fi360 Blog

A Brief History of the Prudent Practices

2013-05-22T20:34:38+00:00

Today marks the official release of our latest update to the Prudent Practices and the associated handbooks for fiduciaries. You can read more about the changes in the News section of our website. As a companion to that release, we wanted to use today’s blog post to give a brief history of the Practices and their history as it relates to our company.

Everything we do at fi360 centers around fiduciary responsibility (hence the “fi” – fiduciary and “360” degrees – full circle) and, as the definitive guide to fiduciary responsibility, the Prudent Practices form the foundation from which we deliver our Training, Tools, and Resources. Our first fiduciary handbook, “Prudent Investment Practices,” was published in 2003. It was a result of more than three years work informed by:

numerous presentations nationwide
fiduciary courses taught at the University of Pittsburgh and elsewhere
input from practitioners, most of who had attended the training
face-to-face consultation with senior staff members at the SEC and DOL
receipt of more than 8,500 comments through our web-based survey soliciting feedback from industry stakeholders nationwide
legal review by a prominent law firm in the financial services field
technical review by the AICPA

The Practices have always been informed directly from requirements found in applicable legislation, including ERISA for corporate retirement plans, UPIA for trusts, UPMIFA for endowments and foundations, and UMPERSA for state, county, and municipal retirement plans, and the associated regulation and case law. In 2007, guidance from the Pension Protection Act was also incorporated and the new release also includes guidance from the Investment Advisers Act, state securities, recent ERISA-related rulemaking, and the Dodd-Frank Act. The legal review was originally handled by ERISA attorney Fred Reish and his law firm exclusively and has since evolved to include a team of law firms from a variety of practice areas.

Minor handbook updates occurred from 2003 to 2005. Our first major update occurred in 2006 when we added more specific Criteria under each of the Practices and differentiated versions of the handbook for advisors and stewards. This was done primarily so we could include more technical information in the advisor handbook while keeping the steward handbook more accessible to the lay fiduciary, such as trustees, plan sponsors, and investment committee members.

We also published our first international edition, for New Zealand, in 2006. Handbooks for Canada and Australia were added in 2007 and 2008, respectively. Each of those present their own unique challenges as we need to engage local experts and attorneys to make any necessary changes to the Practices, criteria, handbook narrative, and, perhaps most significantly, legal substantiation. In each case, an attorney familiar with securities and advice law in that country needs to review the Practices to ensure they are, in fact, compliant with local requirements.

2006 also marked the publishing of the “Prudent Practices for Investment Managers,” for those professionals who have discretion to select specific securities for separate accounts, mutual or exchange-traded funds, commingled trusts, and unit trusts. Those manager Practices were unique both because they are for a type of fiduciary entirely different from stewards and/or advisors and because they were derived from industry best practices vs. legislation, regulation and/or case law.

Again, minor, technical updates have been made since 2006 to all three U.S. handbooks. For about two years now, we have been working on the significant updates to the advisor and steward handbooks (U.S. Editions) that were released today (the managers handbook is largely unchanged, with the exception of an entirely new introduction to match new content in the stewards and advisors handbooks). Again, this has included an internal fi360 team, numerous external reviewers, including adjunct faculty members, an expanded, external legal review, and technical editing by the AICPA.

While the handbooks are obviously a huge part of who we are as a company, we also believe there is no better source of fiduciary guidance that is at once comprehensive, highly practical, and accessible to readers. Whether or not you have a need of our educational or technology solutions, the Practices and handbooks stand on their own as a means of creating a more fiduciary culture in all of financial services.

You can learn more about the updates by visiting the update summary and the Practices section of our website. You can also download the new Periodic Tables here: Stewards, Advisors, and Managers. The full handbooks can be downloaded by active AIF and AIFA Designees via the Designee Portal. Hard copies can be purchased by anyone by visiting the Fiduciary Store.

Fiduciary Links: Mary Jo White’s Honeymoon Short-lived?

2013-05-20T17:33:24+00:00

>>>>New SEC Chairman Mary Jo White’s honeymoon with Congress may be rapidly drawing to a close. Not that it was expected to last forever. Last week the former Wall Street lawyer, in office for only a month, testified before the House Committee on Financial Services about the need for more resources to examine investment advisers. The SEC’s fiscal year 2014 budget would add 325 IA examiners, or nearly half of all new staff hires at the Commission. About 250 of the examiners would inspect traditional advisers with the remainder focused on advisors to newly registered hedge and private equity funds.

