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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 7/24/15

July 27
00:02 2015

1020805_25983300_Trending_Topics_2015.07.27_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
Exclusive Interview: Academic Icon Roger Ibbotson says Rush to Regulate Inhibits Competitiveness,” (FiduciaryNews.com, July 21, 2015) The creator of the industry data base standard Stocks, Bonds, Bills, and Inflation doesn’t hold back.

Compliance – Would You Bet Your Retirement on a Ponzi Scheme?:
Saving for retirement is a one-shot deal. You’re up at the plate only once and you’re given only one swing of the bat. There are no do-overs. Think about that before you bet it all on “Blue” (as “Blue State”).
10 Keys to a Robust Retirement System,” (ThinkAdvisor, July 21, 2015) This might be OK, as long as you think a personal pension plan is OK. For what it’s worth, a personal pension plan is not the same thing as a group pension plans (which nearly all pension plans currently are). A personal pension plan is simply an IRA that has been annuitized upon retirement. Hmm, maybe that isn’t such a good idea.
Social Security trustees: Program is healthier, Congress still must act,” (Los Angeles Times, July 22, 2015) Yipee! It doesn’t go insolvent until 2034 instead of 2033. Either way, it probably won’t survive long enough to celebrate its centennial.
On Retirement, What’s Good for California Could Be Good for the Country,” (The New York Times, July 23, 2015) Or not. That is, if you like bankrupt municipal retirement plans, no drinking water, and mortgage that extends several generations into the future.

Fiduciary – Deadlines Come and Go:
But the debate rages on. All in all, a brilliant diversion for what really matters (see the above section).
DOL rule creates ‘jurisdictional jump ball’,” (BenefitsPro, July 17, 2015) There seems to be some confusion on the part of this annuity lobby group. The proposed DOL Fiduciary Rule has no impact on the ability for brokers to sell annuities. It’s only if a broker tries to sell an annuity while rending “investment advice” that the rule kicks in. It would appear the simple solution is to just separate the product sales process from the investment advice process and everything would be fine.
FINRA brands DOL fiduciary rule misguided, confusing,” (InvestmentNews, July 18, 2015) Because the investing public is already so clear on the difference between an “advisor” and an “adviser.”
Business groups unload on financial adviser rule,” (TheHill, July 20, 2015) These folks have refined their arguments to take advantage of the anti-Obama sentiment that seems to represent the majority of middle America. With the opponents tailoring their talking points to appeal to this group, and with each time the President speaks to the issue only reinforcing these talking points, it gets increasingly more difficult for regular folks who might normally support the DOL’s effort to do so.
Where key players align in the DOL fiduciary fight,” (InvestmentNews, July 20, 2015) You can’t tell the players without a scorecard. But can tell a lazy editor when the sides end up uneven.
6 fiduciary obligations you need to know,” (BenefitsPro, July 21, 2015) A good sound list.
DOL ‘Flexible’ on Fiduciary Rule, Perez Says,” (ThinkAdvisor, July 21, 2015) Yes, but which way will he bend? Will he fix the weaknesses in the proposal, or will he cop out and yield to the demands of the big Wall Street firms?
Perez says DOL fiduciary debate shifts from whether to how,” (InvestmentNews, July 21, 2015) That might be good, that might be bad, see above comment.
SIFMA, US Chamber barrage DOL as fiduciary rule comment deadline looms,” (BenefitsPro, July 21, 2015) Has the DOL been caught bringing a knife to a gun fight?
Why the DOL’s fiduciary effort is doomed to fail,” (BenefitsPro, July 22, 2015) Yes, yes, we know everybody hates Wall Street. But, you know what? There’s one entity they vilify even more. The government.
DOL Fiduciary Rule Comments Pour In; Perez On Defensive At Hearings,” (Forbes, July 22, 2015) This article is a refreshing change from the trade press the topic is usually limited to. Plus it has the advantage of being written in a well-balanced style.
Sen. Warren rips Primerica president during Senate panel on DOL rule,” (BenefitsPro, July 22, 2015) Wow! Just so many things wrong with this scene. First it’s the president of Primerica claiming small investors can’t be served under the new rule. But the real killer is Warren’s ridiculous question about whether it was smart investment advice to move retirees out of a pension and into an IRA rollover. Without knowing the specifics of each case, the correct answer is the contrapostive: Is it morally and ethically correct to leave retirees dependent on risky Ponzi schemes? Many people, and not without some accuracy to the matter believe pensions are merely legal Ponzi schemes. Worse, the more heated inflation gets, the more risky they become. Furthermore, beneficiaries really don’t have access to their assets when they’re held collectively in a pension. And, what’s worse, government pensions are especially risky because they are subject to the whims of politicians and the electorate. Of course, that all being said, it’s almost never in the retiree’s best interests to be victimized by self-dealing transactions.
As DOL Moves on Fiduciary Rule, Battle Lines Harden,” (Employee Benefit News, July 22, 2015) Of interest is the section that says the proposed Rule doesn’t go far enough. That’s the dirty little secret both the industry and the DOL won’t tell you.
Fiduciary Rule Will Harm Investors, Says SEC Commissioner,” (Financial Advisor, July 23, 2015) The tease reads “DOL Is Being ‘Government Nanny’ With New Fiduciary Rules, Says SEC Commissioner.” Seriously, this is like shooting fish in a barrel.
What DOL fiduciary rule means for plan communications,” (BenefitsPro, July 23, 2015) Not sure if this is a change at all if you’re already acting in a fiduciary capacity.
The countdown for DOL to advance its fiduciary rule ticks loudly,” (InvestmentNews, July 23, 2015) At least this week it does.
4 Ways to Strengthen BICE in DOL’s Fiduciary Rule,” (ThinkAdvisor, July 23, 2015) More sound advice from Knut Rostad.
The New Fiduciary Rule and Rollovers,” (WealthManagement, July 24, 2015) Well, at least from a hypothetical standpoint. Making these determinations at this point is not unlike counting the chickens before the eggs hatch.
House GOP Tells DOL to Scrap Fiduciary Plan,” (Thinkadvisor, July 24, 2015) Why not? Did you expect anything else?

