>>>>In a New York Times op-ed, chief investment officer for the Yale Endowment, David Swensen, chronicles the inherent conflict mutual fund companies have between their obligations to produce profits and to produce returns for investors and how, during times of exceptional market volatility, the problem is exacerbated to produce below-market results for investors and market-beating profits for fund companies.
In short, the industry encourages the type of buy high, sell low behavior that results in investor returns underperforming investment returns and profits from the churning this results in.
Swensen offers three ways to improve the situation:
- Investors should be well diversified in low-cost index funds
- SEC should use regulation to encourage low-cost index funds
- SEC should extend an authentic fiduciary standard to the mutual fund industry
Knut Rostad of the Institute for the Fiduciary Standard further expands on Swensen’s fiduciary standard argument by pointing out in a letter to the editor two examples of how the suitability standard does little to discourage this type of behavior.
>>>>We’d also like to direct our audience’s attention to a new website. SROIIA, the Self-Regulatory Organization for Independent Investment Advisers, went live with their new site last week. SROIIA is attempting to lay the groundwork as an alternative to FINRA as the regulator for investment advisers should the SEC authorize self-regulation.
Their new site includes a newsroom and blog for the latest updates on adviser oversight. Along with the launch of the site came the official press release that fi360 has agreed to partner with SROIIA on the development of a fiduciary exam.
Now on to the rest of the best links from the past week:
In the news:
- MSRB floats tough new rules for advisers in the muni market [InvestmentNews]
- Fiduciary standard gets new and influential advocate [InvestmentNews]
- Adviser SRO teams with fi360 to ready its fiduciary exam [InvestmentNews]
- MSRB's proposal is stricter [InvestmentNews]
- The CFP Board is looking to tighten their certification with disciplinary rules for planners [InvestmentNews]
- Mary Schapiro & Phyllis Borzi charge ahead in the ongoing struggle over the fiduciary issue [AdvisorOne]
- A discussion with past BDOTY winners, explains what has changed and what hasn't with the passage of Dodd-Frank and the ongoing fiduciary issue [AdvisorOne]
- MSRB proposes fiduciary duty for municipal advisors [AdvisorOne]
- New Institute for the Fiduciary Standard elevates the conversation [AdvisorOne]
- A discussion on the new Institute for the Fiduciary Standard [AdvisorOne]
- Letter to the editor: Knut Rostad, President of the Institute for the Fiduciary Standard, discusses the differences between sutability and fiduciary standards [The New York Times]
- House panel hears concerns with Labor Department's proposed fiduciary regs [Wolters Kluwer]
- IRA changes in fiduciary regulations, proposed by the DOL, can be good or bad according to some advisors [Financial Advisor]
- Fiduciaries in focus, SROIIA and the Institute for the Fiduciary Standard [advisors4advisors]
- SRO for Independent Investment Advisers partner with fi360 to develop fiduciary exam [Financial Advisor]
- A discussion on the upcoming requirement for mid-sized advisors to switch from SEC to state registration [advisors4advisors]
From the blogs:
- Trending topics for plan sponsors from last week [Fiduciary News]
- The 401k plan sponsor's dilemma-what's wrong with "risk" [Fiduciary News]
- Fiduciary leaders splinter into two advocacy groups over divergent views [RIABiz]
- Why doesn't risk matter to the ERISA fiduciary? [Fiduciary News]
- fi360 partnership a step in the right direction [SROIIA]
From the organizations/associations/government/academia:
- The need for fundamental SEC reform [House Financial Services Committee]
- Upcoming webinar: target date funds have lost their luster, what should fiduciaries do? [Hand Benefits & Trust Company, Blue Prairie Group, & Target Date Solutions]
Articles your clients are reading (or should be):
- Tips on what to do during the extreme market ups and downs [All Things Financial Planning Blog]
- Tax planning for college [The Investment Fiduciary]
- Paul Marriman videos on portfolio construction [Do-It-Yourself (DIY) Investor]
- Plan sponsor quick tip: employer deductibility [401k Basics]
- For investors, patience pays, 4 tips for 401(k) participants, why Americans should focus more on saving, less on investing, and more from U.S. News [The Smarter Investor]
Have a link we missed? Leave them in the comments section or email us at blog@fi360.com. For more of the best links during the week, make sure you follow us on Twitter
Before we place too much credence in Swensen's op-ed, read this: Where Yale CIO's fiduciary argument went wrong | BenefitsPro http://bit.ly/qf5eUC
Posted by: FiduciaryNews | August 30, 2011 at 10:19 AM