Adding a political wrinkle to the hearing was former committee chairman Spencer Bachus’s comments that it would be “pennywise and pound-foolish for there not to be some bipartisan agreement for a [SEC] funding increase.” Bachus was the primary backer of a bill last year to create a private sector self-regulatory organization for investment advisers, most likely administered by FINRA, the SRO for broker-dealers. A statement by Bachus in support of increased SEC funding, rather than for a privately funded SRO, is another signal that the House GOP has little appetite to expand FINRA’s jurisdiction to investment advisers – at least for now.

However, it’s not likely the SEC will get the 18 percent increase in funding for a 2014 budget of $1.674 billion that the Obama Administration is asking for the Commission. Part of White’s plea for more examiners has to do with the sudden influx of 1,500 new hedge and private fund advisors since the Dodd-Frank reform act added the new registration requirement, and the fact that only one in 10 advisors registered with the Commission are inspected each year. Dodd-Frank was supposed to alleviate some of the strain on SEC resources by de-registering some 4,000 smaller investment advisers, and relegating them state oversight. However, only about 2,000 actually de-registered from the SEC. In reality, this trade-off leaves the SEC with fewer resources, given the complexity and time consumed in private fund inspections.

In addition to likely shunning the SEC’s full budget request, the House passed a bill (H.R. 1062) May 17, by a largely partisan vote of 235-161, requiring the SEC to enhance its economic analysis of new regulatory proposals. A recent impasse with the courts over legal challenges involving other cost-benefits analyses by the SEC has left an anticipated fiduciary rule for brokers in limbo. The Obama administration and SEC chairman oppose the House bill, signaling the end of the honeymoon of Mary Jo White with House Republicans, if there ever was one.

Now on to the rest of the best links from last week:

News and columns from the leading trade, consumer, and mainstream media:

Congress to require DOL-SEC to coordinate on fiduciary rulemaking? [InvestmentNews]
Rule change in Social Security leaves some stranded. [InvestmentNews]
Fewer advisers switched to state oversight than was anticipated when the Dodd-Frank financial reform law was enacted three years ago. [InvestmentNews]
The SEC's first priority is more adviser examinations, says White [InvestmentNews]
Self-directed retirement funds offer great flexibility, but require special due diligence for most and are ripe for fraud. [WSJonline]
Generational Dependence: More families are supporting adult children and aging parents, which causes a complete rewrite of the financial planning. [Wealth&Management]

From the organizations/associations/government/academia:

CEFEX now offers a new Electronic Assessment Form (EAF) to aid in working toward the CEFEX certification.[CEFEX]
Mary Jo White's testimony on the oversign of the SEC before the U.S. House of Representatives Committee on Financial Services. [House Financial Services Committee]
The SEC 2014 Budget Request [SEC]
Justin Fox looks at how growth in the size of the asset management industry has outstripped the value of the market and asks, "just how useless is the asset management industry?"

From the blogs:

What would Adam Smith say about the Fiduciary Standard? [Scholarly Financial Planner]
Ron Rhoades makes the case that there is both a legal and economic imperative for the DOL to adopt its broader fiduciary rule [Scholarly Financial Planner]
Fiduciary Obligation to Select Appropriate Share Classes [FredReish]
Trending Topics for ERISA Plan Sponsors [FiduciaryNews]
A case study on the new rules of early Social Security payments and repayment, with a broader lesson on paying attention to rule changes [IN's Retirement 2.0]

Articles your clients are reading (or should be):

How to Choose a Financial/Investment Advisor: A Checklist for Consumers. [Scholarly Financial Planner]
Share this with your clients to show them just how damaging hidden 401(k) fees can be and the importance of fiduciary advice. [NPR]
Why I rolled over my 401(k) to an IRA [USNews]
Investing: Even indexing takes work [The Chicago Financial Planner]

Have a link we missed? Leave them in the comments section or email us at blog@fi360.com. For more of the best links during the week, make sure you follow us on Twitter.

Fiduciary Links: Have you considered an advisory council?

