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:
“A 401k Fiduciary Must Know Where Gamification Fails in Encouraging Retirement Savings,” (FiduciaryNews.com, August 9, 2016) If companies using on-line retirement tools aren’t careful, they may just be allowing class action attorneys the opportunity touse the courts to further refine what it means to breach one’s fiduciary duty.
Compliance – Is Anyone Paying Attention?:
Do you think government run health care is a good idea? Well now try a government run retirement plan on for size. Since the government has such a cracker jack record of success when it comes to managing retirement plans (sarcasm off).
“ICI Urges California Governor to Block State-Run Retirement Plan,” (ThinkAdvisor, August 8, 2016) So, here’s the deal. We all know how business is vilified because all they’re concerned with is money, and to a lesser degree power (because when you have enough money you can buy all the power you need). And, normally, when it’s business versus government, we’ve been trained to always assume it’s greed versus altruism. But, now, stop and think about this for a moment. What have we learned motivates the folks in high office? Why it’s nothing more than greed, and to a lesser degree money (because when you have enough power you can get all the money you need). So, this is not really a good vs. evil scenario. This is an “I get to screw them” vs. “No, I get to screw them” scenario. When will the “thems” realize this and rise up?
“Trade group trying to kill bill making state-run retirement accounts a worker benefit,” (Los Angeles Times, August 9, 2016) Same story from the mainstream media. Notice the clever use of slanted words in the headline as opposed to the more objective wording in the trade journal piece above. Ya think these LA Times editors have an agenda?
Fiduciary – Are We Free to Choose or Not?:
Do we want folks to be self-responsible and independent, or do we want them to be forever reliant on the kindness of strangers. You can’t have it both ways.
“How far-reaching is the DOL fiduciary rule?” (InvestmentNews, August 3, 2016) The DOL’s Rule applies only to retirement accounts. But retirement savers have non-retirement accounts, too. Every good adviser knows you can’t give advice in a vacuum. That means they will have to incorporate non-retirement assets into their advice. So will the DOL Rule become the de facto universal rule?
“How the fiduciary rule is affecting 401k rollovers,” (Employee Benefit Adviser, August 8, 2016) More angst over the impact on prospecting for IRA rollovers.
Fees – Colleges Getting Schooled:
Ouch. That’s all that can be said. But if the pure of heart fail to pay attention, they should suffer the same consequences as anyone else. Of course, there has to be a clear case. We can’t have any of this twenty-twenty hindsight “you could have picked something else that was better” when no one knew it would have been better at the time of the decision.
“Tibble Case to Get Another Review by 9th Circuit,” (PLANADVISER, August 8, 2016) Remember, the Supreme Court ruled “fiduciary means forever.” Yes, this case is about fees, but it’s also about the fiduciary’s duty when it comes to those fees.
“M.I.T., N.Y.U. and Yale Are Sued Over Retirement Plan Fees,” (The New York Times, August 9, 2016) Yale can’t seem to catch a break. Of course, it doesn’t help that they keep shooting themselves in the foot. While this article focuses on fees, the suit oozes into the domain of “bad plan structure” – a relatively untested realm of fiduciary liability. Ironically, some of Yale’s leading behavioral finance researchers have achieved fame empirically testing ways to avoid poor plan design (by coincidence, we interviewed one for this week’s FiduciaryNews.com Lead Story above). Maybe they should read their own researchers work.
“Duke, Johns Hopkins, UPenn and Vanderbilt latest schools under fire for excessive 403(b) fees,” (InvestmentNews, August 11, 2016) When it rains it pours.
“Duke 403(b) Plan Latest Target of ERISA Fiduciary Breach Suit,” (PLANADVISER, August 11, 2106) This article makes it appear the “breach” was due to a failure to “win” a better deal in negotiations. This is a whole lot different than simply failing to pick a lower cost share class of the same fund. This will be interesting.
Investments – The Virtue of Patience:
Rookies make the mistake of “this time it’s different.” They go chasing after new ideas thinking the historic cycle won’t repeat. The best advice: Stick to your knitting through good and ill. Eventually, the regression to the mean will save the day.
