fi360 Blog

New Article Competition entry: 401(k) Plans: the Lake Wobegon effect

Our first entry into the 2010 article competition has been posted. AIFA designee Roger Levy of Cambridge Financial Services Group in Greenwich, CT, authored the article "401(k) Plans: the Lake Wobegon effect."  The article argues that participant-direction has proven itself not to work. No matter how much more information and participant education is made available, the situation hasn't changed.  The solution, argues Roger, is in professionally managed plans, citing evidence that they have proven more successful in the market turmoil of the last year.  Roger also provides advice in converting to trustee-direction, such as the proper appointment of fiduciaries and changes to the investment policy statement. 

If you have any feedback on the article, submit it to resources@fi360.com or in the comments section below.

The winner of the article competition receives a $1,000 prize at our 2010 National Conference. For more information on the fi360 article competition, visit the article competition home page. 

Fi360 designees and subscribers making their mark

401k Wire has completed its annual "100 Most Influential People in Defined Contribution" list and it includes a large number of AIF/AIFA designees and Tools subscribers. 401k Wire does require a subscription to read, but you can see the list via the above link.  Fi360 would like to say congratulations to the following individuals and thank them using their positions of influence to further the fiduciary cause.

• #2 - Fred Reish, AIFA, fi360 Conference speaker
• #19 - Don Trone, AIFA and fi360 co-founder
• #32 - Marc Zimmerman, AIF
• #33 - Yaqub Ahmed, AIF
• #40 - Tommy Thomasson, CEO of DailyAccess Corp., a CEFEX Certified Recordkeeper
• #44 - John Kim, AIF
• #48 - Bruce Ashton, AIFA
• #61 - Al Otto, AIFA, Tools subscriber
• #58 - Mike DiCenso, AIF
• #60 - Dorann Cafaro, Tools subscriber
• #67 - Patrick Rieck, AIF
• #83 - Charlie Epstein, AIF, Tools subscriber
• #84 - David Hinderstein, AIF
• #86 - Chad Larsen, AIF
• #89 - Randy Long, AIF
• #91 - Gregg Andonian, AIF, Tools subscriber
• #95 - Barbara Delaney, AIF
• #96 - Mark A. Davis, AIF

In addition to these designees and subscribers, we'd like to congratulate the following people who we also consider friends of fi360:

• #14 - Brian Graff
• #17 - Steve Saxon
• #28 - Vince Giovinazzo
• #46 - Dave Musto
• #75 - Lou Harvey, fi360 Conference speaker
• #76 - Marcia Wagner
• #80 - Phil Chiricotti
• #99 - Jerome Schlichter

There were also 35 AIF/AIFA designees on the honorable mention list.  Between the designees, subscribers, and friends of fi360, 25% of the most influential people in defined contribution have an affiliation with fi360.  This speaks volumes to the space AIF/AIFA designees and Tools subscribers occupy as leaders in moving the industry in the right direction.  We can't wait to see next year's list and the positive impact these individuals and all fi360 members have on the industry in 2009.

If you are a designee or subscriber who has received an honor or recognition for your practices or impact on the industry, make sure you let us know at blog@fi360.com.

Welcoming an AIF designee to the blogosphere!

AIF designee Joshua P. Itzoe, who released his book Fixing the 401(k) in October, launched his Fixing the 401k blog last week.  The blog is focused on further expanding on the premise of the book,
"What Fiduciaries Must Know (And Do) To Help Employees Retire Successfully."

Joshua writes in his first post, "This blog is intended to provide you, the reader, with timely and useful information concerning fiduciary responsibility, ERISA, and developments in the rapidly changing 401(k) industry. It is based on my strong belief that our country's retirement system is broken and in critical need of repair and transformation."

We congratulate Joshua on the success of his book and look forward to following his blog.  Josh is another great example of AIF and AIFA designees who are leaders in advancing the fiduciary cause.

If you are or know an AIF/AIFA designee who is making a difference in the industry, let us know.  We'd also like to know of other great blogs and sources of information that you go to for more information.  Make sure you leave them in the comments section below.

Designee makes the switch from RIA to B/D

In our first case study, we profiled a designee who made the switch from a B/D to establishing themselves as an independent.  This time we've taken a look at an advisor who went the opposite direction.

AIFA designee David Strother, chief investment officer and financial services director for DSF Wealth Management, LLC, started Wealth Care Group Asset Management as an RIA in partnership with a CPA firm.  When they later merged with DS&F Financial Services, LLC (an affiliate of Darnall, Sikes, Gardes & Frederick, a Corp. of CPAs), who are affiliated with B/D First Global, he had to choose between remaining an independent RIA at the CPA firm's financial services affiliate, or terminate his independent RIA and move under the umbrella and supervision of 1st Global's RIA.