Fees – Everybody Talks About It…:
…but nobody does anything about it – especially those who could do something about it.
SIFMA: DOL Fiduciary Rule To Cost Firms Over $5 Billion,” (WealthManagement, July 20, 2015) We’re placing this item in the fee category because the assumption (and threat) is that the industry will pass on these one-time expenses as well as the estimated $1 billion annual cost increase on to their clients. Hmm, let’s see, by our calculations, if this is true and if the new Rule does eliminate all conflicts of interests, the investing public would then come out ahead of the game $11 billion the first year and $16 billion every year thereafter. It seems like that might be in the best interests of the investing public. That’s what it’s all about, isn’t it?
Sky High 401k Fees: How To Bring Them Down to Earth,” (Forbes, July 20, 2015) The headline promises more than the article delivers.
Scholars: Labor Dept. misstated studies to justify new investment rule,” (Washington Examiner, July 23, 2015) Well, actually, the scholars have misstated how the DOL has misstated the studies. In fact, by cherry picking which studies to look at, the scholars have missed the real point. The relevant studies focus on the impact of conflicts-of-interest on investment returns, not on expense ratios. That’s where the missing money is. Ironically, the DOL did not focus on this, and that’s the real reason why they’ve misstated the studies. Their proposed rule does not eliminate conflicts-of-interest, it institutionalizes them through disclosure.
Regular monitoring keeps 401k fees in check,” (Benefit News, July 23, 2015) The best advice in the article: Some fees are worth it.

Investments – On Unicorns and Leprechauns:
Like all other imaginary beasts, the perfect portfolio is more of an idealized vision than any tangible thing. Remember that, and you will succeed beyond your wildest dreams.
Pros and Cons of the Longevity Annuity Contract,” (ThinkAdvisor, July 20, 2015) In which case, it looks like the cons are winning.
BlackRock Says Broker-Bias Rule Bends Toward Index Funds,” (Bloomberg Business, July 21, 2105) BlackRock executives must be cringing with embarrassment after reading this headline. Not only is the statement factually incorrect, but it’s directionally incorrect. The proposed rule’s focus on fee comparison is limited to identically managed funds. This means actively managed funds from the same family with different share classes. But it also means all index funds – not just index funds from the same family with different share classes. The end result will be the elimination of high fee share classes for actively managed funds (but not the elimination of those funds). On the other it, it will mean the elimination of high fee index funds, since there can be no justifiable reason (at least within the client’s best interests) to recommend them.
Do-It-Yourself Investors Feel Less Secure, Survey Says,” (Financial Advisor, July 22, 2015) Hmm, maybe peace of mind is worth the price of admission after all.
How to design the ideal retirement portfolio,” (MarketWatch, July 23, 2015) Except the last paragraph concludes there is no such “ideal” portfolio.
Millennials Have A Ton Of Stock – They Just Don’t Know It,” (Financial Advisor, July 23, 2015) Well, was there any doubt?

