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Posts Tagged ‘401k advice’
Thursday, July 29th, 2010 by Chad Griffeth, AIF
 We wanted to provide a quick ’shout out’ to our esteemed Portfolio Analyst, Mark Hoppe, for learning on late Monday that he was among the 39% of world-wide candidates that passed Level II of the Chartered Financial Analyst exam. We empathetically watched him study diligently for an obnoxious amount of hours during the first half of the year, and were excited to learn that he passed the second of three exams with flying colors. The Chartered Financial Analyst designation is, in own my words, “the gold standard of the investment world.” Here is an simple overview from the CFA Institute site:
The CFA Program is a graduate-level self-study program that combines a broad-based curriculum of investment principles with professional conduct requirements. It is designed to prepare you for a wide range of investment specialties that apply in every market all over the world.
Global Recognition
- Nearly 90,000 CFA charterholders work in over 130 countries
- Over 100 universities use parts of the curriculum in their courses
- Numerous regulators accept the CFA charter as a proxy for many licensing requirements
- Global media recognition of the CFA charter and CFA Institute events
If you are looking for an investment credential that will earn you instant credibility and respect anywhere in the world, look no further than the CFA charter.
Awareness of the CFA charter has grown considerably since it was first offered in 1963 as a means for investment professionals to prove their expertise and demonstrate their commitment to integrity.
Today, with nearly 90,000 CFA charterholders working in over 130 countries around the world, the CFA charter is widely recognized by investors, investment practitioners, employers, regulators, and the media as the highest educational standard in the investment community.
Congratulations, Mark, you definitely deserve and earned it!
- The BeManaged Team
Tags: 401k advice, 401k fiduciary, 401k investor help, BeManaged, Mark Hoppe
Posted in 401k help, BeManaged, independent fiduciary | 1 Comment »
Monday, July 26th, 2010 by Chad Griffeth, AIF
 The new 408(b)2 disclosure regs have been long awaited, and present a great opportunity for companies to better understand and benchmark the fees associated with their 401(k) provider. Additionally, it will be require 401(k) service providers to better articulate value in light of the fees they charge. ERISA requires plan fiduciaries to review the fee structure of, and I paraphrase, “reasonable fees for reasonable service.” What is reasonable? That is for plan fiduciaries to determine via the value proposition delivered by 401(k) service providers, which includes recordkeepers, TPAs, custodians, advisors and yes, participant advice providers.
While the impact of this disclosure does not directly impact us as a 401(k) participant advice provider since we have been transparent and conflict-free from the start, there are a lot of benefits for the companies and employees we serve. Here are a few:
- Service Providers Must Disclose Whether They are Fiduciaries – There is so much confusion over this issue, it is great to see the regulations require this so to clarify for plan sponsors who is and who is not acting as a fiduciary. Most plan fiduciaries have been confused by this over the proliferation of the terms used by service providers such as fiduciary, co-fiduciary, fiduciary warrant and especially advice, which automatically makes someone a fiduciary. Per InvestmentNews.com:
“Along with requiring bundled service providers to break out costs of their record-keeping services, the new regulation also requires providers to disclose whether they are acting as fiduciaries to plans.”
- Disclosure Simplifies Plan Reviews and Benchmarking – Understanding value will be much easier if there is some standardization and definition of what services are to be included under each term. Making an apples to apples comparison is critical for making a large decision on a large purchase, such as a 401(k) service provider.
- Independence and Conflicts to be Better Articulated – Understanding the inherent conflicts of interest with various service providers. Per InvestmentNews.com,
“Under the rule, consultants — and many plan service providers — will be required to reveal to DB and DC plan sponsors hitherto undisclosed compensation they are receiving, including any revenue sharing or finder’s fees.”
- Transparency Improves Clarity – It is obvious, but understanding what plans are paying for various providers has been extremely difficult to understand for many companies. Including us. We do not do plan-level consulting work, but when we are working on a plan that has a fiduciary plan consultant, the quality of the plan has a distinctly different flavor than the plans that do not. Service and value are the at the crux of the conversation, which ultimately resonate in greater outcomes for participants. Per InvestmentNews.com,
Alison Borland, retirement strategy leader at unbundled provider Hewitt Associates, Lincolnshire, Ill., said: “The regulations will put different types of service providers, including bundled and unbundled providers, on a level playing field.”
