RIABiz

DOL: Employers must fire 401(k) advisors if they don't provide information when asked

2012-02-09T21:41:55-07:00

The new teeth in the rules went noticed by many amid other changes

Fred Reish: Before, the statement said that you should consider firing the provider but now it's very clear that it's mandated.

An important new change in the final 401(k) fee-disclosure rules from the Department of Labor released earlier this month puts advisors on the firing line.

In some cases, perhaps, literally: The final regulation requires plan sponsors to fire their advisors if they fail to provide information regarding fees and information about their 401(k) plan within 90 days of a written request. See: Report of a possible delay in DOL’s fee disclosure rule sparks apprehension among advisors and industry observers.

Industry leaders say advisors worth their weight should be able to provide these important documents in less than 90 days.

“There is no reason for an advisor or provider to refuse to provide or willfully obfuscate critical plan information,” says BrightScope, Inc. co-founder Mike Alfred. “To be honest, what’s most surprising to me is that they will have 90 days to respond. “If I were a plan sponsor and my advisor couldn’t tell me my fees within a few days, I’d be very concerned that I hired the wrong advisor.”

In 2010, the Department of Labor had issued preliminary rules about 401(k) fee disclosures. But earlier this month, the labor department issued the long-anticipated final fee disclosure regulations for 408(b)(2) which require advisors in retirement plans to make available written disclosure of their services and fees. The regulations go into effect on July 1. See: Why the DOL’s proposed 401(k) rules could ding brokers and leave the spoils to RIAs.

Many RIAs in the 401(k) arena say they’ve been preparing for these changes for a long time and have already begun reaching out to clients to prepare them for the changes. See: Do 401(k) assets require all fiduciary care all the time?.

More teeth

This new provision is actually one of the most important changes in the final rule, says advisor Craig Watanabe with Pasadena, Calif-based Penniall & Associates Inc., an RIA with more than $600 million in 401(k) assets under management and about $400 million in non-retirement assets, says the requirement for employers to fire advisors who don’t provide requested information is the “most important change in the final rule” as it relates to retirement advisors.

Craig Watanabe: It sends a strong
message.

“It sends a strong message that the DOL is serious about the enforcement and is taking a zero-tolerance approach to compliance with the rule,” Watanabe says. “The disclosure rules are good for the industry because only the strong will survive and I welcome the change.”

Lost in the crush

Still, despite the importance of this change, it is being overlooked and has gotten little attention, which makes it possible that some advisors may not understand the consequences, says Rick Meigs, chief executive officer of Portland, Ore-based consulting firm 401khelpcenter.com

“This new provision has gotten a few footnotes…but has not been a focus or highlight of any coverage,” Meigs says. “As a result, I believe it is not well known to advisors, plan sponsors or any covered service provider.” See: DOL’s proposal puts the screws to legacy 401(k) providers.

Inside the rule

The final ...

Looking for a second growth spurt, a billion-dollar-plus RIA hires away a Nuveen global ops man

2012-02-09T21:26:36-07:00

Patrick Goshtigian, new president of EP Wealth Advisors has taken over back-office operations from its founders and is also heading up its expansion efforts

Derek Holman: We had grown to the point where the business took up most of the day.

Brooke’s Note: We already wrote about two big-corporation-to-RIA moves this week. John Bunch left his job at TD Ameritrade to join The Mutual Fund Store. We saw Jon Foster migrate from E*TRADE to Angeles. It’s a parallel breakaway movement that is happening everyday at the executive level. Here is just another example of that movement that came to our attention as the relatively sideways-moving corporations feed the talent-devouring beast of upwardly bound RIAs.

EP Wealth Advisors has hired a former Nuveen executive Patrick G. Goshtigian as its president, hoping the move will speed the Los Angeles-based firm’s way to its second billion in assets under management.

Previously, Goshtigian, a CFA, ran Nuveen Global Operations in Chicago and Los Angeles for both Nuveen Investments and the Nuveen Investment subsidiaries. He started with EPWM in June.

Managing directors Derek Holman and Brian Parker say the hiring of Goshtigian stemmed from desire to grow the company while at the same spending less time on operations. Parker and Holman formerly directed all aspects of the firm in tandem, sharing the operational duties.

“We had grown to the point where the business took up most of the day.” says Holman.

Growth spurt

The Torrence, Calif. firm was formed in 2005 with the coming together of Premier Financial Management, which Holman and Parker founded in 1999, with Enright Financial Consultants, founded in 1982. See: RIAs reveal their M&A war stories with 200 Schwab IMPACT attendees.

At the time of the merger, EPWM had $170 million in assets under management.

Patrick G. Goshtigian: I was looking
for an entrepreneurial opportunity.

Its growth since 2005 has been buoyed by the addition of two lift-outs from other advisory firms: Clint Camua, who joined the firm in 2007 from Glencrest Investment Advisors in Ontario, Calif., bringing with him about $10, and Ryan Serrecchia, most recently of Horan Capital Management of Delray Beach, Fla., who brought about $5 million with him.

