FiduciaryNews.com Trending Topics for ERISA Plan Sponsors: Week Ending 10/28/16
Welcome to FiduciaryNews.com 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. “When everybody’s a fiduciary… no one is.”
FiduciaryNews Lead Story:
“Retirement Advisers Speak Out on Next President: Trump Trumps Fiduciary Rule,” (FiduciaryNews.com, October 25, 2016) The world of finance is unforgiving. You can’t sweet talk your way out of a bad decision and, quite often, a blunt demeanor can get a job done more effectively and efficiently than the soft ambiguity of diplomatic language.
Compliance – The Ugly, the Bad, and the Mediocre:
Face it, when it comes to government sponsored retirement programs, there’s simply no there there. The pensions are nothing more than legal Ponzi Schemes. The contribution plans have no fiduciary protections. It’s all that you would expect from a government program – mediocre at best, not just bad but ugly at worst. The best thing to do is to take control of your own destiny (and if you want to buy a lot of ammo, you can do that too, but we’re talking about relying on your own personal retirement plan).
“Think Your Retirement Plan Is Bad? Talk to a Teacher,” (The New York Times, October 21, 2016) Silly New York Times, here they have an article that exposes the soft underbelly of non-ERISA retirement plans like state-run private employee retirement plans and, instead, they pick on 403(b) plans that haven’t yet adopted the safeguards of their 401k brethren and blame high cost/low value service providers. Well, high cost/low value service providers are quickly becoming a thing of the past in ERISA plans, and the whys behind that trend represent the true story.
“New York Times Nonsense: Donald Trump and Defined Contribution Plans,” (The 401(k) Specialist, October 24, 2016) And here’s the counterpoint to the sloppy New York Times article above.
“Report Offers Suggestions for Improving the U.S. Retirement System,” (PLANADVISER, October 24, 2016) Wow, these are some of the most “inside the box” suggestions you can ever see. There’s almost no attempt at creativity here. It’s as though they’re written by a government bureaucrat, not someone with business experience. This is perhaps the clearest indication yet that the problem isn’t the problem, but the way we’re constraining ourselves from looking as the problem.
“Finding Lost Pension Beneficiaries,” (Financial Advisor, October 25, 2016) The DOL is concerned about this, and they’re about ready to get one the job to address it.
“Pennsylvania Lawmakers Try Anew To Overhaul Public Pensions,” (CBS Pittsburgh, October 26, 2016) This is what happens when a Ponzi Scene unravels.
Fiduciary – Clarifying Fog:
The DOL really does have sincerity behind it, but the harder it tries the more it ends up having to do to fix things. Unfortunately, there’s just no way around controversial regulations. In the end, it’ll be a judge that decides what the regulation really means and, honestly, is that any way to run a railroad?
“DOL fiduciary rule won’t help some 403(b) retirement plans,” (InvestmentNews, October 21, 2016) Just like state sponsored retirement plans, government retirement plans are not subject to ERISA. That doesn’t mean the plan sponsors aren’t subject to fiduciary liability.
“Why a Fiduciary Duty Matters,” (ThinkAdvisor, October 25, 2016) Bob Clark kindly recaps the study presented the Institute for the Fiduciary Standard.
“Schwab CEO: Advisers face challenge of keeping fiduciary edge over brokers in post-DOL rule world,” (InvestmentNews, October 25, 2016) But regular readers of Trending Topics already knew this. What they might not know is although the differentiating point can longer remain “fiduciary,” it can easily become “conflict-of-interest fees” (see section below).
“Here come the lawsuits over fiduciary compliance,” (Financial Planning, October 27, 2016) Again, as regular readers already know, this has always been the way the DOL envisioned the new Rule would be enforced.
“A Fiduciary Twist on This Year’s Presidential Election,” (BenefitsPro, October 27, 2016) When do one set of “best interests” supersede another set of “best interests”? Here’s a current events example to an issue of dissonance that has long perplexed trustees of split-interest trusts. In this case, it’s a bit easier to resolve, though, since it involves a singular individual (much like the similar problem of investing a “risk-averse” 25-year old’s retirement plan.
“DOL Clarifies Fiduciary Rule With FAQs,” (Financial Advisor, October 27, 2016) This is the first of several “clarifications” from the DOL. They don’t have the same legal power as the actual Rule, but they’re meant to answer the most frequently asked questions. The trouble with this one is that it generates almost as many as it answers.
“DOL releases first batch of FAQs on fiduciary rule,” (InvestmentNews, October 27, 2016) Same story, different take.
“DOL Releases FAQs on Fiduciary Rule,” (ThinkAdvisor, October 27, 2016) Same story, yet another take.
