The materials on this website are maintained for the sole purpose of providing general information about investments, market outlook, fiduciary law, and tax accounting and do not under any circumstances constitute legal, accounting or investment advice. You should not act or refrain from acting based on these materials without first obtaining the advice of an appropriate professional. This website contains links to third-party websites. We are not responsible for, and make no representations or endorsements with respect to, third-party websites, or with respect to any information, products or services that may be provided by or through such websites.
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.
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.
Last year, we began the transition of moving from the name Actium to that of our flagship service, BeManaged. For many of you, you may have never noticed that our email was from @myactium.com, while we communicate ourselves as BeManaged. It just didn’t make a lot of sense why our participant clients knew us as BeManaged while companies and advisors knew us as Actium.
We are finally nearing the finish line due to our recent acquisition of the BeManaged.com URL. The following are some of the changes that will be taking place over the next 30 days:
Emails Change – If your spam filter is finicky, we will ask that you add/adjust us in your address book to the @bemanaged.com email suffix rather than @myactium.com. We will provide additional notices as reminders as we near the transition date.
Website - As you might assume, our website will be at bemanaged.com, not bemanagednow.com. However, your bookmarks will automatically redirect you to the new address, so no worries there.
We appreciate your patience in this process and apologize for any confusion it has caused over the years. If you have any questions, do not hesitate to reach out to us. Thank you!
Since the beginning of May, let alone since the final quarter of 2007, the market has been volatile, to say the least. One of the biggest issues we see during this time is people will stop their contributions when the market takes a down turn, and then contribute again once the market is doing “better.” Unfortunately, as with the other achilles heels we have discussed, this is the exact opposite thing 401(k) investors should do.
It’s perfectly understandable why people do this, asking themselves, “why invest in something that is ‘losing’ money?” When the market is going down, you might have heard people say it’s on sale. However, it can feel hopeless as your contributions may look like they are evaporating as soon as you toss them into your 401(k). The most important thing to remember is you are buying an asset when you contribute to your account. They are called shares of the investment funds you have access to in your plan.
Shares are owned by you. If the market goes down, your contributions should be purchasing more shares for the same amount of money you always contribute. The more shares you own, the better, so investing during a down cycle in the market is a very good thing.
If the market decreases by 20% like the real estate market has in the past few years, you do NOT lose your shares. Instead, they simply decrease in value. For example, just because the value of your home has decreased by potentially 20% in the past few years, that doesn’t mean your garage will be gone when you get home. The physical asset is still there, it is simply devalued.
The following slides are from our Myths and Tips for Investing in Volatile Markets presentation. Make sure you take a look at the final slide illustrating the exponential growth in your account from investing through the down market. The shares you purchased at the ‘bottom’ are the ones that appreciate the most. In this case, the pain of the downturn can pay off in a big way for you once the market rebounds.
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]
The following are some of the highlights discussed in the June ‘10 Research Newsletter from John Whaley, CFA, AIF, Director of the BeManaged Research Department.
Government Finance Bubbles Hit World Equity Markets
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.
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.
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.
LinkedIn has been something I have been active on for over two years. It’s Groups feature has helped it evolve into a resource in which busy professionals can learn or get free guidance and feedback on various topics of interest. Personally, our company has benefited from other’s experience and expertise to the tune of saving thousands of dollars on various projects.
That being said, with the recent developments in 401(k) advice, we decided to create a group to help keep employers and advisors apprised of the regulatory and market developments that result from the clarifications. We launched the 401(k) Fiduciary Advice Group on Wednesday morning, and since then, there have been over 70 employers and 401(k) industry professionals join. Interested? Simply click the link below to join.
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:
Since the beginning of May, let alone since the final quarter of 2007, the market has been volatile, to say the least. One of the biggest issues we see during this time is people will stop their contributions when the market takes a down turn, and then contribute again once the market is doing “better.” Unfortunately, as with the other achilles heels we have discussed, this is the exact opposite thing 401(k) investors should do.
Recent Comments