Currently, the firm has $1.1 billion in assets under management, serves 1,300 clients and has 27 employees. The average client has about $800 million in AUM. Two years ago, the firm raised its minimum account level to $500,000 from $250,000. Since Goshtigian started with EPWM, the has also engaged a public relations firm, Impact Communications, to raise its profile.

Holman now hopes to grow the firm rapidly. There are now three deals actively in the pipeline and two more brewing, he says.

For his part, Goshtigian is aiming to push the firm to the $3 billion mark in AUM by 2014. The company will expand, he says, with increased hiring and by acquiring established RIAs and advisor lift-outs.

Family feel

Goshtigian is responsible for day-to-day operations including organizational structure, compensation plans, service offerings and marketing. He is also in charge of EPWM’s growth and acquisition strategies, as Holman puts it, “recruiting [new advisors], retaining and rewarding our current employees” and focusing on acquisitions.

“I’d known Derek for a while,” says Goshtigian. “I was looking for an entrepreneurial opportunity and this seemed a good chance to lead a firm that has a good foundation and a good growth spectrum.

As head of ...

Ben Brigeman is exiting Schwab and his position atop its retail business -- perhaps portending bigger changes

2012-02-09T21:43:37-07:00

The San Francisco-based company will have Andy Gill and John Clendening assume the duties

Ben Brigeman is leaving as Schwab searches for ways to boost profitability in its retail business.

Brooke’s Note: We just became truly aware of Ben Brigeman in 2011 when he announced the introduction of Schwab’s franchise concept and quoted him for this article. See: Why Schwab is embracing a franchise-like strategy to fast-forward branch growth.

Benjamin L. Brigeman is leaving his position as The Charles Schwab Corp.'s head of retail investing.

The executive vice president of investor services will vacate the position with the San Francisco-based company later in the year and his duties are being transitioned to G. Andrew Gill and John S. Clendening. Gill has been serving as the chief operating officer of retail, making him Brigeman’s number two man. Clendening has been overseeing OneSource, Windhaven and central advertising, among a long list of duties.

Hong Kong to Indianapolis

Brigeman leads the development, strategy and delivery of Schwab’s broad array of investment services for individuals. He is responsible for approximately 300 domestic and international branch offices, including offices in London, Hong Kong and Puerto Rico, and also oversees client service centers in Austin, Texas; Denver; Indianapolis, Ind.; Orlando, Fla.; Phoenix and San Francisco.

This transition has been underway for more than a year, and Brigeman has held his current job for the last five years and has been with Schwab since 1996.

In the company’s Feb. 2 business update for Wall Street analysts, Schwab chief executive Walter Bettinger spoke warmly of his colleague.

“He and I have worked together for almost 16 years, [and] have a very, very close business relationship. As many of you know, Ben has done a wonderful job for us. He has traveled extensively over the last 15 years, and certainly the last five, in which case that five years is the longest tenure of any individual leader in our retail business since I joined Schwab back in the mid ’90s. But with his family in Ohio and all of the issues that go along with that, Ben’s made the decision to leave the firm later this year.”

Walter Bettinger: Five years is the
longest tenure of any individual leader
in our retail business since I
joined Schwab.

Peak earning years

An executive recruiter who asked not to be identified says she finds it very difficult to believe that an executive like Brigeman would simply walk away from a job of this caliber in this job market during his peak earning years. Brigeman is 49. He made about $2,563,404 in total compensation in 2010 and had a salary of more than $511,000, according to Forbes.

The recruiter added that there is considerable buzz in the headhunting community about big structural changes afoot at Schwab because of the company’s desire to jump-start its growth — particularly on the retail side where things have been relatively stagnant. The recruiter believes that Brigeman’s departure could very likely be tied to those fast-coming changes. Those changes are indeed likely, according to a second observer who asked not to be identified.

Central management function

Alison Wertheim, spokeswoman for Schwab, explains Brigeman’s departure in this way:

“The head of the retail business is a central management function within Schwab and as such needs to be a job that ...

Where Boston Private Financial stands after selling one of its last original acquisitions for $10.5 million

2012-02-09T17:03:39-07:00

The roll-up spun out Davidson Trust and its $1 billion of AUM to Bryn Mawr Trust, which largely unwinds Boston Private's aggressive buying spree from last decade,

Frank Leto sees value in Davidson Trust though Boston Private said it had a negligible bottom line impact.

Bryn Mawr Trust Co. is purchasing Davidson Trust Co., one of the last few remaining advisory firms originally rolled up by Boston Private Financial Holdings Inc.

Bryn Mawr is paying Boston Private $10.5 million for Devon, Pa.-based Davidson Trust — $7.35 million in cash at the closing, which should occur in the second quarter, and the remainder to be paid over an 18-month window based on retention of assets.

Davidson is bringing over about $1 billion in assets, raising Bryn Mawr’s assets to about $6 billion in assets. See: This generation of advisor aggregators puts the roll-up ghosts to bed, for now.