“Here come the lawsuits over fiduciary compliance,” (Financial Planning, October 27, 2016) This affects plan sponsors and service providers alike.
“The BICE Is Not a DOL Fiduciary Get-Out-of-Jail-Free Card,” (ThinkAdvisor, October 28, 2016)
Fees – A Line is Drawn:
We’ve said all along this has nothing to do with fiduciary (i.e., imagined conflicts-of-interest) and everything to do with conflict-of-interest fees. Well, we knew thems would end up bein’ fightin’ words and now we see the sides being drawn up. Good luck and may the best business model win.
“What is Reasonable 401k Compensation (Really)?” (The 401(k) Specialist, October 21, 2016) Charlie Epstein talks turkey about adviser fees and value-added.
“DOL Rule Casualty: Commonwealth Drops Commission Retirement Products,” (ThinkAdvisor, October 25, 2016) Another one bites the dust…
“Errors of Commission: AUM Fees Are Better Business,” (ThinkAdvisor, October 26, 2016) Bob Clark comes through again with a common sense argument against commissions.
“Ameriprise’s fiduciary plan: Commissions stay, product range narrows,” (On Wall Street, October 26, 2016)
“Morgan Stanley and Merrill Lynch go in opposite directions on fiduciary rule,” (On Wall Street, October 26, 2016)
“Morgan Stanley To Keep Commission-Based IRAs For Wealth Management Customers,” (Financial Advisor, October 27, 2016)
“Raymond James follows Morgan’s lead in keeping commissions under fiduciary,” (On Wall Street, October 27, 2016) The DOL’s new Fiduciary Rule does not ban conflict-of-interest fees, it merely institutionalizes them (for the mere cost of a BIC disclosure paragraph most won’t read and, for those that do, are more likely to be impressed with the company’s “honesty”). The war against fee conflicts hasn’t ended, it’s just moved to a different battlefield.
Investments – What if All You Ever Learned Turned Out to be Wrong?:
The times they are a changin’, and not merely because something thought it would be cool for Dylan to win a Nobel Prize. The pendulum has swung too far to “we shouldn’t care about investments.” As it swings back, we’re discovering everything ain’t as it seemed to be when we left.
“A Terrible Way To Protect A Retiree From Inflation,” (Forbes, October 20, 2016) How many people do you know that believe all those commercials touting the advantages in buying gold? Well, this article debunks that whole ad campaign. But you already know what it says…
“Target-Date Funds Are ‘Yesterday’s Technology,’ Says Stadion’s Doherty,” (ThinkAdvisor, October 20, 2016) He says managed accounts are the future. That may be the case but plan sponsors will need assurances that this will reduce if not eliminate all fiduciary liability as it pertains to retirement investments.
“The Key to Better 401k Participant Outcomes: Olivia Mitchell,” (The 401(k) Specialist, October 24, 2016) Here’s another academic telling us why longevity annuities are the Holy Grail to solving the retirement crisis. What is it about the lack of market enthusiasm that is so hard for this people to miss? They need to stop assuming consumers aren’t acting in their own best interest and come up with a better theory as to why they’re behaving the why they are. The Edsel was a superior automotive achievement, but it was one of the grandest product failures of all time. Do you know why?
“How a simple two-fund portfolio can boost your retirement returns,” (MarketWatch, October 26, 2016) Another historical study that shows value stocks beat the market.
“The Next 10 Years Will Be Ugly for Your 401k,” (Financial Advisor, October 27, 2016) Wait, wasn’t this published in 2010? Is certainly wasn’t published in 2000. That’s why we call it “market timing.” And that’s why it has such a bad track record.
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.
“Mismanagement Cost NY Pension $3.8 Billion Over 8 Years – Regulator,” (Wealth Management, October 18, 2016)
“Yet Another Reason 401ks Are Increasingly Important,” (The 401(k) Specialist, October 23, 2016)
“What happens when there’s a mistake in your 401k,” (MarketWatch, October 24, 2016)
“Efforts Needed to Reduce DC Plan Cashouts,” (PLANADVISER, October 25, 2016)
“Handling 401k plan terminations,” (Employee Benefit Adviser, October 25, 2016)
“Is Adoption of 401k Auto-Enrollment Decreasing?” (The 401(k) Specialist, October 25, 2016)
“Third Wells Fargo ERISA Stock Drop Complaint Filed,” (PLANADVISER, October 25, 2016)
“How to Save for Retirement When You’re Self-Employed,” (US News, October 25, 2016)
“Roth 401k, pre-tax 401k or both?” (Employee Benefit News, October 25, 2016)
“Settlement Reached for Providence Health Church Plan Challenge,” (PLANADVISER, October 26, 2016)
“13 facts about 401k plans & pensions via Form 5500 data,” (BenefitsPRO, October 27, 2016)
“IRS Announces 2017 Limitations for Retirement Plans,” (PLANADVISER, October 27, 2016)
Trends and Truths 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.
