fi360 Blog

An interview with the Healthcare Financials blog

I was recently interviewed by the Healthcare Financials blog.  It is a very interesting blog geared towards medical professionals and financial advisors who serve the medical community.  They, like many, are confused and seeking clarity on the fiduciary issue.  Some of their questions were particularly interesting coming from one of the "classic" fiduciary fields.  Here is a sample question:

Q. Medical Executive Post
You have been very helpful and gracious to us. So, let’s get right to it, Ben. In the view of many; attorneys, doctors, CPAs and the clergy are fiduciaries; most all others who retain this title seem poseurs; sans documentation otherwise

A. Mr. Aikin
You are correct. Attorneys, doctors and clergy are the prototype fiduciaries. They have a clear duty to put the best interests of their clients, patients, congregation, etc., above their own. [The duty of a CPA isn’t as clear to me, although I believe you are correct]. Furthermore, this is one of the first topics we address in our AIF training programs, and what we call the difference between a profession and an industry.  The three professions you name have three common characteristics that elevate them from an industry to a profession:

• Recognized body of knowledge
• Society depends upon practitioners to provide trustworthy advice
• Code of conduct that places the clients’ best interests first

The interview continues to look at the meaning behind the various industry designations, specific examples of who is or is not a fiduciary, what various standard agreements provide protection from, how to choose investment professionals, etc.  And, the comments section below the post has also generated some interesting discussion that we are monitoring and trying to provide meaningful follow up comments.  It is an informative Q&A style post that would be of value to anyone seeking clarity on questions as to who is a fiduciary and what that means, not just to those involved in the medical industry.

Fi360 is now on Twitter

Fi360 has created a Twitter account.  If you are on Twitter, make sure you search for and start following Fiduciary360 to receive updates about the latest goings-on at fi360 and links to the best news, articles and information of the day.

Press Release: Fi360 National Conference

FIDUCIARY360 NATIONAL CONFERENCE TO “UNCOVER TRENDS AND OPPORTUNITIES IN UNCERTAIN TIMES”

Turbulent Economic Environment, Lack of Investor Confidence Reinforces Need for Training in Prudent Practices and Fiduciary Standards of Care

PITTSBURGH – February 20, 2009 – The fifth annual fi360 National Conference will be held May 6 – 8, 2009 in Scottsdale, Ariz. The event is the financial industry’s only conference focused exclusively on fiduciary responsibility. It promises to be a critically important and timely education forum for investment fiduciaries and other professionals to discuss the value and applicability of following prudent investment processes and principles, especially in light of on-going economic volatility.

The Conference, which provides continuing education (CE) credits for the hundreds of professionals who attend, brings together some of the nation’s foremost experts to address topics such as restoring investor confidence, asset allocation and portfolio design, how advisors can not only survive but thrive in these challenging times, ERISA and related regulations and trends and best practices for investment professionals. It is open to all investment advisors, financial planners, plan sponsors, broker dealers and others seeking to improve their knowledge of the fiduciary prudent practices and to learn how to put this powerful information into action. Among those scheduled to present at the Conference are:

• Roger Gibson: Chief Investment Officer and Founder, Gibson Capital Management, best-selling author and pioneer in the area of asset allocation and portfolio design, will discuss how to successfully implement these activities given the marketplace volatility.
• Charles Lowenhaupt: Chairman/President/CEO, Lowenhaupt Global Advisors, a recognized industry leader in managing wealth for ultra-high net worth families around the world, will present "Protecting Private Wealth: A Call To Action for Global Families, Trusted Advisors.”
• Carlos Panksep: General Manager, CEFEX, an independent global assessment and certification organization that helps determine the trustworthiness of investment fiduciaries. He will discuss the process of certification and how companies can use certification to set themselves apart and boost investor confidence.
• Fred Reish: Partner, Reish Luftman Reicher & Cohen and one of the nation’s foremost experts in the areas of ERISA and employee benefits law, will review fiduciary trends and new laws and regulations being considered by the Obama administration.
• Bob Veres: Well-known commentator, author, consultant and journalist in the financial industry, he has been named one of the most influential people in the financial planning industry by several industry publications, and will speak about “Planning in Mayhem.”
• Marcia Wagner: A specialist in pension and employee benefits law she will discuss ERISA litigation and evolving best practices in the areas of defined contribution and defined benefits plans and other related employee issues.