2013-05-13T13:45:29+00:00

>>>>Advisory councils are not something new to the financial services industry, but an article in InvestmentNews this week highlights why advisors may want to consider creating one. If you’re willing and able to commit the time and thick-skinned enough to actively solicit constructive criticism, it can certainly pay dividends. Council members are typically current clients who are encouraged to provide feedback about what they like and, perhaps more importantly, don’t like about you, your organization, and the services you provide. There are many questions that relate to starting and maintaining an advisory council such as 1) size, 2) make-up, 3) frequency of meetings, and 4) feedback methods, so it behooves those interested to speak with someone that has already gone down this path, or hire a coach to help you through the process. In fact, two fi360 employees were recently asked to join an advisory council for an investment advisor in the Pittsburgh area. In this case, the council includes current clients, peers, and personal acquaintances.

On a semi-related topic, RIABiz published a column of five questions advisors need to be prepared to answer from prospective client, mostly geared to defining what type of person you are as an advisor.

It is interesting that these two pieces offer takes on connecting with clients on a personal level, which just might help you gain some insights into what part of your processes are or are not resonating.

Now on to the rest of the best links from last week:

News and columns from the leading trade, consumer, and mainstream media:

How Wall Street defanged Dodd-Frank, and battalions of regulatory lawyers burrowed deep into the federal bureaucracy to foil reform by Gary Rivlin. [The Nation]
Listen to Rivlin, speaking on his above article, here. [NPR]
Brokers, advisers are facing an uphill battle in finding new recruits, as attrition and retirement shrink advisors ranks over the next several years. [InvestmentNews]
No fiduciary rule is better than a bad one, NAPFA official says, as the industry reacts to the SEC's information-seeking request. [InvestmentNews]
Talk to your intern, and start to use expert (but cheap) advice on effective social networking. [InvestmentNews]
Some advisors find great success from leaving wirehouses to go independent. [InvestmentNews]
According to a N.Y. life study, financial security is percieved to be a necessity to be a good person. [AdvisorOne]
According to Larry Fink, our longevity is killing us, and he is calling on U.S. policy changes to address the problem. [AdvisorOne]

From the organizations/associations/government/academia:

FINRA and the SEC issue an investor alert on pension or settlement income streams. [FINRA]
National Crime Prevention Council and FINRA Foundation partner to reduce investment fraud among consumers nationally. [FINRA]
Bruce Karpati, Chief Enforcement Division Asset Management Unit, to leave SEC after 12 years. [SEC]
SEC announces panelists for credit ratings roundtable. [SEC]
Orphaned 401(k) accounts are opportunity for advisors willing to work on these fragmented accounts. [NAPANet]

From the blogs:

On the dangers of micromanaging your asset allocation [Abnormal Returns]
Stuff every 401(k) Plan Sponsor must keep [JDSUPPRA Law News]
Trending topics for ERISA plan sponsors. [FiduciaryNews]
Watch the PBS Frontline documentary, dealing witht he challenges in America's retirement plan system, featuring Jack Bogle and other experts. [TheBogleBlog]
Five questions advisors must prepare to answer to remain relevant [RIABiz]
RIAs recount how they use LinkedIn and Twitter to reap new clients, and slip ahead of shackled wirehouse advisors. [RIABiz]
A panel of experts will speak on "Valuation and ERISA Fiduciary Liability: Traps for the Unwary Appraiser," including AIF Dr. Susan Mangiero, a speaker at the 2013 conference. Read more here. [PensionRiskMatters]

Articles your clients are reading (or should be):

Stock market highs and your retirement [ChicagoFinancialPlanner]
Four great ways to learn about retirement [USNews]
The case against divends for retirees [USNews]
Low rates will limit investors' options [USNews]

Have a link we missed? Leave them in the comments section or email us at blog@fi360.com. For more of the best links during the week, make sure you follow us on Twitter.

Financial Planners as Fiduciaries

2013-05-08T18:13:02+00:00

>>>>We know that investors often assume that their financial advisor is a fiduciary. That might be accurate or not depending on the circumstances. Trying to simplify the explanations is perhaps a bit cumbersome. Those who offer financial planning services, in situations unrelated to ERISA’s realm, like other financial advisors, may or may not have a fiduciary duty to their clients depending on the specifics of the engagement. Financial planners, much like other functional fiduciaries, are deemed to have fiduciary responsibility when their activities fall under the definitions found in applicable laws, regulations, or professional standards that impose a fiduciary standard of care.

To illustrate, let’s look at two distinct non-ERISA situations.

