lay of the land in no uncertain terms as only Knut can. He feels the DOL is waxing and the SEC is waning when it comes to their respective fiduciary regulations. Read the article to find out what inside information gives him reason to say why.
DOL Fiduciary Rule Could Lead to Billions in Retirement Cash-Outs: Study,” (On Wall Street, April 10, 2014) A study commissioned by brokers found that if the DOL treats IRAs the same way it treats other retirement plans, brokers by the boatload will quit the business. The brokers say this will leave million high and dry with no service. Other the other hand, this would probably be good for advisers and direct-buy mutual funds, who would stand to benefit from the brokers pulling out.
DOL Fiduciary Plan Could Hurt Workers Changing Jobs: Study,” (ThinkAdvisor, April 9, 2014) A variation on the theme of the immediately preceding article.

Fees – Policy Wonks are People, Too:
And that means they can be just as wrong as the hoi polloi. The best thing to do is learn from the watch dogs and listen to the whistle blowers.
True price transparency,” (BenefitsPro, April 9, 2014) Interesting idea. What if everyone had to disclose their fees upfront, like RIAs have to do in their ADV Part 2?
Merrill Lynch’s Thiel: Fee transparency key to restoring trust,” (InvestmentNews, April 10, 2014) Really? No, we mean, REALLY?! And Thiel has the arrogance to end with a claim that we need the “fiduciary standard”? Then why are big brokerage firms fighting so hard against the fiduciary standard? And, if fee transparency so important, why isn’t Merrill Lynch doing it in advance of any requirement to do it? After all, if Thiel is right, that would give them ol’ ML a competitive advantage, right? And if fee transparency is a key competitive advantage why are so many clients still at firms that hide fees instead of at firms that are currently required to follow the true fiduciary standard? I think we already know the answer.
Think Tank Recommends New Type of Fee Disclosure,” (PLANSPONSOR, April 11, 2014) We wonder why this publication would even publish a story on this report. The authors of the report clearly fail to understand what 401k fee disclosure is all about. They want simple label, in effect, say: “Warning: Your 401k is paying 5 times more than a low cost fund.” Well, that’s all fine and good, but they don’t offer the disclosure which the DOL is looking for which is: “Congratulations! Your 401k is receiving 5 times more service than the least serviced fund.”

Investments – Why we’re so stupid:
Nobody gets it! Nobody gets it! Nobody gets it!
‘Risk Tolerance’ Questionnaires: Should We Even Bother?” (WealthManagement.com, April 8, 2014) This article assumes you should bother only with a more sophisticated questionnaire. The real answer appears in this article: “Should 401k Plan Sponsors Ban Risk Tolerance Questionnaires?FiduciaryNews.com, August 13, 2013). Read the FiduciaryNews.com piece and you’ll see why not only won’t you want to bother with them, you won’t want to touch them with a ten-foot pole.
How to Avoid Getting Ripped Off By ETFs,” (USNews.com, April 7, 2014)  …and another fad bites the dust…
It’s not the unemployment rate, stupid! It’s total employment,” (BenefitsPro, April 8, 2014) Want to know which way the market is probably going? This article tells you what tea leaves to look at.

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.
5 tips for maximizing 401k tax benefits,” (BenefitsPro, April 7, 2014)
Baby boomers continue retirement confidence slide,” (Employee Benefit News, April 7, 2014)
IRA Shift: Gen Y Pick Roth IRAs Over Traditional IRAs,” (Financial Planning, April 7, 2014)
When boomers face separate retirements: the dos and don’ts,” (BenefitsPro, April 7, 2014)
8 best practices in 401k and 403b plan design,” (Employee Benefit News, April 8, 2014)
Stop IRA Rollovers ‘Immediately,’ Expert Warns After Tax Ruling,” (ThinkAdvisor, April 8, 2014)
4 Essential IRA Planning Tips,” (USNews.com, April 8, 2014)
What 401k Plans Can Learn from 403b Plans,” (PLANSPONSOR, April 8, 2014)
No Retirement Crisis, But Financial Advisors Help Urgently Needed,” (On Wall Street, April 8, 2014)
Middle-Income Americans Lack Understanding of Retirement Tax Impact, New Study Says,” (Insurance Broadcasting Daily, April 9, 2014)
Mountains of paperwork make 401k transfers a tough hill to climb,” (InvestmentNews, April 10, 2014)
Help employees understand retirement withdrawals,” (Employee Benefit Adviser, April 10, 2014)

Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: What I’m Reading – Final Four Edition |
Scholarly Financial Planner: 10 Strategies to Motivate Students: Instilling the 3 S’s in SUCCESS |
ERISA Lawyer Blog: Treasury And IRS Issue Guidance Facilitating Tax-Free Rollovers To Employer-Sponsored Retirement Plans |
Boston ERISA Law Blog: Ayres is Wrong, and Hecker is Wrong: Establishing a Fiduciary Breach Through Excessive Fees |
The Trusted Advisor: Can Your Practice Continue to Flourish Through the Retirement Boom? |
Boston ERISA Law Blog: Fifth Third Bancorp and the Lack of a Historical Foundation for the Existence of a “Coach Class Trustee” |
The Trusted Advisor: Cooking Up Financial Planning Advice |
ERISA Lawyer Blog: IRS Provides Guidance On Keeping Your SARSEP Compliant |
Behavior Gap: Seeing the Future |
The Chicago Financial Planner: Would You Meet With Me For $100? |
The Trusted Advisor: IRA Rollover Ruling Stuns Advisers and Savers |
Behavior Gap: The Only Goal That Matters |
ebri.org: Needs “Assessment” |
fi360: SEC Opens Door for Social Media Endorsements of Fiduciary Advisors |

Hot Tips from Popular Web Resources:
NAPA Net: ‘Expected’ Values |
Knowledge@Wharton: Borrowing from the Future: 401k Loans and Their Consequences |
NAPA Net: TDFs Gaining at the Expense of Fixed Income |
NAPA Net: Why Investor Education Doesn’t Work – And How to Change That |
NAPA Net: Case of the Week: Advisors’ Considerations for Rollover Discussions |
NAPA Net: Detroit May Settle with Bond Holders, as Municipal Pensions Look Bleak |
NAPA Net: Dark Pool Trading: Another Emerging Threat to Market Transparency? |

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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