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Integrity Financial Corporation helps business owners evaluate and make smart financial planning decisions on behalf of their business. Please visit our website at www.ifclegacy.com and take advantage of a free intial 401k consultation.
Thursday, June 18, 2009
Friday, June 12, 2009
2009 is the Year of the Advisor - a recent article by Fred Barstein
2009 is the Year of the Advisor
by Fred Barstein
With the popularity of Target Date funds and the Auto Plan as a result of the 2006 Pension Protection Act (PPA), some observers had opined that advisors would become less important in helping companies with their corporate retirement plans. If participants were automatically enrolled and fund selection is controlled by the target date providers, what would be the advisors’ role? So why are more and more plan sponsors abandoning the direct sold model and hiring advisors at an incredibly growing rate?
As shown in the chart below based on almost 20,000 surveys in 2009 and close to 3,500 in May, over 80% of DC plans with less than $100 million in plan assets indicated that they were using an independent financial advisor. Compared to last May, there’s a stunning increase trending even higher. Retirement advisors roles have changed over the years from:
Selecting the right products and vendors, to
Creating the right process with a focus on fiduciary concerns, to
Managing to the right outcome for participants and sponsors
More plan sponsors than ever realize that not only do they need an advisor to protect them from liability (process), manage costs and limit work for diminishing HR and finance staffs, participants need someone to speak to or be available to answer thorny questions, especially after the recent market meltdown, like, “What happened to my account balance?” or, “How will I ever be able to retire?”
Many of the most popular target date providers have failed their 2010 clients either out of greed, ignorance or neglect. Fewer plan sponsors are instituting automatic enrollment because they have to match up to 2.5% to qualify for the PPA’s safe harbor provisions. Bob Reynolds, CEO at Putnam Investments and architect of Fidelity’s DC business, wisely suggested at the recent 401kWire Thought Leader’s Summit in DC that all participants should be automatically enrolled and sponsors that match should be rewarded with a tax credit. But until then and perhaps even after, the notion that sponsors and participants can be guided from above without expert, human advice is ridiculous. There will always be some challenge facing sponsors and participants that only an experienced retirement advisor can answer. Clearly, more sponsors are coming to that realization and, of those selecting an advisor, more are becoming discerning buyers. Fewer sponsors are hiring family members, college roommates, golfing buddies or personal financial consultants who do not have the necessary experience realizing that these kinds of “favors” can result in disaster, especially for participants in need of answers to very difficult questions.
Integrity Financial Corporation helps business owners evaluate and make smart financial planning decisions on behalf of their business. Please visit our website at www.ifclegacy.com and take advantage of a free intial 401k consultation.
by Fred Barstein
With the popularity of Target Date funds and the Auto Plan as a result of the 2006 Pension Protection Act (PPA), some observers had opined that advisors would become less important in helping companies with their corporate retirement plans. If participants were automatically enrolled and fund selection is controlled by the target date providers, what would be the advisors’ role? So why are more and more plan sponsors abandoning the direct sold model and hiring advisors at an incredibly growing rate?
As shown in the chart below based on almost 20,000 surveys in 2009 and close to 3,500 in May, over 80% of DC plans with less than $100 million in plan assets indicated that they were using an independent financial advisor. Compared to last May, there’s a stunning increase trending even higher. Retirement advisors roles have changed over the years from:
Selecting the right products and vendors, to
Creating the right process with a focus on fiduciary concerns, to
Managing to the right outcome for participants and sponsors
More plan sponsors than ever realize that not only do they need an advisor to protect them from liability (process), manage costs and limit work for diminishing HR and finance staffs, participants need someone to speak to or be available to answer thorny questions, especially after the recent market meltdown, like, “What happened to my account balance?” or, “How will I ever be able to retire?”
Many of the most popular target date providers have failed their 2010 clients either out of greed, ignorance or neglect. Fewer plan sponsors are instituting automatic enrollment because they have to match up to 2.5% to qualify for the PPA’s safe harbor provisions. Bob Reynolds, CEO at Putnam Investments and architect of Fidelity’s DC business, wisely suggested at the recent 401kWire Thought Leader’s Summit in DC that all participants should be automatically enrolled and sponsors that match should be rewarded with a tax credit. But until then and perhaps even after, the notion that sponsors and participants can be guided from above without expert, human advice is ridiculous. There will always be some challenge facing sponsors and participants that only an experienced retirement advisor can answer. Clearly, more sponsors are coming to that realization and, of those selecting an advisor, more are becoming discerning buyers. Fewer sponsors are hiring family members, college roommates, golfing buddies or personal financial consultants who do not have the necessary experience realizing that these kinds of “favors” can result in disaster, especially for participants in need of answers to very difficult questions.
Integrity Financial Corporation helps business owners evaluate and make smart financial planning decisions on behalf of their business. Please visit our website at www.ifclegacy.com and take advantage of a free intial 401k consultation.
Saturday, June 6, 2009
BrightScope 401k Ratings
Some colleagues recently directed me to a new website that independently analyzes 401k plans from public data sources. It is most useful for plans that are above the audit point. An interesting discovery is to analyze the results for companies like: Nordstrom (52), Microsoft (80), Costco (62), Boeing (79), and Paccar (76). According to BrightScope, Nordstrom and Costco could use some improvement. The website has gained some prominence among independent fiduciary 401k advisors accross the country. www.brightscope.com How does your company's 401k plan rate?