“Ultimately that means better transparency, more negotiating power and lower total costs for plan sponsors and plan participants.”
Cheaper is not always better. Receiving the best value for a reasonable cost is all this disclosure regulation is aiming at in our humble opinion, which is great for plan fiduciaries and their participants, which includes themselves.
Tags: 401k, 401k advice, 401k advice regulation, 401k fiduciary, fiduciary
Posted in 401k advice, 401k fiduciary, Advice Regulations, conflicts of interest, fiduciary, fiduciary education, independent fiduciary | 5 Comments »
Thursday, July 8th, 2010 by Chad Griffeth, AIF
 Our friend Carl Richards wrote yesterday on this subject at the NYTime.com Bucks blog, and it is very good advice. We have seen people follow guidance from the likes of the Jim Cramers, Suze Ormans and Dave Ramsey (though we are big fans of his debt reduction advice), which more often than not steers people into an inappropriate portfolio. Many 401(k) providers will even provide some general guidance as well, but they leave investors to figure out the ideal recipe (asset allocation) to create from their plan’s ingredients (investment options). Understanding some basics such as age and your prospective time horizon for retirement are easy, but understanding your risk tolerance can be tricky. Additionally, here is an easy way to distinguish general guidance from specific, personal advice:
Advice will tell you specifically which funds in your 401(k) plan you should be invested in as well as what percentage. Guidance only speaks to the types of investment options.
The following are some key excerpts from the Bucks blog post by Carl Richards:
It is dangerous to mix investing with entertainment. The classic example is thinking that Jim Cramer is your investment adviser rather than some sort of circus clown.
But what can be even more dangerous is taking what’s meant to be general financial information and acting on it, without first taking the time to figure out if it applies to your particular situation.
Making important decisions about how to invest your life savings seems to be getting more and more complex as the amount of information continues to grow.
Take this article, “A Market Forecast That Says ‘Take Cover,’” that appeared in the The New York Times this weekend. It offers up advice from a market watcher who suggests that individual investors “move completely out of the market and hold cash and cash equivalents, like Treasury bills, for years to come.”
The article has been among the most e-mailed articles for several days, so it’s clearly getting a lot of attention. But the question is what you’re supposed to do with information (general advice) like this. Should you follow this advice to “take cover,” regardless of your age, unique goals and family situation?
The financial press, personal finance bloggers and best-selling authors are all sources of information. But don’t confuse information with the real work of figuring out how it applies to your very unique situation. I know many of the best personal finance bloggers. As good as many of them are at providing a filter for information, and even providing general rules of thumb, you are the only one who can figure out how it applies to your life.
The reason is simple: planning for your financial future is personal. It has to be. A good plan will be unique to your situation, and what is right for your situation may be a disaster for your neighbor. So read as much as you want, but then make sure you spend the time to figure out how it applies to you before you make important decisions about your life savings.
Read the Article at the NYTimes.com Bucks Blog
Tags: 401k advice, 401k investor help, Carl Richards, investment behavior, personal finance, retirement
Posted in 401k advice, 401k help, Asset Allocation, investing, investment behavior, investment education, retirement | 2 Comments »
Wednesday, July 7th, 2010 by Chad Griffeth, AIF
 Our friend Matthew Hutcheson, Independent Fiduciary, recently conducted testimony with the Congressional Ways and Means Committee. The goal of the testimony was to discuss fiduciary best practices as well as avoiding the potential conflicts of interest inherent to the broker dealer model in the 401(k) world. When the topic of 401(k) advice was discussed, information we provided him was cited. Our information spoke to the potential conflicts of interest that could have existed under the original January ‘09 proposal, which has since been replaced by a conflict-free proposal by the DoL in February of ‘10. The following is the testimony and the reference to us:
Independent Fiduciary Adviser, Chad Griffeth, AIF®, makes the following observation:
If the provider of the advice is being paid by the mutual funds in any way, trust is damaged dramatically. The reality of the situation is that the advice provider must earn participants’ and management’s respect, and the story of true independence, fiduciary prudence, and thus acting in the sole interest of the participant’s best interest is critical to the success of the advice provider, and thus the participants. If participants do not trust the source of the advice and account management, they will not use it, even though they need it. Thus, participants will likely not experience the success they need for a dignified retirement.[6]
Read the Full Testimony
Tags: 401k advice, 401k advice regulation, 401k fiduciary, BeManaged, Chad Griffeth, fiduciary, Fiduciary Adviser
Posted in 401k advice, 401k fiduciary, Advice Regulations, BeManaged, Managed Accounts, conflicts of interest, fiduciary, fiduciary education, independent fiduciary | 1 Comment »
Thursday, May 13th, 2010 by Chad Griffeth, AIF
 For the third straight year, I attended the fi360 National Conference, the premier fiduciary-focused conference in the nation. The sessions were outstanding, focusing on the many changes taking place within the retirement plan industry, including those proposed for 401(k) advice. I was fortunate enough to be able to speak on an esteemed panel regarding the topic to a packed house of concerned advisors and retirement plan providers. Here are some key points that were discussed:
- Shifting Liability and Risk - Jason Roberts, Partner at Reish and Reicher, mentioned that providing fiduciary advice is one of the best risk-shifting mechanisms for advisors and employers.
