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FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 10/16/15

FiduciaryNews Trending Topics for ERISA Plan Sponsors: Week Ending 10/16/15
October 19
00:41 2015

Welcome 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:
7 Tips Present Day Retirees Wished They Knew When They Were 24,” (, October 13, 2015) And that may be the most important lesson of all.

Compliance – A Spreading Menace:
Yeah, it looks like regulatory reach will be seeping into new and exciting areas.
Are robo-advisors risky?” (BenefitsPro, October 12, 2015) A Yale Law School study shows there are a number of legal (including fiduciary) problems with the way robo-advisors work, contrary to what the DOL says.
RIA Rollover Advice Could Fall Under DOL Rule,” (Financial Advisor, October 14, 2015) Well, for RIAs that “manage” products, not individual portfolios of stocks and bonds.

Fiduciary – If a Tree Falls…:
…in the forest and investors aren’t there to see it, will they still not know what it means to be a fiduciary?
DOL’s Critics Use Convoluted Logic,” (Financial Advisor, October 5, 2015) While correctly refuting the critics, the great irony is that the author admits the critics should go along with the DOL proposal precisely because it doesn’t change the way they do business, it merely adds a layer of disclosure. If this isn’t a reason for fiduciary proponents to oppose the DOL’s proposal, we don’t know what is.
Financial Advisors Should Be Fiduciaries, Investors Say,” (Financial Advisor, October 9, 2015) There’s this famous “bad dad” joke. The kid asks the dad, “Can you make me a sandwich?” So dad says, “Poof! You’re a sandwich!” Do investors want the DOL to simply say “Poof! You’re a fiduciary?”
4 ways the Labor Department is about to rock our world,” (InvestmentNews, October 13, 2015) Hmm, don’t know about this, especially since we don’t even know the final language yet.
Investors Want Financial Advisors, but Don’t Dare Call Yourself a Fiduciary,” (ThinkAdvisor, October 14, 2015) According to the article, most investors assume all those offering financial advice are acting in the client’s best interests. We all know this is wrong. The article interviews someone who believes we need to educate the market – by avoiding to tell them the definition of “fiduciary.” Go figure.
DOL Chief: We Won’t Play ‘Gotcha’ With Fiduciary Enforcement,” (ThinkAdvisor, October 16, 2015) Well, that’s inspiring, isn’t it?

Fees – When Will They Ever Learn?:
Why doesn’t the mass media even make an effort to get it?
Investing May Be Cheaper, but Fees Still Hurt,” (The New York Times, October 11, 2015) Wow. What can be said. This article virtually proves how bereft most people are when it comes to talking fees. Worse, being printed in “the paper of record,” this article has the potential to hurt many more people than Bernie Madoff. Case in point. The article claims “victory” by pointing out that a Vanguard emerging market fund charges only 33 basis points while a Fidelity emerging markets fund charges slightly more than 1%. The piece disparages Fidelity for raking in 70 basis points more than Vanguard for the same type of portfolio. But is it really the same? A quick look at the fund prospectus shows the Fidelity fund – net of fees – handily beats the Vanguard fund (i.e., by more than 1% per year) in 3 out of 4 performance reporting periods. Moreso, the Vanguard fund only beat the Fidelity fund in the oldest time period, meaning the Vanguard fund has been significantly underperforming in recent years – a time when one would expect the index fund to beat the actively managed fund. Bottom-line: You pay 70 basis points more a year with Fidelity, but you end up with more than 1% more money (that’s a swing of 1.7%). That’s the real lesson of expense ratios.

Investments – Have Index Funds Jumped the Shark?:
It seemed impossible only a moment ago, but there seems to be a new trend in reporting on index funds. It’s more honest and it’s not necessarily complimentary.
Enjoy stock-market volatility because it can quadruple your retirement,” (MarketWatch, October 8, 2015) Another nail in the coffin of pie-chart asset allocation?
Stop Measuring Your Retirement Portfolio Performance Wrong,” (DailyFinance, October, 8, 2015) We can see the point, but… we can’t see the point. Out of the frying pan and into the fire. The author does the old MPT Watusi on risk. He gets the first half right, but then falls into that old familiar trap of “risk tolerance.”
The Ease of Index Funds Comes With Risk,” (The New York Times, October 9, 2015) Believe it or not, the Gray Lady may have actually read this article: “3 Reasons to Outlaw Index Investing Right Now (and One Selfish Reason Not To) in 5 Acts,” (May 12, 2010).
Wintergreen’s Winters: Are index funds a threat to retirement savings?” (InvestmentNews, October 7, 2015) We don’t usually post videos, but this is important given the Times article above. The first two minutes and the last minute are most relevant (the middle digresses into a proxy discussion). Oddly, the interview overlooks the obvious theoretical problem with index funds as described in the May 12, 2010 article.
Active Managers Catch Break as U.S. Stock Correlations Collapse,” (Bloomberg Business, October 9, 2015) What?! Three articles all espousing the same theme? Sounds like somebody’s PR firm will find a little something extra in their paycheck this week. But seriously, if this “Man bites dog” trend continues, John Bogle won’t be very happy.
Does dollar-cost averaging protect from loss?” (MarketWatch, October 12, 2015) Not only is the answer “no,” but dollar-cost averaging might not offer the advantages it presumes to offer.
Why TDFs are the best 401k plan option,” (Employee Benefit Views, October 14, 2015) While the offer says he doesn’t derive any benefit from promoting TDFs, his opinion piece reads more like a TDF wholesalers list of talking points.
Here’s why pension giant CalPERS wants to cut investment goals,” (InvestmentNews, October 14, 2015) Like other large pension plans, they’re just recognizing our anemic economy just can’t support higher equity market returns like it used to.
Five common mistakes to avoid in volatile markets,” (MarketWatch, October 15, 2015) Good advice.

