Posts in 401(k)

Teacup Pigs and Your Retirement: John Oliver’s Segment on 401(k) Plans

June 15th, 2016 Posted by 401(k), Investment Strategy, NAPFA, Politics, Retirement Planning 0 thoughts on “Teacup Pigs and Your Retirement: John Oliver’s Segment on 401(k) Plans”

For those of you who enjoy John Oliver’s straight-shooting and hysterically funny slant on the world and are concerned about getting unbiased advice from a fiduciary advisor on your retirement funds, do yourself a favor and watch his June 12th show. As a fiduciary myself who implements passive, low-cost investment approaches for 401(k) plans and clients in general, I can tell you that Oliver’s segment on retirement advice is right on the mark. Work with a fiduciary who is legally obligated to put your interests ahead of their own, get a full accounting of fees (beware 12-b1 fees, broker fees, internal fund fees), and keep aggregate costs low. Also I would add to his list the following: make sure your plan participants are being individually helped and educated based on their situation, protect yourself as plan sponsor by having the fiduciary advisor take responsibility in writing to serve as section 3(21) fiduciary to the plan, and use only index funds or low-cost asset class mutual funds–the ones we use are from Vanguard or Dimensional Fund Advisors. And please spread the word!!!!

[Strong language advisory]


Also read my April 7th blog for even more reasons to want the Department of Labor to succeed in their efforts to bring fair treatment and transparency to retirement fund management.

$17 Billion in retirement funds have been wasted in hidden broker fees

21st Century Retirement

April 19th, 2016 Posted by 401(k), Investment Strategy, Life Planning, Retirement Planning, Saving 0 thoughts on “21st Century Retirement”

Retirement is traditionally defined as “leaving one’s job and ceasing to work.” But the definition is changing in the 21st century. Economic, workforce, and societal trends are causing a fundamental shift in the way that individuals view and prepare for retirement.  Five primary factors are shaping the realities of the “new retirement”:

  1. Longer life expectancy

As we know, life expectancy has increased dramatically since the early 1900’s. Pre-retirees are facing the possibility of a retirement that could span one-third of their lives. They are wondering how they will spend their time, and they are concerned about how they will afford it.

  1. A growing need for self-reliance

We’ve all heard the slogan, “If it is to be, it’s up to me.” Increasingly, this is the attitude required for everyone planning for retirement. The concept of employment-funded pensions fully covering the costs of retirement is fading into the past. Building financial security for the future is becoming much more the responsibility of each individual.

  1. Preference for active lifestyles

Those looking ahead to retirement expect this stage of life to be a time for new activities and pursuits. The results of several studies indicate that today’s pre-retirees are more likely than previous generations to view retirement as an opportunity to start a new career and engage in other meaningful endeavors. They are also embracing the belief that physical activities will improve their quality of life.

  1. Expectation of post-retirement work

The idea of retirement can no longer be defined as leaving the workforce. Many members of the Baby Boomer Generation plan to continue working, while trying new and varied careers.  Their main reasons for working include the necessity for additional income, a desire to stay active, and the need to feel productive.

  1. Looking beyond financial matters

Individuals and retirement planning professionals are increasingly recognizing that a successful and satisfying retirement experience depends on more than a healthy nest egg. Retirement is a major life transition that deserves planning and preparation in all areas of life. Issues to explore can include potential changes in lifestyle and social interaction, physical activities, special health requirements, and satisfying employment. Important considerations can involve deciding where to live and how to fulfill any remaining life goals.

Changes in the world around us are occurring at an increasing rate. Meanwhile, many of us are living longer than our predecessors could have imagined. The result is that we must be ever more adaptable to the opportunities that life presents to us. The key to adapting is to anticipate change and try to prepare for it. The challenges of that can be daunting without the guidance of experienced professionals. There is no need to go it alone. We can help. To learn more, please give us a call at 203-985-0448.

$17 Billion in retirement funds have been wasted in hidden broker fees

April 7th, 2016 Posted by 401(k), Investment Vehicles, Politics, Retirement Planning, Saving 0 thoughts on “$17 Billion in retirement funds have been wasted in hidden broker fees”

On April 6, the Department of Labor (DOL) published the final version of the conflict of interest rule it proposed in April 2015. The new regulations require those who advise on retirement savings plans to adhere to the “fiduciary standard” that our firm has long held dear.

Given the complexity of finance, many customers are simply unaware of hidden fees that may eating into their savings. $17 Billion in retirement funds have been wasted in hidden broker fees. As a Registered Investment Advisor, we are held to a fiduciary standard, and have been transparent about our fees since day one.

Because we’ve always been fiduciaries, these regulations won’t affect our relationship with our clients, but it’s a big win for individuals saving for retirement through their employer-sponsored retirement plans or through Individual Retirement Accounts (IRAs).

The new regulation should provide extra transparency and peace of mind in a relationship retirement savers usually don’t have control over (who their employer chooses to manage their retirement plan). We hope to see the rule result in better investments offered (and better advice given) to retirement plan participants across the country.

We anticipate you’ll be curious about what the ruling means to you, so we have answered a few big questions below:

Why was this regulation proposed?

The DOL fiduciary rule was proposed to better protect people who are saving for retirement as a result of changes in the investment environment. Over the last 40 years, the availability and importance of self-managed investments, such as IRAs and participant-directed retirement plans, has increased. At the same time, the number and complexity of investment products in the marketplace has grown, as well as the creative and sometimes questionable way they are packaged and sold.

Due to this changing landscape, the DOL has issued new conflict of interest rules that apply to retirement plan advisors and IRAs. The DOL believes that requiring all advisors who work with retirement plans to operate under a fiduciary standard will prevent advisor conflicts of interest estimated to lower participants’ returns by 1 percent a year and result in approximately $17 billion lost annually.

Why was there so much opposition to this regulation?

Broker-dealers are generally only required to meet the suitability standard in making investment recommendations rather than operating under the fiduciary standard. The suitability standard required broker-dealers only to recommend a product “suitable” to meet clients’ goals; the fiduciary standard requires an advisor to act in a client’s best interest. The DOL rule changes will require broker-dealers to act as fiduciaries for retirement plan and IRA purposes, affecting the compensation arrangements available to them.

What’s changed? What’s different from before?

The rule requires those advisors who work with retirement plans to do only what’s in the best interest of their clients and to disclose any conflicts of interest. Recommendations that previously would not have resulted in a prohibited transaction may now run afoul of the rules that bar financial conflicts of interest. In its final form, the rule defines who is considered a fiduciary investment advisor. Broker-dealers, insurance agents and others that act as investment advice fiduciaries can continue to receive a variety of common forms of compensation (such as commissions) as long as they are willing to adhere to standards aimed at ensuring that their advice is impartial and in the best interest of their clients.

Who will this rule affect? How?

For clients or participants in 401(k) plans, the new regulation should provide extra transparency and peace of mind in a relationship retirement savers usually don’t have control over (who their employer chooses to manage their retirement plan). We hope to see the rule result in better investments offered (and better advice given) to retirement plan participants.

On the advisor side, the main impact falls on broker-dealers. Broker-dealers frequently receive compensation that varies based on the investment options they recommend, and they will now have to comply with prohibited transaction rules designed around a best-interest fiduciary standard.

Registered Investment Advisors (RIAs) such as our firm, who already are considered retirement plan fiduciaries, do not receive compensation that varies by investment, so the impact will be minimal.

When will the new regulation take effect?

Compliance with the rule will be required beginning in April 2017 (one year after the final rule is published in the Federal Register). Exemptions will be available at that time with a “phased” implementation approach designed to give financial institutions and advisors time to prepare.