The deal brings together two like-minded firms, says Frank Leto, head of wealth management division for Bryn Mawr.

“They have a very similar model to ours,” Leto says. “This brings additional investment expertise and gives us a great opportunity to cross-sell from the bank to their clients things like mortgages and private banking services.”

Unrolling

While the deal promotes growth for Bryn Mawr, it continues a pattern by Boston Private to contract its businesses in recent years. See: The seven things I learned from roll-up executives in Princeton, including not to call them that.

Dan Inveen: Boston Private’s rough patch
seems to have subsided.

Boston Private was one of the industry’s first roll-up firms known for an aggressive buying spree in the early 2000s but when the economy slowed, it began rapidly selling firms just as fast.

In 2008, Boston Private had 15 affiliates but since 2009 it has sold off Coldstream Capital Management, Westfield Capital Management, Gibraltar Private Bank & Trust Co., Sand Hill Advisors, Boston Private Value Investors and RINET Co.

Now, Boston Private has just five affiliates, including one created when four private banks merged into one — Boston Private Bank & Trust Co. — as of May 2011. On the wealth-management side, Boston Private still owns two wealth advisory firms — Bingham, Osborn & Scarborough and KLS Professional Advisors Group. And the firm still owns investment management companies Anchor Capital Advisors LLC and Dalton Greiner Hartman Maher & Co. LLC.

It appears that Boston Private had gained solid footing after some tough times, according to Dan Inveen, principal of FA Insight.

“When the financial downturn hit, they had to start retrenching fairly quickly because they had some balance sheet concerns and they sold several firms in 2009,” he says. “After the financial market meltdown, they had a rough patch but it seems to have subsided.”

Smaller yet bigger

“We believe that our current roster of affiliate companies is well-positioned for growth,” says Jeanne Hess, a spokeswoman for Boston Private, adding that Boston Private’s net income was $39 million in 2011 despite an $8 million one-time restructuring charge associated with the consolidation of the banking entities. She says that excluding the restructuring charges, the company’s net income is ...

After the loss of a spouse: Five pointers for helping grieving clients

2012-02-09T12:19:02-07:00

Effective guidance at this crucial time can be enormously helpful to those you serve – and support the maintenance of valued relationships as well

Chris Blunt: Meet with both spouses at least once a year for a “what if . . .?” conversation.

Losing a spouse is one of life’s most painful and emotionally complex events. It’s particularly challenging when there are still children at home. The surviving spouse typically is left to manage myriad tough, interrelated issues: coping with their own bereavement, helping their children grieve and interacting with friends and colleagues who may themselves be uncertain about how to respond.

In many cases, those in grief also are facing a difficult new financial reality.

Most surviving parents aren’t prepared for the financial impact of the loss of a spouse and are finding it hard to manage financial challenges such as investing, saving for their kids’ education or maintaining their lifestyle, according to a recent survey* of surviving spouses/partners conducted by the New York Life Foundation and National Association for Grieving Children. What’s more, many were disadvantaged from the get-go in dealing with such issues: Two-thirds of survivor spouses didn’t have a financial advisor at the time of their loss.

Despite this somber reality, it is evident that financial professionals can have an enormous positive impact on a client during the months — and years — after the death of a spouse. According to the New York Life poll, nearly eight of 10 surviving spouses who did have the support of a financial professional said that this guidance was critical in dealing with financial matters after their loss. Helping clients cope with the aftermath of loss in a caring, professional way can be enormously helpful to those you serve — and support the maintenance of valued relationships as well.

Yet, for many financial professionals the prospect of engaging during this extremely difficult period in a families’ life can be daunting — and even those advisers who are inclined to do so can be unsure how to proceed. Here are five simple, but powerful, pointers for advisors discussing this complicated life event with clients.

1. Talk about it

Don’t let the death of a spouse become an “elephant in the room” because you think your client will be uncomfortable talking about it. It’s an important conversation to have, because talking about the death of a loved one is often healing and therapeutic for a grieving spouse — as well as an essential first step in your effort to help the client understand what they must do next.

2. Be mindful of women’s specific needs — and their risk profiles

The demographic realities of aging make it inevitable that more married women than men will be left bereaved. According to a 2009 New York Life survey **, 71% of people who lost a parent before the age of 20 indicated that the parent was a father. It is clear that after the death of their spouse, women found it more difficult than men to “put money away,” “save for their children’s education,” and “get affordable health care” despite the fact that 53% of those women had full-time employment at the time of their spouse’s death and nearly three-quarters had some form of employment. Furthermore, keep in mind that many women are more risk-averse than men and this will certainly be the case when the death of a spouse is unexpected — and where a wage earner is no longer part of the financial picture. Capital preservation and income generation often become priorities.

See: Forget their reputation; rich women are more fearless investors than supposed.

3. Be patient

According to the New York Life survey, nine of 10 bereaved spouses feel their loss is the “worst thing” that has ever happened to them. As such, simple decisions may become excruciating ordeals for surviving spouses who are simply trying to cope with their ...