“How Buffett, Bezos and the index-fund investor all get it right,” (MarketWatch, August 4, 2016) There’s an excellent lesson in this article that good portfolio managers learn very early in their careers (that’s what makes them “good”). There exist any number of investment philosophies or styles to choose from. They all have their particular idiosyncrasies. They all take turns leading and they all take turns lagging. No single style rises above the rest. Investors can be successful no matter which style they pick. The lesson is they must learn to stick with that one style. Don’t try to be a jack of all trades because all that leaves you is a master of none.
“Don’t let short-term risk dominate investment strategy,” (On Wall Street, August 8, 2016) This is a very important warning that bears constant repeating.
“How to Invest in Retirement,” (US News, August 8, 2016) The author splits up retirement into three investment retirement phases: Go-Go; Slo-Go; and No-Go.
“The secrets to a lasting retirement portfolio,” (Financial Planning, August 9, 2016) Answer: Shorten the retirement period. That could mean a lot of things: Work longer; Have a naturally shortened actuarial life expectancy; Leak DNC emails… you get the picture.
“Retirees stick with equities rather than target-date funds,” (BenefitsPro, August 10, 2016) This makes a lot of sense.
“Future Market Expectations Call for a Change in DC Plan Investing,” (PLANADVISER, August 11, 2016) Which is precisely when and why people make poor decisions.
“Once-celebrated Dallas Pension Fund runs risk of going broke,” (Employee Benefit News, August 12, 2016) Normally, you’d find a story about a pension faux pas up in the top section about various government indelicacies. This, however, is more of an investing story. In particular, it is about the failure of alternative investments. Similar to the humbling experience of Yale’s much publicized endowment investment strategy, this article shows how there continues to be such a thing as “too big to big” when it comes to investment portfolios. In fact, we might use another bromide in this situation: “The bigger they are the harder they fall.”
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.
“What If Retirees Don’t Want To Run Out Of Money In 30 Years?” (Forbes, August 4, 2016)
“How Retirement Plan Sponsors Can Address Cognitive Decline,” (PLANADVISER, August 5, 2016)
“A blueprint to encourage more 401k savings,” (InvestmentNews, August 7, 2016)
“Employers prioritizing financial wellness, retirement readiness,” (Employee Benefit News, August 7, 2016)
“Late retirement windfall lays trap for plan sponsors,” (Employee Benefit Adviser, August 8, 2016)
“Employers: Promote that retirement plan,” (BenefitsPro, August 8, 2016)
“Cost Sharing in Mandatory Arbitration Provision Does Not Violate ERISA,” (PLANADVISER, August 8, 2016)
“New Checklist to Aid with 401k Fiduciary Issues,” (The 401(k) Specialist, August 8, 2016)
“The Need for More Retirement Planning Support,” (Wealth Management, August 9, 2016)
“Kitces: Tax-efficient retirement draw-down strategies,” (On Wall Street, August 9, 2016)
“401k balances increased very little in the last 10 years,” (MarketWatch, August 10, 2016)
“Helping high-bracket clients boost their IRAs,” (On Wall Street, August 10, 2016)
“Cash flow is king when planning for retirement,” (Financial Planning, August 11, 2016)
“Leaderboards, dire headlines, and encouraging retirement saving,” (BenefitsPro, August 11, 2016)
“The Time to Reach Gen Z Is Now,” (PLANADVISER, August 11, 2016)
“Study: Here’s one way to slow 401k plan leakage,” (BenefitsPro, August 11, 2016)
“Rise in retirement plan audits should be ‘wake-up’ call for employers,” (Employee Benefit News, August 11, 2016)
“Don’t get fancy: Retirement conversations shouldn’t overwhelm clients,” (Financial Planning, August 12, 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.
