Independent Fiduciary Consultant, Economics and Financial Ethics

One who intends to leave others better off for his having existed.

2/23/15

"Obama to Push for Tougher Broker Rules on Retirement Funds"

"The Obama administration is picking a fight with Wall Street over the handling of Americans’ $11 trillion of retirement savings, accusing brokers of skimming significant sums annually from small investors and urging new protections against biased financial advice.

The White House on Monday plans to throw its full weight behind a Department of Labor proposal to make it harder for brokers to push higher-fee mutual funds or other expensive products on people saving for life after work. The plan would require brokers to act in a customer’s best interest, a change that could limit the earnings of financial advisers.

...“The outdated rules create an unfair playing field making it hard for good advisers to compete, and making it harder for working and middle-class families to know who they can trust,” Jeff Zients, director of the White House National Economic Council, said on a conference call with reporters Sunday. He was joined by other administration officials and John Bogle, the founder of mutual-fund company Vanguard Group Inc.

Obama is scheduled to tout the Labor Department proposal at an AARP event Monday along with U.S. Senator Elizabeth Warren of Massachusetts, whose popularity has surged among Democrats based on her claims that bankers and the financial industry too often try to take advantage of workers.

Officials declined to outline specifics of the plan to impose a standard known as a fiduciary duty, which will crack down on “backdoor payments and hidden fees” earned by brokers...

...At the heart of the proposal is an effort to tighten the legal standard for brokers handling retirement funds in individual retirement accounts and 401(k)s, which now hold more than $11 trillion. Under current rules, brokers can sell any product that is “suitable” for an investor, meaning it fits the client’s needs and tolerance for risk.

...Clients lose as much as $17 billion a year from such conflicted advice, according to the Obama administration.

“The corrosive power of fine print, hidden fees and conflicted advice can eat away like a chronic illness at people’s hard-earned retirement savings,” Perez said.

...Investors are particularly vulnerable to conflicts of interest when moving investments from an employer-sponsored 401(k) plan to an IRA, the White House said. That process allows brokers to steer investors into products that earn them higher fees."

http://www.bloomberg.com/politics/articles/2015-02-23/obama-to-lead-push-to-toughen-broker-rules-for-retirement-funds

Cognative Dissonance = What you think you think, isn't nessessarily what is; Goldman Sachs Leasing Indicator Swirlogram Edition





http://www.zerohedge.com/news/2014-12-18/recovery-propaganda-central-we-have-huge-problem

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10/20141001_GLI.jpg






http://www.zerohedge.com/news/2014-02-03/goldman-warns-global-slowdown-getting-more-serious


2/21/15

On Retirement Plan Fees, Index Funds and Fiduciary Duty

"...Common flaws in the popular savings plans include high fees and the absence of low-cost index funds, which can make investing cheaper and easier. Conflicts of interest, fraud or theft, though far less common, also can cost 401(k) participants dearly.

...Jessica Robinson, a 37-year-old dental hygienist, and her husband, Brian, pointed out to her boss, Brad Dodds, how fees were affecting everyone who participates in the 401(k) plan at her small dental office.

The fees “kind of put up a red flag,” says Ms. Robinson, who lives in Eden Prairie, Minn.

Mr. Dodds hadn’t paid much attention to fees. “I just looked at my statements and put them in the drawer,” he says. He and the Robinsons approached Wells Fargo Advisors, a unit of Wells Fargo, which recently agreed to reduce the plan’s annual administrative fee to 0.75% of assets, down from 1.5%. For a participant with an account worth $100,000, the change would save $750 a year.

Index funds, which are designed to track investment benchmarks such as the S&P 500, also are worth lobbying for. Many experts consider them the best option for investors because the funds tend to charge lower fees than those run by active stock pickers. Index funds also don’t leave investors at risk of lagging behind the market, which active funds often do.

...Even in some relatively large companies, the people in charge of making decisions about the 401(k) plan may not know much about investing.

...“A lot of times, companies themselves don’t know they’re overpaying,” says Mike Alfred, BrightScope’s chief executive.

...Many broad stock-market index funds charge annual fees of less than 0.20%, or $20 on a $10,000 investment, so if you are paying substantially more, that could be a sign of a high-fee plan.

The average expense ratio on an actively managed mutual fund, adjusted for assets, is 0.85%, according to investment-research firm Morningstar..."

http://www.wsj.com/articles/how-to-lobby-for-a-better-401-k-1424459507
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Most investors, both institutional and individual,
will find that the best way to own common stocks
is through an index fund that charges minimal fees.

Those following this path
are sure to beat the net results (after fees and expenses)
delivered by the great majority of investment professionals."

Warren Buffett
Berkshire Hathaway Annual Letter, 1996

http://www.bogleheads.org/wiki/How_to_campaign_for_a_better_401%28k%29_plan
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"An IA must adhere to a fiduciary standard of care laid out in the US Investment Advisers Act of 1940. This standard requires IAs to act and serve a client's best interests with the intent to eliminate, or at least to expose, all potential conflicts of interest which might incline an investment adviser—consciously or unconsciously—to render advice which was not in the best interest of the IA's clients."

http://en.wikipedia.org/wiki/Registered_Investment_Advisor

2/6/15

Glendale City Council Retirement Plan Fee Reductions

"There is a significant reduction in the mutual fund expense that is a critical calculation in the net performance credited to participants. The average mutual fund expense for the city’s current mutual fund portfolios with ICMA-RC and Nationwide is 1.11%. The average expense for the new mutual fund portfolio with Great-West is 0.55% plus an administrative expense reimbursement allowance of $45,000 or approximately an additional 0.06% for the fiduciary operation of the plan. This means there is a total 0.61% aggregate expense to the mutual fund portfolio for Great-West compared to the 1.11% expense with the current providers, an almost 50% reduction. This will result in savings to a participant currently, or prospectively, investing in mutual funds.

This reduction in expense translates to an aggregate plan savings of $212,000 annually or a total of nearly $1.2 million compounded over the five years of the contract. This savings is experienced directly by the account balances of participants who have invested in mutual funds."

http://www.glendaleaz.com/Clerk/agendasandminutes/Meetings/Agendas/021213-09.pdf