“If you think the election means something to your portfolio, think again,” (MarketWatch, October 20, 2016)
“How earnings are taxed in 401k plans,” (MarketWatch, October 21, 2016)
“Your Retirement Won’t be a Dream if You Don’t Get Real,” (USA Today, October 22, 2016)
“A Little-Known Retirement Tactic for Government Employees,” (Wall Street Journal, October 23, 2016)
“Social Security Benefit Formula Robs Older Workers,” (Forbes, October 23, 2016)
“Be Careful When Passing Down a Roth IRA,” (Wall Street Journal, October 23, 2016)
“5 ways to salvage retirement,” (BenefitsPRO, October 24, 2016)
“Ask Larry: Will Early Spousal Reduce My Wife’s Retirement Benefit?” (Forbes, October 24, 2016)
“3 Risks that Could Derail Your Retirement Plan,” (Fox Business, October 24, 2016)
“The future of retirement is now — time to get ready,” (Employee Benefit News, October 24, 2016)
“Why This Retirement Adviser Doesn’t Plan To Retire,” (Forbes, October 25, 2016)
“A better measure of retirement security,” (Houston Chronicle, October 25, 2016)
“The One-Second Retirement Plan,” (Forbes, October 25, 2016)
“Before Retiring, Take This Simple Test,” (Wall Street Journal, October 26, 2016)
Wisdom from Some of Our Favorite Blogs:
The Rosenbaum Law Firm P.C. Blog: Who is the biggest 401k Recordkeeper and what really matters |
Behavior Gap: Your Opinion May Be Wrong |
Squared Away Blog: Latino Labor Force’s Retirement Burden |
Fred Reish: Interesting Angles on the DOL’s Fiduciary Rule #25 |
Pension Risk Matters: Educational Webinar About Pension Risk Management |
Proskauer Employee Benefits & Executive Compensation Blog: Update on Lawsuits Challenging the U.S. Department of Labor’s Fiduciary Rule |
Behavior Gap: Why Is Your Money Invested That Way? |
RetirementRevised: Beneath the rancor, Social Security is on the November ballot |
fi360: The Importance of Using Prudent Practices in Today’s Lawsuit-filled Environment |
NCPA: What’s Up in Washington This Week? |
Data “Points”: 4 Things Plan Sponsors Are Scared of – and 3 More They Should Be |
Data “Points”: 6 Things People Who Need to Save for Retirement Need to Know About Saving for Retirement |
Hot Tips from Popular Web Resources:
Kiplinger: 401k or IRA Rollover: Which Is Best for You When You Change Jobs? |
The Motley Fool: 3 Ways to Withdraw From Your IRA Before Retirement – Penalty-Free! |
NAPA Net: Eaton Vance Goes Social With Calvert Acquisition |
NAPA Net: What’s the Scariest Movie? |
NAPA Net: Code, Read |
NAPA Net: IRS Extends 401k Loan, Hardship Relief to Matthew Victims |
Kiplinger: Contributing to Retirement Accounts When You Haven’t Fully Retired |
The Motley Fool: Bust the Retirement Myth and Get Back to Work – Your Way |
NAPA Net: Another 401k Participant Files Suit |
NAPA Net: 4 Things Plan Sponsors Are Scared of – and 3 More They Should Be |
NAPA Net: The Taxman Cometh, Graff Warns |
NAPA Net: The Benefit Issues on Plan Sponsors’ Minds |
NAPA Net: Borzi: FAQs on Fiduciary Rule Coming Soon |
NAPA Net: Commonwealth Makes a (Small) Shift Away from Commissions for Retirement Accounts |
NAPA Net: As DC Industry Shifts, Trust Becomes More Critical |
NAPA Net: 3 Steps That Can Help Advisors Avoid Getting Sued |
NAPA Net: Morgan Stanley, Ameriprise Opt to Keep Commissions for Retirement Accounts |
NAPA Net: A 5% Return: What Are the Odds? |
NAPA Net: Neutral Factors and Adviser Compensation |
NAPA Net: More Americans Seeking Financial Advice |
NAPA Net: DOL’s First FAQ ‘Wave’ Focuses on BIC |
NAPA Net: 2017 Contribution, Benefit Limits Mostly Status Quo |
NAPA Net: Reader Poll: The Scariest Movie Is… |
NAPA Net: RayJay to Keep Commissions |
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