The first situation involves a financial planner whose practice is restricted to preparing cashflow and budget statements. In general, there is no fiduciary duty (unless extenuating circumstances such as a relationship involving reliance or control leads to fiduciary status imposed under common law or other statutes). In the absence of such common law relationship or other statutes, no fiduciary relationship exists because there are no regulations governing those particular activities that impose a fiduciary standard. In this limited situation, then, there would be no applicable fiduciary obligation.

In the second, more-common scenario, once the planner begins to offer advice on securities for compensation as a regular part of his or her business, or performs other activities governed by a law or regulation that imposes a fiduciary obligation, the planner may be considered a fiduciary. In relation to investment activities, a planner would be subject to regulation under the Investment Advisers Act of 1940 and, consequently, would need to register as an investment adviser. His or her fiduciary obligations would then flow from the Advisers Act (or similar state statute, depending on the size of the business*). In fact, SEC Interpretive Release 1092 drafted in 1987 defined the registration requirements of financial planners. SEC staff analyzed the services offered by financial planners and arrived at the conclusion that they must register as investment advisers when investment advice is a central part of their service offering.

*Financial planners who manage less than $100 million, don’t manage investments but provide investment advice, or otherwise are not subject to SEC registration, will likely be required to register as investment advisers under state laws. Most states require registration of financial planners who provide investment advice. Two states – Maryland and Washington – go even further under their “holding out” provisions by requiring those who describe themselves as financial planners to register, even if they do not provide investment advice.

Certain individuals who provide financial planning services may also fall under any number of exemptions from registration, such as the case of a registered representative who may offer limited financial planning advice solely incidental to brokerage services without charging a separate fee. In providing such brokerage services, the registered representative would be subject to the suitability standard and normally not be considered a fiduciary. Another example would be the planning services provided by an individual working for a bank’s trust department who would be subject to an exemption under the Advisers Act, but still be subject to a fiduciary standard under other laws and regulations.

Professional obligations can also alter the fiduciary status of the financial planner. Once a planner becomes a CFP® certificant, CFP Board’s Standards of Professional Conduct impose certain obligations of a certificant including the duty to observe the fiduciary standard of care as defined by CFP Board. CFP Board Standards impose a baseline, non-fiduciary standard of care in all situations requiring a certificant to place the interest of the client ahead of his or her own, and impose the fiduciary standard; to act in utmost good faith in a manner he or she reasonably believes to be in the best interest of the client when a certificant renders financial planning services or material elements of financial planning.

In light of the fact that investor information is confusing on the matter, the general points for you to remember are that financial planners are regulated on a functional basis related to activities performed rather than on a professional basis by virtue of their status as financial planners. In addition, they are subject to the same hodgepodge of law and regulation regarding their fiduciary duties as others in the financial industry, and a determination of their fiduciary role is not always an easy task. Keeping it all straight can help investors understand and make critical evaluations when choosing to work with those who are in a fiduciary role.

Fiduciary Links:

2013-05-06T13:44:03+00:00

>>>>FINRA has released guidance to member firms regarding how they should be communicating to investors regarding REITs and real estate direct participation programs. The memo addresses eight areas in which firms have shown deficiencies when communicating about the products: dislcosures, distribution rates, stability/volatility claims, redemption features and liquidity events, performance of prior related real estate programs, use of indices and comparisons, pictures of specific properties, and capitalization rates. In each section, the notice provides guidance for how these aspects should be communicated in a way that does not mislead investors. In addition to the specific guidance regarding REITs, the notice is worthwhile reading for the insight it provides into how FINRA expects communications to accurately reflect an investment program.

Media coverage: [InvestmentNews] [Wall Street Journal]

>>>>On a lighter note: While the debate over the virtues of passive versus active management typically centers around considerations of performance expectations, cost, investor time horizon, risk, etc., apparently we also need to start taking patriotism into account when choosing which path is right for you.