- Fiduciary Advice is Ongoing – All panel members were emphatic that in order to provide proper fiduciary advice, it must be ongoing. If there is not a mechanism/service orientation toward delivering advice in an ongoing fashion, it can translate into a liability for both advisors and their employer clients.
- Liability Risk is Real - Mike DiCenso, National Practice Leader of Gallagher Retirement Services shared an entertaining overview (see presentation below) of the risk of liability for plan fiduciaries as it relates to ERISA plan settlements. Take a look at the presentation, it puts the potential risk to the bottom line in perspective.
- Outsourcing is Ideal – As Jason Roberts wrote in January, outsourcing investment advice can often result in a more effective and less risky approach for advisors and plan sponsors to provide 401(k) investors advice. The responsibilities, fiduciary requirements and documentation required of an advisor to provide advice are intense, thus they must consider the risk/reward of doing so.
- Protecting Plan Sponsors – When an employer is considering advice, delivering a fiduciary safe harbor from the advice delivered is critical to protecting them and their liability exposure. Signing on as a plan-level fiduciary is very different from signing on as a participant-level fiduciary, which is a best practice to protect employers.
- Is the Reward Worth the Risk? – On the topic of risk and reward, Scott Holsopple of Smart401k discussed that while the risk of providing plan advice and participant advice is high for the adviser, the reward may not be what they expect. The cost of the services must be reasonable (as ERISA requires), and within an institutional environment such as a 401(k), fees are quite different from those of a retail investor. In addition, as a plan fiduciary there is a responsibility to oversee the services provided to the participants. If the plan adviser is also the participant level adviser there are inherent issues with over-site. Someone operating in both positions would need to prudently select and monitor themselves.
Many attendees asked for the presentation, so here you go. If you have any questions or comments on the session, we would love to hear them in the comments section below. If you have trouble viewing the presentation, you can download it here.
Tags: 401k advice, 401k advice regulation, 401k fiduciary, BeManaged, Chad Griffeth, fi360, Fiduciary Adviser, Jason Roberts
Posted in 401k advice, 401k fiduciary, Advice Regulations, Managed Accounts, fiduciary education | 1 Comment »
Wednesday, May 12th, 2010 by Chad Griffeth, AIF
 The comment period for the DoL’s new 401(k) advice period ended on March 5th, and the 70 response letters will be under consideration by the Employee Benefits Security Administration. Financial-Planning.com reported that the Department could have the rule on advice finalized as soon as this fall. Though it might end up being four years since the PPA was passed before this rule is finalized, it should be worth the wait for 401(k) investors due to its conflict-free, fiduciary approach.
The article in Financial Planning had some interesting tidbits on the advice rule, as it has been a highly contentious issue, which is reflective of the time that has passed without final clarification.
(Assistant Secretary of Labor Phyllis) Borzi noted that investment advice in defined contribution plans has been EBSA’s “most controversial regulation, having already been debated by two or three Congresses.”
Advice in 401(k) plans has proven so thorny, Borzi noted, that it was the final item in the Pension Protection Act, “with the debate focused on who should be able to provide investment advice—and that it be reliable, simple, understandable and relevant advice.”