What made this move possible for David was 1st Global's culture of independence that already existed.  While some B/Ds run from the "f" word, fiduciary, they allowed David to use his AIFA designation, use and show fi360 Tools reports, and share the Prudent Practices with clients. 

"Working under 1st Global's RIA allowed us to outsource most of the compliance function, while providing us more flexibility, which we believe benefits our clients,” said Strother. "It allows us to operate in the best of both worlds. We don't sell any proprietary products and we'll never make a recommendation based on compensation. We may make selections that pay us a commission – such as limited partnerships, structured products and insurance products, because we feel it's best for the client, but we always communicate what our compensation is."

David's B/D experience is not typical to what we usually see, and we think it makes a lot of sense to go the route of independence if you want to give your clients a level of service that is less conflicted.  But his story is a good example of how a scenario like this can work under the right circumstances.  Just remember, fiduciary status is determined by facts and circumstances, and going the B/D route will not shield you from liability if your actions dictate that you were acting as a fiduciary.

Go to our articles section to read the whole story.  Here are some other sources relating to the subject:

• Investment Advisor gives a guide to deciding "B/D or RIA?", even though it doesn't mention the fiduciary issue.
• Blogger/2008 fi360 National Conference speaker/RIA Mike Patton blogs on his "Road to Independence" for Investment Advisor.
• The SEC has guides to registering both as a broker-dealer and as an investment advisor.

If you or someone you know would be a good subject for a case study on fi360 or the adoption of a fiduciary culture has benefitted them, send us an email at resources@fi360 and tell us the story.

AIF designees making their mark this week

A few AIF designees were in the news this week, as well as a few fi360 employees.  Every time one of our designees is recognized for their expert opinion or status, it is good for our entire community of designees.  Make sure you send us a notice at blog@fi360.com and let us know if you have been featured in a publication or on the web, we'd be happy to post it. 

• AIF designee Joshua P. Itzoe of Greenspring Wealth Management has written a book, titled Fixing the 401(k).  The book is written for 401(k) fiduciaries to diagnose problems in their plans and bring them up to snuff.  The Pension Risk Matters blog offers a review of the book.
• AIF designee David Todd Misenheimer of Gordon Asset Management, LLC in Durham, NC was named a regional mover and shaker by Business Leader magazine.
• Redding, CA's local paper asked fiduciary experts the question, "What does 'fiduciary' mean and why should investors care?"  Wouldn't you know it, AIF designees Lewis Chamberlain and Richard Kamorek were the first two featured answers.
• We'd like to recognize a few of our employees who were in the news locally, here in Pittsburgh.  CEO Blaine Aikin was profiled as a newsmaker and Andy Frommeyer and Heather Turns were recently promoted.  Good work team!
• Finally, as a reminder, we have free Legal Memorandaums available in our Fiduciary Store. This is the older version of our handbook that contains the full legal substantiations behind our Prudent Practices for Investment Fiduciaries.  This version does not include the UPMIFA substantiation included in the newer version, but is otherwise identical.  Still a very valuable resource, just click on the above link and follow the directions.  Make sure you enter the discount code, "legal."   

Designee makes the switch from BD to RIA

We would like to extend a congratulations to David Bromelkamp and his firm, Allodium Investment Consultants.  They were recently nominated by a client for the Minnesota Business Ethics Award for their commitment to investors' interests.  Three years ago David left his job at a broker-dealer to start an independent RIA with fi360's Practices at its core.  You can read a full case study on David's experiences in the articles section of our website.

David's move was largely in response to the BD's refusal to allow him to share the Practices with his clients. This has been a roadblock that we have frequently encountered here at fi360.  Many BDs do not permit their employees to use the AIF or AIFA designations because they are afraid of the "f" word, fiduciary.  Their stance seems largely to be if they avoid the word, and by extension, the issue, they are avoiding the responsibility and liability.  However, this is simply not true.  The overturning of the broker-dealer exemption meant that there would be no more exceptions to registration and disclosure requirements for those providing investment advice.  Fiduciary status is determined by facts and circumstances, and regulators and the investment community are taking a greater interest in ensuring investors' interests are always the primary concern. BDs who are not proactive in embracing this change in culture are at risk of losing the faith of the community, of increased scrutiny from regulators, and of defections from advisers who want to do the right thing by their customers, like David Bromelkamp did.

Additional sources of information:

• Don Trone's article on how the overturning of the broker-dealer exemption signaled a new era of investment advice.
• A recent report from the lawfirm of Reish Luftman Reicher & Cohen on how the impact new 408(b)(2) disclosure regulations most dramatically affects broker-dealers.
• An article on the partnership between fi360 and LPL, a broker-dealer who is proactively addressing their fiduciary responsibilities.

Have you made or are you contemplating a similar move?  If you have any experiences or questions you want to share, leave them here in the comments section.