Other discussions and presentations will focus on advice for participants under the Pension Protection Act, the success of target date funds, behavioral alpha, deciphering fees and expenses and other timely topics.

Additionally, there will also be two pre-conference events:

• Capstone Accredited Investment Fiduciary^® (AIF^®) Training Program – Fi360’s most popular training program for investment advisors, stewards and managers, AIF training is the most effective way for investment fiduciaries to learn the Prudent Investment Practices, their legal underpinnings and how to apply them within existing fiduciary policies and procedures. The program combines pre-conference Web-based study and on-site instruction and testing, leading to the AIF designation. (May 5-6)

• Interactive fi360 Toolkit Workshop – The fi360 Tools team will demonstrate how to successfully employ its powerful Toolkit software programs – designed with the Prudent Investment Practices at their core. Fi360 Toolkits include an Investment Policy Statement Generator, Watch List Management tools and techniques, advanced searching methods using the Investment Analyzer and more. A laptop computer is required to participate; Internet access will be provided. (May 6)

The Conference continues to grow in size and impact each year and brings together those at the forefront of creating a culture of fiduciary responsibility in the investment markets, in governance, in the non-profit realm and everywhere individuals are managing money for others, according to Blaine Aikin, AIFA^® CFA^®, CFP^®, president and CEO of fi360. “Fiduciary best practices not only help professionals limit their liability, but more importantly, they promote transparency on fees and conflicts of interest; engender client trust and ensure that professionals always put the best interests of the investor first. Given the events of the last few years, we support an even stronger push by regulators and the investing public for professionals to fully embrace these principles.”

About the Conference

For information and registration, visit www.fi360.com/main/conference.jsp. Updated information will be posted as it becomes available. For hotel reservations, attendees should contact the Westin Kierland Resort and Spa in Scottsdale, Ariz. online or by calling 800-354-5892 and mention fi360 to secure the Conference rate. Conference fees until February 28, 2009 are $795 and $895 after March 1 for AIF or AIFA^® (Accredited Investment Fiduciary Analyst™) designees or fi360’s Toolkit subscribers. Cost for non-members now until the Conference is $995. Attendance fees for the pre-Conference AIF Training and Toolkit sessions are extra, but attendees who register for all three events will save $195. Registration for these sessions is also available online.

Reactions to the new 401k fee disclosure bill

Last week, with the introduction of the "Defined Contribution Fee Disclosure Act of 2009” (S. 401) by Senators Harkin and Kohl, we promised to take a look at the bill and give our analysis.

Now having had the time to look over the bill and reflect on its meaning, I find it difficult to devote too much time and attention to it, given that everyone is waiting with baited breath for the entire financial regulatory system to be overhauled. Once a new and (hopefully) improved regulatory structure is in place we should have a much clearer picture of how the new Administration and Congress plan to restore trust in financial services firms and the governmental entities that oversee them. It seems premature for S. 401 to zero in on fee disclosure at this time. It would make more sense for Congress (or a new super regulator) to address a more robust set of disclosures all at the same time rather than in a piece meal fashion. For example, disclosure of service providers’ affiliations, conflicts, and fiduciary status should also be required, as was going to be the case under the DOL’s proposed 408(b)(2) regulations. Unless and until it looks like S. 401 is going to gain some traction on the Hill, a detailed analysis of the bill would be premature. Stay tuned in with us for close coverage of what we expect will be a flurry of legal and regulatory developments over the coming months.