Now on to the rest of the best links from last week:

News and columns from the leading trade, consumer, and mainstream media:

Consumer Federation of America, Americans for Financial Reform and AFL-CIO to SEC: don't leave investor protection behind in Reg D rulemaking [InvestmentNews]
SEC's White plays money market reform close to the vest. [InvestmentNews]
Sallie Krawcheck says advisors generally ignorant when it comes to women investors [AdvisorOne]
How does a planner's brain react to change? Judith Glaser tells the tale at the FPA Retreat last week. [AdvisorOne]

From the organizations/associations/government/academia:

From the blogs:

Five questions for advisers considering going independent as a growth strategy [The Advisor Center Blog via InvestmentNews]
CEFEX-certified firm Richardson GMP recently signed a de facto non-aggression and partnering pack with Dynasty Financial. [RIABiz]
Trending topics for ERISA plan sponsors [FiduciaryNews]
Top 10 wealth managment posts in April 2013 [InvestmentFiduciary]

Articles your clients are reading (or should be):

The SEC is warning investors to be wary of private security offerings in the gas and oil industry [SEC]
Three powerful ways to reduce your 401(k) fees [USNews]
Seven reasons to downsize after retirement [USNews]
Why you need more bonds as you get older [USNews]
Friday finance links - DOW 15,000 edition [theChicagoFinancialPlanner]
Have a link we missed? Leave them in the comments section or email us at blog@fi360.com. For more of the best links during the week, make sure you follow us on Twitter.

Fiduciary Links: What can we read into the SEC’s assumptions regarding fiduciary rule making?

2013-04-29T20:22:03+00:00

>>>>The Institute for the Fiduciary Standard, an advocacy group that promotes the fiduciary standard, issued a paper that takes issue with a number of the assumptions made in the SEC’s request for data to inform potential fiduciary rulemaking. The paper notes that the assumptions suggested in the request would indicate a severe change in how the fiduciary standard is understood. This would include increased reliance on disclosures as a means of managing conflicts of interest while also weakening the forms and methods of disclosure, allowing fiduciary duty to be waived, redefines the duty of loyalty, and glosses over the seriousness of conflicts issues. In short, the Institute’s position is that the assumptions, if they came to pass, would be a dramatic departure from the Advisers Act and clearly in opposition to the Dodd-Frank mandate that the uniform standard be “no less stringent” than the existing Advisers Act standard.

The SEC release for the request does note that the assumptions for the request should not be presumed to be an indicator of what rulemaking will look like. Nonetheless, it is illustrative enough that these assumptions have not been thrown out by the SEC.

As always, InvestmentNews has coverage.

>>>A story making headlines in the consumer media this week was PBS Frontline’s special “Can you afford to retire?” Which looked at Americans’ reliance on 401(k) plans and the risks of inadequate retirement savings. While some praised the show for highlighting the problems of suspect sales practices and high fees, others felt it portrayed the entire advice industry with a large (negative) brush. InvestmentNews has a recap of the reaction.

Now on to the rest of the best links from last week:

News and columns from the leading trade, consumer, and mainstream media:

RIAs are bringing in new money, according to a recently released study. [InvestmentNews]
Software options can make claiming social security a little easier. [InvestmentNews]
Senate Internet tax bill could open door to state levies, hitting advisers [InvestmentNews]
To attract high-net-worth clients, offer more than financial planning [InvestmentNews]

From the organizations/associations/government/academia:

From the blogs:

Dale Brown tells RIAx why SEC's fiduciary standard is too costly for their clients. [riabiz]
Trending topics for ERISA plan sponsors [FiduciaryNews]
Thoughts on the GAO report on IRA Rollovers [fredreish]

Articles your clients are reading (or should be):

Three big problems with your retirement savings, and what you can do about them. [thefamilyCEOblog]
Beware of financial fraud. [USNews]
Your old 401(k), should you take it or leave it? [thechicagofinancialplanner]
Four financial tips for the sandwich generation, care for your children and your parents without sacrificing your retirment savings. [USNews]

Have a link we missed? Leave them in the comments section or email us at blog@fi360.com. For more of the best links during the week, make sure you follow us on Twitter.

On Transitioning My Children into Young Fiduciary Clients

2013-04-24T14:03:30+00:00

My son turns 18 in August. At that point he plans to sign an engagement letter with an independent financial planning firm in Texas, and with a personal advisor he’s never met, or at least doesn’t remember meeting as a child. My daughter, 21, graduates from college in another month, and is also a fiduciary client, at least in a limited engagement. Both inherited a very modest amount of shares in a family-owned business that was sold last November. Big changes, as they say, are ‘a-coming.

The financial planner in question is mine as well, and with brokerage, RIA and insurance licenses, has a host of conflicts to manage. However, I trust him implicitly with helping my kids begin their path through adult life by setting clear financial goals that most other young adults their age won’t think about doing until they are middle-aged, according to current industry research. Hopefully the odds will be better 30 years from now in selecting a fiduciary advisor, but at this point Washington policymakers aren’t telling us much.

