5 “Must Read” 2015 Articles for the 401k Plan Sponsor and Fiduciary – Honorable Mention
Nothing signals the long slide into the year-end than a series of annual top ten lists. We’ll save that story for next week. In the spirit of “misfit toys, however, here are five popular articles from 2015 that didn’t quite make next week’s top ten list. They stand out as powerful in their own right, each either asking or answering critical questions every 401k plan sponsor and fiduciary must address. We’ll call these fearsome five our “Honorable Mention” list. Feel free to add to the comments after each of these articles.
#1: “What does Retirement Plan “Best Interests” Really Mean for the 401k and IRA Fiduciary?” – There are good examples of “best interests” and bad examples of “best interests,” but the ugly truth is we won’t know the practical definition of “best interests” until the courts decide. Such is the new reality created by the DOL’s proposed fiduciary rule. This article not only introduces a vital discussion, but it also revealed that many don’t understand the true meaning of “fiduciary.” Fortunately, #3 (below) on this list addresses that.
#2: “Why Asset Allocation Doesn’t Matter In The Long Run” – This was one article in a series of five featuring our ongoing “7 Deadly Sins Every ERISA Fiduciary Must Avoid” exposés. This one was the most popular, but, taken together, all five installments offered some very revealing – if not controversial – data. Just check out the graphs in this article. The results are in. Sometimes the truth can hurt, but numbers don’t lie. Asset allocation doesn’t work in the long run. Rebalancing doesn’t produce better returns in the long run. In short, asset allocation as popularly practiced is myth.
#3: “When Must a Fiduciary Just Say ‘No’ to a Client?” – This is a critically important article, as it pretty much defines the difference between a fiduciary and a product salesman. The article stems from several public discussions where professionals claiming to be fiduciaries stood by the mantra “the customer is always right.” As this piece explains, that’s not true if you’re acting in a fiduciary capacity. What is right is always right, even if the beneficiary disagrees. Indeed, the fact the beneficiary may not know what is always right is the entire reason why a fiduciary is hired in the first place. When it comes to being a fiduciary, the customer is, most assuredly, not always right.
#4: “The Best Way Plan Sponsors Should Pay Fees for 401k Fiduciary Advice” – It seems there’s a lot of chatter about competing fee models. It’s almost got to the point where people are expecting not to pay anything. Does that sound reasonable? Obviously not, but you wouldn’t get that impression from some of the other media reports. In the end, you’ve got to consider this: Someone who visits the doctor for a regular check-up pays more than someone who doesn’t. Guess which one is healthier.
#5: “Exclusive Interview: Andrew Golden Reveals the Huge Fiduciary Conflict-of-Interest Nobody Talks About” – Despite some very well-known interviewees, this was 2015’s most popular “Exclusive Interview” article. Among other things, Golden tells us how David Swensen’s books have explained why a fiduciary cannot use a cookie-cutter approach. To him, this represents an under-reported fiduciary issue. It makes sense if you think about it. Much of what’s written about investing tends to skew towards institutional clients which, by their very nature, tends to be a demographic/actuarial exercise. The same can’t be said of individual clients, yet the implication is too often that they should be treated the same as institutional investors.
Did these five articles whet your appetite? Read next week’s blockbuster “Top Ten Most Popular 2015 FiduciaryNews.com Articles” and discover if you’ve remembered how these important trends will influence the coming year and beyond.
Are you interested in discovering more about issues confronting 401k fiduciaries? If you buy Mr. Carosa’s book 401(k) Fiduciary Solutions, you’ll have at your fingertips a valuable reference covering the wide spectrum of How-To’s every 401k plan sponsor and service provider wants and needs to know. His latest book Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort answers the same questions from the retirement saver’s point of view and is also available from your favorite bookstore.
Mr. Carosa is available for keynote speaking engagements, especially in venues located in the Northeast, MidAtantic and Midwestern regions of the United States and in the Toronto region of Canada.