New Webinar: Fiduciary lessons learned from scoundrels and thieves

Registration is now available for the newest Resources Webinar, entitled "Fiduciary Lessons Learned from Scoundrels and Thieves."  The Webinar is free and open to the public.  Sign up to learn more about some the biggest financial scandals of our time and what lessons fiduciaries can learn from them.

Fiduciary Lessons Learned from Scoundrels and Thieves
Presenters: Blaine Aikin, CEO and Rich Lynch, COO
Date: Thursday, March 5, 2009
Time: 4-5 p.m. EST
Description: Take a walk down the hall of shame to recall some of the greatest fiduciary fiascos of all time that have been heavily concentrated in the last few years. It is no coincidence that they have been accompanied by the near collapse of the global financial system. All types of assets, all types of investors, and all types of financial institutions have been involved. Invariably fiduciaries committed the most egregious crimes and other fiduciaries had the best chance of preventing them. This session will bring into focus the essential lessons to be learned from the financial calamities that have captured the headlines, crippled the financial markets and changed the investment advisory business forever.

Click here to register for this event.

Proposed investment advice rules dance around fiduciary principles

One of the first moves by the new presidential administration last month was to put on hold all pending regulations until further review could take place.  This included the DOL's "final" regulations on investment advice provisions.  While these rules did make the Federal Register, they basically have been reverted back to "proposed" status, as the DOL is once again accepting comments on the rules generally, and whether they should be "rescinded, modified or retained." 

In my new Fiduciary Corner column for InvestmentNews, I outline the four primary reasons I believe the class exemption proposal should be rescinded.  In short, the class exemption rules are designed to manage the problems of a system that still allows conflicted investment advice, rather than promoting the full acceptance of fiduciary principles and avoiding those situations altogether.  This approach both neglects some of the problems at the heart of the current financial crisis and creates new ones.

I will be submitting the four points outlined in my article to the DOL, and I encourage others in the fiduciary community to do so as well.

Read my full article at InvestmentNews.com.  If you like it, make sure you click the "Recommend" button at the start of the article.

408(b)(2) replacement in the works

New 401(k) fee disclosure legislation was introduced in the Senate on Monday by Tom Harkin (D-Iowa) and Herb Kohl (D-Wisconsin). This was to be expected as the 408(b)(2) fee disclosure regulations were not going forward, presumably for stricter requirements.  What is suprising is that it wasn't George Miller (D-California) who introduced new plans first.  We haven't seen the full text yet, but apparently the new bill introduced will be less stringent than Miller's designs.  We'll provide a link to the full text, as well as fi360 analysis, once it becomes available.

UPDATE: Full text of the bill can be found here.

UPDATE: Our analysis is now posted.

Employee Notification for Automatic Enrollment 401(k) plans

We are changing up the format of our Fiduciary Q&A posts. From here on out, I'll show you the question as it was submitted and our response.  To encourage more questions and to protect anyone who may be hesitant to pose their questions, we will not post your name or specifics such as company names or specific investment options, unless you clearly specify that we should for the context of the question.  We also encourage you to pose generic questions that may or may not have anything to do with any situation you are currently involved. 

We want the blog to be a forum to provide clarity where there may be confusion and to help improve the fiduciary processes of investment professionals.  If you have a topic you would like to see us address or would like to submit a question to the Fiduciary Q&A, send us an email to blog@fi360.com. And if you have thoughts or experiences related to any post to the fi360 Blog, make sure you let us know using the "Comments" feature below each post.

Q. I have a 401(k) client that just engaged automatic enrollment and they are now worried that many employees never received the notification given to them for their ability to “opt-out.”  The company is now afraid a disgruntled employee could come back later and have a case against the fiduciaries of the plan for this.  Please let me know if you have any thoughts on this, or if you know of a due diligence checklist for the risk management component of automatic enrollment.