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.
How to make sure your adult children can retire well,” (CNBC, October 8, 2015)
Vanguard Study: Millennials Have Retirement on Autopilot,” (Financial Advisor, October 9, 2015)
Retirement Investors, Riding Out the Panic,” (The New York Times, October 9, 2015)
Employees want financial wellness programs, privately,” (BenefitsPro, October 12, 2015)
RMDs From Client IRAs: An Unconventional ESA Funding Tool,” (ThinkAdvisor, October 12, 2015)
I moved my retirement money and lived to tell about it,” (BenefitsPro, October 12, 2015)
Allianz, Pimco targeted in class-action 401k suit,” (InvestmentNews, October 12, 2015)
Millennials Motivated to Plan for Future, but Feel Overwhelmed by Options,” (ThinkAdvisor, October 12, 2015)
Are millennials financially doomed?” (CNBC, October 12, 2015)
When Do Roth Conversions Make Sense?” (On Wall Street, October 13, 2015)
Gen X lags boomer generation in retirement savings: Study,” (InvestmentNews, October 13, 2015)
How millennials listen to financial advice,” (BenefitsPro, October 14, 2015)
Savings barriers contribute to financial stress,” (Benefit News, October 14, 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.
Don’t waste your savings on a boring retirement,” (CNN, October 7, 2015)
Answers to readers’ questions on Social Security COLAs and Medicare,” (USA Today, October 12, 2015)
Diverting retirement savings to pay for college,” (CBS News, October 12, 2015)
4 simple things to do now while you’re not retired,” (BenefitsPro, October 13, 2015)
Survey: Millennials seriously can’t wait to wipe out debt,” (USA Today, October 13, 2015)
How to become a 401k millionaire,” (CNBC, October 13, 2015)
Quenching Retirement’s Many Thirsts,” (Financial Advisor, October 14, 2015)
What To Do In Retirement,” (Financial Advisor, October 14, 2015)
Your Ticket To A Fatter Retirement,” (Forbes, October 14, 2015)
Difficult retirement choices ahead for baby boomers,” (Benefit News, October 15, 2015)

Wisdom from Some of Our Favorite Blogs:
Data “Points”: 5 Reasons Why Your Small Business Should Offer a Retirement Plan |
Behavior Gap: 3 Alternatives to the Average Market Return |
The Chicago Financial Planner: Health Savings Accounts – The Other Retirement Plan |
Nerd’s Eye View: IRA Aggregation Rule And Pro-Rata IRA Taxation |
Behavior Gap: 4 Steps to True Freedom |
Squared Away Blog: High-deductible Health Plans on the Rise |
ERISA Lawyer Blog: Ninth Circuit Rules That A Succesor Employer Can Be Responsible For Predecessor’s Withdrawal Liability Under ERISA |
Boston ERISA Law Blog: What Osberg v. Foot Locker Teaches About Equitable Remedies Under ERISA |
fi360: DOL’s “Conflicts of Interest Rule”: Two Views from the Trenches |
Behavior Gap: Uncertainty Overrides Our Common Sense |

Hot Tips from Popular Web Resources:
NAPA Net: Report: Robos Not Ready for ERISA Plans |
NAPA Net: Finance Distractions Take Toll on Productivity, Benefit Satisfaction |
NAPA Net: While You Were Obsessing Over the Fiduciary Proposal… |
NAPA Net: Record Keepers’ Proprietary TDFs Losing Favor with Advisors |
NAPA Net: 4 Reasons Why Plan Sponsors Should Care About Outcomes |
NAPA Net: How Do Millennials Fare Across Key Indicators of Financial Wellness? | Trump’s Tax Plan and the Deficit |
NAPA Net: Case of the Week: Distributions to Qualified Public Safety Employees |
NAPA Net: Most Non-Advised Want Advisor, But… |
NAPA Net: September Swoon Sends Flows to Fixed |
Morningstar: Medicare’s Open Enrollment Checklist |
NAPA Net: Are You Leading on Outcomes? |
NAPA Net: Another Provider Hit With Proprietary Fund Suit |
NAPA Net: Impact of DOL Fiduciary Rule on Plan Sponsors |
NAPA Net: No COLA for Social Security in 2016 |
NASDAQ: IRAs for the Self-Employed |
Kiplinger: Know the Difference Between a Broker and a Registered Investment Adviser |
NAPA Net: Rieck: Data and Technology Key to Fighting Margin Pressure |
NAPA Net: Could This Year Be ‘Next Year’? |
NAPA Net: Graff: DOL Rule Could Devastate Participant Education |
Kiplinger: 6 Ways to Avoid Outliving Your Retirement Nest Egg |

Miss anything? Feel free to add a comment below.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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