Effectively, the PPA of 2006 changed ERISA, and since then, the “dispute has been as to the nature of the safeguards to provide advice that is independent of the plan,” Borzi said.
“This is a very controversial regulation. It was published on the day the new administration took office, and we took a fresh look. The comment period closed two, three days ago,” Borzi said on Friday. “We have received 70 comment letters and have promised Congress we will be faithful to the intent of the original statute.”
Read Article at Financial-Planning.com
Tags: 401k advice, 401k advice regulation, 401k fiduciary, Fiduciary Adviser
Posted in 401k advice, 401k fiduciary, Advice Regulations, Managed Accounts, conflicts of interest, fiduciary, fiduciary education, independent fiduciary | No Comments »
Monday, May 10th, 2010 by Chad Griffeth, AIF
 Financial Advisor Magazine, May '10 In this month’s F-A Magazine, BeManaged was featured in the article titled “Better Laid Plans,” which is focused on how companies around the nation are answering the call for 401(k) advice. It was a privilege to be included in the article, but there is a key point we would like to correct about how we operate.
We do NOT control the investor’s contributions. The participant is ALWAYS in complete control, we simply provide encouragement and strategies for how to increase those contributions.
One advisor working in this space, Chad Griffeth, markets 401(k) advice through his company BeManaged in Grand Rapids, Mich. (Bemanagednow.com). The company was four years old on Valentine’s Day.
“I used to be a broker,” says Griffeth, who does the marketing while his partner, John Whaley, a CFA, does the research on investment options and determines asset allocations. “The first thing people would ask is if I could manage their 401(k) plans for them.” He and Whaley set up their company hoping to give investors with just $30,000 in their accounts an institutional level of service.
Companies that seek 401(k) advice for employees tend to be paternalistic, to want the best for their workers and to offer a good plan with well-thought-out options, Griffeth says. In its pursuit of such business, BeManaged has won the contract to work with the 4,600 401(k) plan participants at health and beauty products marketer Amway, whose headquarters are located near where BeManaged is based.
Amway performed a five-year due diligence search to find advisors for their employees before settling on BeManaged. “Other vendors wanted to sell products or move the 401(k) somewhere else,” Griffeth says. The way the firm works is to set up its consulting site at Amway’s offices, sometimes for three weeks at a time. The firm is happy to use the funds in the company’s plan, which Griffeth says are good ones.
“We don’t have clients come to us,” he says. “We have a very humble office and that allows us to be efficient.” Employees have a choice to either simply be advised on their plan or to be managed. Most choose the latter.
When BeManaged sets up at the company’s headquarters, Amway employees can go to the 401(k) Web site and schedule a Web consultation and then come to one of the spots where BeManaged advisors are waiting. “Consultations are free,” Griffeth says. “We can control risk, control the contribution and control their behavior.”
BeManaged charges a standard fee of 15 basis points, which is capped at $125 per quarter. The company is growing slowly and the Amway account was a big break. “Amway is very well known for its culture and a lot of other employers took notice,” Griffeth says.
Read the Article “Better Laid Plans“
Tags: 401k advice, 401k advice regulation, 401k fiduciary, BeManaged, Chad Griffeth, fiduciary, Fiduciary Adviser, John Whaley
Posted in 401k advice, 401k fiduciary, Advice Regulations, BeManaged, Managed Accounts, fiduciary, fiduciary education, independent fiduciary | No Comments »
Wednesday, April 28th, 2010 by Chad Griffeth, AIF
 Weigh in with your vote regarding the affect the DoL’s 401(k) advice proposal will have on the accessibility of advice for investors on LinkedIn. More? Less? No Change?
Have some thoughts? We would love to hear them in the comments section below.
VOTE NOW
Tags: 401k advice, 401k advice regulation, 401k fiduciary, fiduciary, Fiduciary Adviser
Posted in 401k advice, 401k fiduciary, Advice Regulations, Asset Allocation, conflicts of interest, fiduciary, fiduciary education, independent fiduciary | 2 Comments »
Tuesday, April 27th, 2010 by Chad Griffeth, AIF
 As in ‘09, I will be presenting with a distinguished panel of speakers on the timely topic of 401(k) advice at the ‘10 fi360 National Conference. The session, titled “401(k) Participant Advice: How to Protect Plan Sponsors and Yourself.”