“Almost Half of Millennial Women Aren’t Saving for Retirement,” (MONEY, August 4, 2016)
“What Nest Egg? Two-Thirds of Americans Can’t Cover $1,000 Emergency,” (Fox Business, August 4, 2016)
“Seniors are getting locked out of Social Security accounts … because they don’t text,” (CNN, August 5, 2016)
“It’s critical to avoid these required-minimum-distribution mistakes,” (MarketWatch, August 5, 2016)
“The Post-70 ½ Retirement Plan Contribution Rules,” (ThinkAdvisor, August 8, 2016)
“5 questions with retirement expert and author Emily Brandon,” (The Washington Post, August 8, 2016)
“Avoid this disastrous IRA blunder,” (On Wall Street, August 8, 2016)
“How Much of My Income Will Social Security Replace?” (MONEY, August 9, 2016)
“Social Security Replacement Rates Fall as Wives Earn More,” (ThinkAdvisor, August 10, 2016)
“Retirement Keeps Americans Up At Night – Even if They Plan,” (Financial Advisor, August 10, 2016)
“Saving for Retirement Is Leading Cause of Financial Stress: Schwab Poll,” (ThinkAdvisor, August 10, 2016)
“How to use time to potentially double your retirement income in five years,” (MarketWatch, August 10, 2016)
“How to live a longer and happier retirement,” (CNN, August 10, 2016)
“6 Big Expenses Retirees Didn’t Save For – But Should Have,” (TheStreet, August 10, 2016)
“Using Roth 401k Plans to ‘Supersize’ Retirement Savings: Ed Slott,” (ThinkAdvisor, August 11, 2016)
Wisdom from Some of Our Favorite Blogs:
The Chicago Financial Planner: Small Business Retirement Plans – SEP-IRA vs. Solo 401(k) |
The Retirement Plan Blog: Pension Plans Continue to Enjoy Double Digit Annual Growth – Cash Balance Plans That Is |
fi360: Collective Investment Trusts Capturing Assets and Attention |
Squared Away Blog: Social Security Replaces Less for Couples |
Fred Reish: Interesting Angles on the DOL’s Fiduciary Rule #15 |
Pension Risk Matters: Reading Books For Longevity? |
Proskauer’s ERISA Practice Center Blog: Challenge to Pension Fund Investment Decision Time Barred |
Behavior Gap: Why You Need Some Space Between Thinking and Doing |
Boston ERISA Law Blog: Moving on From the Churches, the ERISA Plaintiffs’ Bar Takes Aim at the Universities |
Nerd’s Eye View: Should Paraplanners Get Time Off To Study For The CFP? |
RetirementRevised: Decade after landmark pension law, changes still needed |
Behavior Gap: Your Money & Your Brain |
Hot Tips from Popular Web Resources:
NAPA Net: Tibble Gets (Another) Day in Court |
NAPA Net: Are You Talking Politics at Work? |
NAPA Net: Traditional DCIO Distribution Partner Support Changing |
The Motley Fool: The 3 Best Ages to Start Taking Social Security |
NAPA Net: Markets, Volatility Top Q2 Adviser Focus |
NAPA Net: The IRA Generation Gap |
NAPA Net: Work with IRAs? |
Kiplinger: Safely Traversing The Retirement Danger Zone |
The Motley Fool: Changing Jobs? Don’t Forget 401k Accounts Along the Way |
Society of Human Resource Management: Employees May Profit from Less Choice in 401k Plans |
NAPA Net: Excessive Fee Litigation Hits Education Sector |
NAPA Net: Case of the Week: Delivering Plan Notices Electronically |
NAPA Net: Does Retirement Planning Predict Healthy Behaviors? |
NAPA Net: Millennials Most Trusted Financial Source? Not Advisors |
The Motley Fool: Retirement Planning: A Checklist for Older Workers, Part 2 |
NAPA Net: Another University Sued for Excessive Fees |
NAPA Net: A Millennial’s Perspective on Social Security |
NAPA Net: Survey: Advisors Would Boost Confidence, But… |
NAPA Net: Temperatures – and Participant Transfers – Heat Up in July |
Kiplinger: Rethinking Your Retirement Nest Egg |
NAPA Net: 3 More University Retirement Plans Draw Excessive Fee Suits |
NAPA Net: Talking Politics at Work – A Mixed Bag |
NAPA Net: What Will the Fiduciary Regulation Mean for HSAs? |
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