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.
Plan sponsors shouldn’t design retirement plans,” (BenefitsPro, July 17, 2015)
DOL settles one ESOP claim, while another proceeds,” (BenefitsPro, July 21, 2015)
IRA account balances increasing,” (Benefit News, July 21, 2015)
Safe harbor IRAs aren’t always safe,” (Employee Benefit News, July 22, 2015)
How much retirement income will $1 million generate?” (CNN. July 22, 2015)
Workers Rely on 401k Providers for Retirement Advice: Cerulli,” (ThinkAdvisor, July 23, 2015)
Meaningful shift in acceptance of new retirement savings strategy,” (Employee Benefit Adviser, July 24, 2015)

Trends and News for Retirement Savers:
If you’re a retirement plan fiduciary – whether a plan sponsor or a financial professional, don’t you think it’s a good idea to keep up on the topics retirement savers are most interested in? That’s what the media tries to do. Here’s what they think is on the mind of the people saving for retirement.
Here’s What to Do If Your 401k Stinks,” (Time, July 16, 2015)
Canadian citizen can qualify for U.S. Social Security,” (USA Today, July 17, 2015)
How to Find a Retirement Job,” (US News, July 17, 2015)
Social Security: Don t Forget the Kids,” (OnWallStreet, July 19, 2015)
4 Tools To Make You A Better 401k Investor,” (Forbes, July 19, 2015)
Consolidating Your Retirement 101,” (Fox Business, July 19, 2015)
5 Steps Millennials Can Take Now for a Richer Retirement,” (Money, July 19, 2015)
Retirement crisis not a crisis?” (BenefitsPro, July 20, 2015)
The best prescription for RMD woes,” (MarketWatch, July 20, 2015)
Why Most People Can’t Even Guess What Their Social Security Benefits Will Be,” (Forbes, July 21, 2015)
How a retirement community is embracing the internet of things,” (Fortune, July 21, 2015)
How Alicia Munnell Messed Up, and Then Saved, Her Retirement,” (ThinkAdvisor, July 21,  2015)
Are Millennials Saving Enough for Retirement?” (WealthManagement, July 21, 2015)
Why Millennials Aren’t Saving More for Retirement,” (Money, July 21, 2015)
Retirement Lessons From Parents,” (Wall Street Journal, July 22, 2015)
Economists Want You To Stop Borrowing From Your 401k,” (WealthManagement, July 23, 2015)
Social Security Benefits You Don’t Know About,” (OnWallStreet, July 24, 2015)

Wisdom from Some of Our Favorite Blogs:
Behavior Gap: Boring Plus Hard Often Equals Long-Term Exciting |
Fiduciary Matters Blog: Additional Thoughts on the Latest Tussey v. ABB Decision: Fiduciary Lessons Aplenty |
Squared Away Blog: Saving Is a Lot Like Yoga |
Proskauer’s ERISA Practice Center Blog: Third Circuit Rules That Actual Harm Needed for Monetary Equitable Remedy |
SFP: My Comments to the DOL on its Conflict of Interest Rule: Common Sense 2015 |
Behavior Gap: The Boring & Hard Plan for a Stable Financial Life |
ERISA Lawyer Blog: Employee Benefits-IRS Announces Revisions To The Employee Plans Determination Letter Program |
Fred Reish: Impact of the DOL’s Fiduciary Proposal on Participant Investment Advice |
Squared Away Blog: Jared Diamond: Elderly Have “Low Status” |
ERISA Lawyer Blog: IRS Discusses A Mid-Year Retirement Savings Check-Up For Workers |

Hot Tips from Popular Web Resources:
NAPA Net: ‘Significant Unintended Consequences’ Cited in Fiduciary Proposal |
NAPA Net: Multi-Manager TDFs: The Future or a Pipedream? |
NAPA Net: Which Professional Designations ‘Matter’? |
NAPA Net: Big Apple Looks to Close Retirement Coverage Gap |
Motley Fool: Are You Emotionally Ready for Retirement? |
NAPA Net: American Retirement Association Files Comments on Fiduciary Proposal |
NAPA Net: 13 Things ‘Those People’ in Washington Need to Know |
NAPA Net: Keen on Technology-Aided Advisors, Robo-Advisors Not so Much |
NAPA Net: Funds Continue to Flow to TDFs, From Company Stock |
Motley Fool: 7 Things You Never Knew About Retirement |
NAPA Net: Will DOL’s New ‘North Star’ Work? |
NAPA Net: Case of the Week: Timeline for Proposed Investment Advice Rules |
NAPA Net: Advisors Must Lead a Team Effort To Define Successful Plan Outcomes |
NAPA Net: FINRA Finds Confusion in DOL’s ‘Fractured Approach’ |
Motley Fool: Use the Backdoor Roth IRA While You Still Can |
NAPA Net: Leadership Dives into NAPA’s Position, Approach on DOL Fiduciary Rule |
NAPA Net: NAPA Net Updates DC Industry Consolidation List |
NAPA Net: Fiduciary Rule Pushmi-Pullyu Continues |
NAPA Net: The Rx for Financial Happiness |
NAPA Net: RIA Growth: More Than Markets |
NAPA Net: Advisors Say (Some) Designations Matter — But Do Plan Sponsors Care? |
NAPA Net: Report from the Hill: NAPA’s DC Fly-In Forum |
NCPA.org: Can We Stop Pretending That the Trustees Reports Are Good News? |

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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