The position of trust and confidence that I place in my advisor, and in having him assist my children, didn’t come casually. I have known my advisor for many years. He stayed overnight once at my former home in Boulder, Colorado, when my daughter and son were little. I went to his wedding and know his family as well. As someone involved on the regulatory side of the business, I must confess that I am also very comfortable with his working with my children because I understand his business model, and how he avoids or manages any conflicts that arise in our own client relationship. It is not just about being friends on which the foundation of trust and confidence is based. In fact, over the years we have had literally dozens of hours of discussion over regulation of financial planners, the various licenses that they hold, including his own, the standards that attach to each, and the best way to avoid or manage conflicts associated with the many services provided by comprehensive financial planners. And since I have been involved directly with various Texas securities and insurance regulatory matters over the years, I know those laws better than most other state’s requirements. Yes, my financial planner will say he places his clients’ interests first, and no, like many other financial planners with multiple licenses he is not always legally required to act as a fiduciary. But I believe him when he says so because my confidence and trust is built partly on the many years that I have known him and again in part on my years of work involved in understanding fiduciary obligations and other rules that govern advisor conduct in general.

Despite my enthusiasm in wanting to teach my children over the years about basic money concepts, they were terribly bored with it as teens. They still are. However, the capital gains that Uncle Sam slapped on their share transactions, was quite a learning experience. Kind of like having the tax man pour ice-cold water on them. I hadn’t thought about financial education techniques in those terms, but it sure worked.

There is an obvious age gap, not to mention a geographical one, complicating the fiduciary relationship since I and my kids live in Maryland and at a North Carolina campus, 1,400 miles away from the Texas financial planning firm. My kids made it clear, though, that they prefer to answer quick questions mainly by texting, which helps bridge the geographical gap in a way. As for age, because my planner is a sole practitioner in middle age, like myself, he is grooming a young planner to take over one day, yet another hallmark of a fiduciary best practice by starting succession planning way in advance of retirement. If that works out, then both my children will have someone younger to work with eventually, and hopefully with whom they can relate, since communication skills involving recommendations and disclosure of conflicts is critical in a fiduciary relationship.

Part of the age difference includes other obstacles. My planner declined to discuss his conversations with my daughter, since she is no longer a minor and an adult in her own right. Again, I don’t mind, because as a fiduciary he must legally guard her privacy. Perhaps she’ll give me a hall pass and let me converse from time to time with OUR mutual planner about her financial situation, but it will be her choice, not mine. Indeed, we have different scopes of engagement, and certainly different goals, needs and priorities, even if we’re family.

As for my son, we decided to let implementation of the recommendations sit for several more months until he is 18 and can legally sign his own client agreement.

This is the beginning of a new journey in life for them, and I am excited that they will learn more about the connections between money and life goals than they realize at this point, and perhaps along the way, what it means to trust someone outside of the family, and how that trust is formed under the law, as well as through a personal relationship.

Fiduciary Links: Fiduciary of the Year and Article Competition Winners Announced

2013-04-22T18:18:33+00:00

>>>>Last week's fi360 Conference was the occasion for the announcement of two awards of distinction for investment management fiduciaries: The Committee for the Fiduciary Standard's Fiduciary of the Year and the winner of the fi360-AdvisorOne Article Competition.

Eugene F. Maloney, Executive Vice President and Corporate Counsel of Federated Investors, Inc., was named Fiduciary of the Year by the Committee for the Fiduciary Standard. Mr. Maloney is widely known in the financial services industry as an advocate for fiduciary responsibility and as a resource for fiduciaries and investment advisors nationally. Spanning a career of more than 40 years, he has provided bank trust officers, investment advisors, and other financial services participants with educational efforts, as well as market-driven solutions, pioneering such issues as implementation of the Uniform Prudent Investor Act, asset allocation as a means of optimizing return and minimizing risk, the prudence of international investing, and the propriety of a corporate fiduciary utilizing a mutual fund to which it provides discrete services.

In addition to producing and sponsoring a seemingly never-ending series of conferences, videos, sourcebooks, and legal opinions on developing issues facing fiduciaries, Mr. Maloney has also acted as an expert witness in numerous court cases on behalf of fiduciaries, as well as testifying before Congress and the various financial regulatory authorities as an advocate for fiduciaries and the fiduciary standard. Mr. Maloney has also contributed to the education of future fiduciary leaders as a long-time faculty member of the Graduate Program in Banking and Financial Law at the Boston University School of Law. An alumnus of Holy Cross College and Fordham Law School, it is difficult to envision a person whose career has been more deeply devoted to fiduciaries and the fiduciary standard than Gene Maloney.