A. Yes, there are administration/communications duties that carry over into admin support.  While administrative functions are not an area we focus much attention on, we can point you towards a couple of good resources.  One is our own 404(c) checklist, which is available to AIF/AIFA designees in the Designee Portal area of our Website.  Part of the 404(c) requirements are the notifications to participants.  Fred Reish’s firm also has an article that includes a summary of the notification requirements of the QDIA Safe Harbor. While you may not specifically try to qualify for either of these safe harbors, they provide a good measuring stick for satisfying notification requirements.

The basics of these requirements are that you should provide notification 30 days before making any default investment and annual notification of their ability to transfer assets into alternatively available options.  You should also document those notifications, such as by using the receipt request feature from email and following up directly with employees who don’t return an email receipt.  

While not having provided notification might be a problem, it would be a bigger problem to not rectify the situation now.  If any issues came up where an employee was disgruntled or unaware of this automatic enrollment, there are good sources out there about the benefits of enrollment to which you could point them.  Although, you may want to consult legal counsel before doing any retroactive notification.

Update: Soon after sending this email, I found that EBSA had recently released a new packet for small businesses to implement an automatic enrollment 401k plan..

It includes a section on employee notifications starting on page 7.

2009 fi360 Conference - Scottsdale, AZ

The 2009 fi360 National Conference is coming.  This May 6-8 in Scottsdale, AZ, we'll be hosting our fifth annual event and it just keeps getting better and better.  The conference always brings together a great mix of industry professionals who are excited to see some quality speakers and meet others who are leading the way in advancing fiduciary standards in their profession.  Our theme this year is "Uncovering trends and opportunities in uncertain times" and here are some of the highlights from the agenda so far:

• Fred Reish: New laws, more regulations and fiduciary trends: where are we going?
• Bob Veres: Planning in mayhem
• Marcia Wagner: ERISA Litigation matters and evolving best practices
• Roger Gibson: Asset allocation and portfolio design
• Charles Lowenhaupt: Trends and opportunities in managing high net worth investors
• Carlos Panksep: CEFEX Certification and fiduciary assessments

Fred, Charles and Carlos have all spoken at our conferences before, while this will be our first time with Bob, Marcia and Roger.  I encourage you to do some searching on those names and you'll find some great articles and opinions that are worth reading. We'll be announcing more speakers soon, so make sure to check back to the conference page of our Website and here on the blog for updates.

So, register for the conference soon, early bird pricing runs through February. We'll also be offering two special pre-conference events in Scottsdale this year.  An AIF Capstone program on May 5-6 and an fi360 Toolkit Workshop on May 6.  If you register for all three events, you can save $195. 

We hope to see you in Scottsdale.  Let me know if you have any questions and, if you've been to one of our conferences before, leave some feedback in the comments below.

Press release: Stormer and Stark join the fi360 team

Fiduciary360 Appoints Judy Stormer Director of Finance and George Stark Application Systems Manager

SEWICKLEY – FEBRUARY 4, 2009 – Fiduciary360 (fi360) announces the hiring of two senior staff members: Judy Stormer as Director of Finance and George Stark as the new Application Systems Manager.

As the Director of Finance, Ms. Stormer coordinates all accounting functions, taxes, budgeting, audits and benefits plans and will assist in contract negotiations. She joins fi360 following seven years as assistant treasurer at CS McKee, a Pittsburgh investment firm.

Ms. Stormer received an M.B.A. degree with a concentration in human resources from Waynesburg Universityand earned a B.S. degree in education from Indiana University of Pennsylvania. She resides in McDonald, Pa

In his position as Application Systems Manager, George Stark is the most senior technology officer at fi360 and responsible for the strategy and application of all software, hardware and networks. Mr. Stark has been working in the information technology field since 1996. He began his career as a systems programmer at G.T. Systems, Inc. in Jeannette. Later, he served in a series of progressively more responsible positions at Education Management Corporation where he was most recently a project manager.

Mr. Stark graduated magna cum laude with a B.S. degree in information management and earned an M.B.A. degree in management information systems, both from the University of Pittsburgh He resides in Pittsburgh.