And yourself you ask? In our experience, we have found advisors and their clients have a difficult time quantifying the fiduciary risk of providing individual advice to participants. The other panelists, listed below, will help advisors better understand the risk/reward of providing 401(k) participant advice, as well as how the PPA Fiduciary Adviser safe harbor can be used to protect their plan sponsor clients. Come join us at 9:15am on Friday, May 7th in Mediterranean Salon 1 & 2.
Mike DiCenso, PRP, LLIF, AIF
National Practice Leader at Gallagher Retirement Services
Jason Roberts, Esq., AIFA
Partner at Reish & Reicher
Scott Holsopple
President at Smart401k
Chad Griffeth, AIF
Co-Founder | President at BeManaged
Tags: 401k advice, 401k advice regulation, AIF, BeManaged, Chad Griffeth, fi360, Fiduciary Adviser, Jason Roberts
Posted in Advice Regulations, independent fiduciary | No Comments »
Wednesday, April 21st, 2010 by Chad Griffeth, AIF
 April 2010 Issue This month’s CFO magazine featured an interesting article regarding the change taking place in how employers’ are taking a more paternalistic approach to their employees’ decisions with their 401(k) accounts. Some of the issues that have made paternalism more necessary (not that it’s new news) are as follows:
Employers have long struggled to educate employees about how to actively manage their accounts for maximum gains.
Fidelity reports that among the 11 million 401(k) plan participants in the plans it administrates, only 6.1% made any kind of asset exchange in the hairy last quarter of 2008, up a mere percentage point from the previous quarter, and only 11.3% took any action in all of 2009.
For those of you that are thinking, “Well, that’s better than a higher percentage of people jumping in and out,” you have to consider this also means there was little to no rebalancing taking place late last year after the market’s rebound.
While that inertia likely saved many people who otherwise would have made bad moves, such as selling at the bottom of the market and buying back in as it climbed, it is hardly what most would consider a wise investment strategy.
Unfortunately, we have run into fear and greed oriented investing (seeing a lot of greed right now) numerous times, regardless of the investor’s perceived level of investment sophistication. That being said, what are they doing about it?
Investment Advice:
Fifty-one percent of employers now offer online investment guidance, 39% provide online advice, and 30% offer phone access to advisory services, according to a recent Hewitt survey. Another 34% plan to add some form of advice this year. (At most companies, the retirement plan or the company itself will pay for a third party to provide this advice, in order to avoid the legal burdens that befall company executives who give it.)
While this sort of help sounds good in theory, there are several obstacles. For one, the perpetual debate about what kinds of advice can be offered, and by whom, has yet to be resolved. Pending regulations at the Department of Labor are likely to redefine what is and isn’t acceptable, and a bill in the House of Representatives (HR 2989) also seeks to put new boundaries around it. “Until the Department of Labor advice regulations are finalized — there’s some justifiable angst about what is conflicted advice and what is not” — many employers are sitting tight, says Lori Lucas, defined contribution practice leader at Callan Associates, an investment consulting firm.
Managed Accounts:
Some 26% of employers now offer this option. Among them is Allergan, a $4.4 billion maker of pharmaceutical products. “A lot of people have come to me over the years and said, ‘I’d rather have someone do this for me,’” says Gary Prem, assistant treasurer at the company. Several years ago he enlisted Financial Engines (which offers both advice and management options) to do just that.
In our opinion, managed accounts are simply a more efficient delivery of investment advice, and should be held to the same DoL conflict-free, fiduciary standard as 401(k) advice (more to come on this). However, for the time being, both services options are becoming much more appealing to paternalistic employers sponsoring 401(k) plans. The level of uncertainty in the stock market, as well as the DoL’s proposed regulations of conflict-free advice, should only continue the advancement of plan sponsors moving forward with providing 401(k) advice/managed accounts to their employees, which is the help they desire.
Read Article: Sea Change – Companies now play a much more active role in guiding employees’ 401(k) investment decisions.
Tags: 401k advice, 401k advice regulation, 401k fiduciary, fiduciary, Fiduciary Adviser, investment behavior
Posted in 401k advice, 401k fiduciary, Advice Regulations, Asset Allocation, Managed Accounts, conflicts of interest, fiduciary, fiduciary education, independent fiduciary | No Comments »
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