The fi360-AdvisorOne Article Competition for 2013 was won by Jacob C. Adamczyk, an AIF© of Aurum Wealth Management Group, for his article, Rethinking TDFs as QDIAs: Why Target Date Funds Are a Fiduciary Nightmare for Qualified Plans. Mr. Adamczyk’s article provides a review of the development of TDFs as the “go-to” choice as Qualified Default Investment Alternatives for most defined contribution plans. He then discusses the troubling record of TDFs as a retirement asset, particularly during the downturn of 2008.

Mr. Adamczyk discusses the plight of plan sponsors and trustees in selecting and evaluating TDFs over the long-term for which they are intended. He addresses these problems by advocating a shift in the focus of TDFs from growth and capital appreciation to professionally risk-managed portfolios that match the duration of the assets with the duration of the investors, thereby addressing both longevity risk and risk tolerance. He closes by discussing the Department of Labor’s February 2013 bulletin advising plan sponsors on performing due diligence and monitoring of TDFs. The winner of the Article Competition provides substantial food for thought for anyone involved in the management or operation of defined contribution plans.

Now on to the rest of the best links from last week:

News and columns from the leading trade, consumer, and mainstream media:

Learn five things Gens X and Y can do for a more secure retirement [FinancialPlanning]
Fiduciary advocates take issue with SEC's request for comments [WealthManagement]
15 best investing quotes of all time [AdvisorOne]
Walter says SEC puts priority on lifting Reg D ad ban [InvestmentNews]
Walter says SEC request for more examiners not enough [InvestmentNews]
The Consumer Financial Protection Bureau said regulators should do more to stop older Americans from being confused by the many designations used. [InvestmentNews]
Waters introduces bill to fund investment advisor examinations [InvestmentNews]

From the organizations/associations/government/academia:

From the blogs:

April is financial literacy month, so take a firm charge of your finances. [AllThingsFinancialPlanningBlog]
Trending Topics for ERISA Plan Sponsors [FiduciaryNews]
Fiduciary Advice and 12b-1 Fees [Fred Reish]

Articles your clients are reading (or should be):

Stockpicking or Indexing? Consider this 2012 Market Study. [US News]
Why software won't replace humans for investing advice. [US News]
4 percent annual withdrawals are still safe. [US News]
Seven steps to spring clean your portfolio [The Chicago Financial Planner]

Have a link we missed? Leave them in the comments section or email us at blog@fi360.com. For more of the best links during the week, make sure you follow us on Twitter.

Fiduciary Links: fi360 Insights Conference Week

2013-04-15T17:54:57+00:00

>>>>It’s fi360 Conference week once again! The fi360 team has already begun arriving in Scottsdale and our pre-conference training sessions have already begun. The conference itself begins in earnest on Wednesday afternoon with attendee checkin and the evening networking reception. That’s followed by two days of educational content on Thursday and Friday.

Our two general sessions this year are Nate Silver and a panel of fiduciary experts, including our own CEO Blaine Aikin, Ron Rhoades of Alfred State College, and Skip Schweiss from TD Ameritrade. Nate Silver will be doing a session on Thursday based on his book, The Signal and the Noise, in which he will discuss how advisors should value predictions and make the best use of them in their practice. He will also be signing copies of his book immediately following his session. Our panel on Friday will be looking at the current and future state of fiduciary regulation and what our audience should be expecting at the federal and state level, as well as how competitive forces are shaping the direction of the fiduciary standard of care. On top of those sessions, there will be an additional 30 breakout sessions over the course of the two days. You can see the full details of the agenda on our website.

We’ll be providing updates throughout the week, both here on the blog and via our Twitter account, where we’ll be using the hashtag #fi360_2013. If you are coming to Arizona for the conference, we look forward to seeing you there. Designees who are not in attendance can look forward to hearing many of the recordings in the Designee Portal within a few weeks of the end of the conference.