About BrightScope
BrightScopeTM, Inc. is an independent provider of 401k ratings and financial intelligence to plan sponsors, advisors, and participants in all 50 states. Our mission is to increase the retirement security of America's workforce by bringing transparency and efficiency to the 401k plan market. We maintain a comprehensive database of information on the 401k plan market and add additional value and insight by quantitatively rating each 401k plan across critical metrics. BrightScopeTM empowers plan sponsors to quickly and accurately determine the optimal structure for their 401k plan and choose the providers that provide the most value for the fees they charge. BrightScope is the only 401k analytics firm that is truly independent and does not accept compensation in the form of revenue sharing from mutual fund companies or plan providers. BrightScope is aligned with plan sponsors and seeks to avoid conflicts that will jeopardize its ability to give its clients unbiased advice. BrightScope is not a fiduciary under ERISA.
The BrightScope Rating
The BrightScope RatingTM is an industry standard quantitative 401k plan rating developed by BrightScopeTM, Inc. with the help of leading academics and independent 401k fiduciaries. The BrightScope rating algorithm calculates a single numerical score for each 401k plan in the country after considering over 200+ individual data points in broad categories such as total plan cost, company generosity and investment menu quality. The BrightScope RatingTM is designed to assist industry participants in determining the relative quality of a company's 401k plan when compared to a unique peer group with similar demographic characteristics. We believe that industry adoption of the BrightScope RatingTM will ultimately lead to more cost-effective plans, increased participation rates, higher employee satisfaction, and better outcomes for employees who depend on their 401k plan for retirement.
The BrightScope Database
BrightScopeTM obtains some of its data from public sources such as the Department of Labor, the Securities and Exchange Commission, the U.S. Census Bureau, the Equal Employment Opportunity Commission, and the Bureau of Labor Statistics. Mutual fund and investment data are obtained from mutual fund prospectuses, statements of additional information, Form NSAR and the Center for Research on Securities Prices (CRSP). Data on 401k fees comes directly from plan sponsors who work with us to improve their plan. While all company-specific data is protected and confidential, we aggregate fee data across comparable companies to construct relevant benchmarks on fees. BrightScopeTM believes it possesses the most comprehensive private database of 401k information in the country. The company will leverage this database to provide our clients with accurate and high quality data that places them on a level playing field with their providers.
Please visit our website at www.ifclegacy.com to have an independent fiduciary 401k advisor at Integrity Financial Corporation in Bellevue analyze and evaluate your company's 401k plan.
About BrightScope
BrightScopeTM, Inc. is an independent provider of 401k ratings and financial intelligence to plan sponsors, advisors, and participants in all 50 states. Our mission is to increase the retirement security of America's workforce by bringing transparency and efficiency to the 401k plan market. We maintain a comprehensive database of information on the 401k plan market and add additional value and insight by quantitatively rating each 401k plan across critical metrics. BrightScopeTM empowers plan sponsors to quickly and accurately determine the optimal structure for their 401k plan and choose the providers that provide the most value for the fees they charge. BrightScope is the only 401k analytics firm that is truly independent and does not accept compensation in the form of revenue sharing from mutual fund companies or plan providers. BrightScope is aligned with plan sponsors and seeks to avoid conflicts that will jeopardize its ability to give its clients unbiased advice. BrightScope is not a fiduciary under ERISA.
The BrightScope Rating
The BrightScope RatingTM is an industry standard quantitative 401k plan rating developed by BrightScopeTM, Inc. with the help of leading academics and independent 401k fiduciaries. The BrightScope rating algorithm calculates a single numerical score for each 401k plan in the country after considering over 200+ individual data points in broad categories such as total plan cost, company generosity and investment menu quality. The BrightScope RatingTM is designed to assist industry participants in determining the relative quality of a company's 401k plan when compared to a unique peer group with similar demographic characteristics. We believe that industry adoption of the BrightScope RatingTM will ultimately lead to more cost-effective plans, increased participation rates, higher employee satisfaction, and better outcomes for employees who depend on their 401k plan for retirement.
The BrightScope Database
BrightScopeTM obtains some of its data from public sources such as the Department of Labor, the Securities and Exchange Commission, the U.S. Census Bureau, the Equal Employment Opportunity Commission, and the Bureau of Labor Statistics. Mutual fund and investment data are obtained from mutual fund prospectuses, statements of additional information, Form NSAR and the Center for Research on Securities Prices (CRSP). Data on 401k fees comes directly from plan sponsors who work with us to improve their plan. While all company-specific data is protected and confidential, we aggregate fee data across comparable companies to construct relevant benchmarks on fees. BrightScopeTM believes it possesses the most comprehensive private database of 401k information in the country. The company will leverage this database to provide our clients with accurate and high quality data that places them on a level playing field with their providers.
Please visit our website at www.ifclegacy.com to have an independent fiduciary 401k advisor at Integrity Financial Corporation in Bellevue analyze and evaluate your company's 401k plan.
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