>>>And for the best of this week’s fiduciary roundup: law firm warns that DOL fiduciary rule could make SEC cost-benefit analysis moot…federal appeals court upholds decision in favor of in-house trading policies…draft federal budget includes new allocation to fund SEC adviser examinations…tactical allocation strategies way up since onset of financial crisis

News and columns from the leading trade, consumer, and mainstream media:

A law firm comments that the DOL fiduciary rule would make the SEC plan pointless [InvestmentNews]
A survey indicated that there are millions of mass-affluent investors that don't believe advisors are worth it, but here are some tips for bringing back that crowd. [InvestmentNews]
The federal budget proposed by Obama would increase the SEC funding by more than $250 million. [InvestmentNews]
When executors should and shouldn't trust their accountant's advice. [InvestmentNews]
With new guidance from the SEC, here's five social media activities you don't need to report to FINRA [AdvisorOne]

From the organizations/associations/government/academia:

SEC names Jennifer Marietta-Westberg as Deputy Director of the Division of Risk, Strategy and Financial Innovation [SEC]
CEFEX renews the registration of 19 firms. You can view a complete list of CEFEX-registered firms here. [CEFEX]
At an SEC event for broker-dealer compliance officers, FINRA CEO Richard Ketchum highlighted the need for greater supervision of complex products [FINRA]

From the blogs:

Trending topics for ERISA plan sponsors [FiduciaryNews]
Last-minute tax tips [GettingYour Financial Ducks in a Row]
Why 408(b)(2) is a flop for the 401(k) business and how RIAs can turn it around [RIABiz]

Articles your clients are reading (or should be):

Five reasons to save for retirement in a Roth IRA [USNews]
When is the right time to retire? [USNews]
Four debt consolidation traps to avoid [USNews]

Have a link we missed? Leave them in the comments section or email us at blog@fi360.com. For more of the best links during the week, make sure you follow us on Twitter.

Fiduciary Links: GAO Report Brings Attention to IRA Rollovers

2013-04-08T15:38:04+00:00

>>>>IRA rollovers were the big, fiduciary-related story of last week, as the GAO released a report suggesting many providers were recommending IRA rollovers for participants leaving a company without much consideration to the particular facts and circumstances related of that investor. In most cases, participants have very little information available to them that provides straightforward pros and cons of their available options. In addition, they found that the process of a plan-to-plan rollover from the old company to a new company’s 401(k) plan presents some obstacles.

Among the suggestions of the report is to make the plan-to-plan process simpler for participants, utilize more straightforward disclosure, and for DOL to move forward with its new definition of fiduciary, including addressing IRA rollovers. This will be a topic worth tracking as IRAs continue to get attention from government and consumer groups. As always, InvestmentNews has coverage, and supported the GAO recommendations in an editorial.

>>>>PensionRiskMatters.com, a blog focusing on risk management, celebrates its 7th anniversary this year. The author, Dr. Susan Mangiero, will be speaking at the upcoming fi360 Conference on due diligence for alternative investments. She is also author of the book Risk Management for Pensions, Endowments, and Foundations.

News and columns from the leading trade, consumer, and mainstream media:

A former employee of FINRA filed a suit in federal court, claiming he was fired after he detected a flaw in the ranking-system. He said large broker-dealers were allowed to circumvent an SEC rule. [InvestmentNews]
Some advisers believe that an Obama tax break cap would hurt clients, and that a 28% limit is not a helpful policy for jobs or growth. [InvestmentNews]
Many Wall Street institutions are chasing independent financial advisers, but it's not an easy task to win trust. [InvestmentNews]
The GAO claims that workers are hurt when they roll their 401(k) plans to IRAs. [InvestmentNews]
Investors faith in advisers soared after financial crisis. [InvestmentNews]
The SEC recently ruled that as long as companies are clear to investors about plans for social media, it is OK to use it to communicate with shareholders. [InvestmentNews]
One of the key fiduciary concepts is that fees and expenses must be reasonable to the value they provide. But our experience is that many advisors aren’t sure how their own pricing stacks up. In a new white paper, Pusateri Consulting addresses this with a suggested exercise for evaluating your pricing.[AdvisorOne]

From the organizations/associations/government/academia:

From the blogs:

Learn five fiduciary facts the DOL wants every 401(k) plan sponsor to know. [FiduciaryNews]
The Pension Risk Matters blog celebrates it's 7th anniversary. [PensionRiskMatters]

Articles your clients are reading (or should be):

Have a link we missed? Leave them in the comments section or email us at blog@fi360.com. For more of the best links during the week, make sure you follow us on Twitter.