Friday, November 15, 2013

Don Trone: Uniform Fiduciary Standard is "Institutionalizing Mediocrity"


As the industry struggles with expanding the definition of who is subject to a Fiduciary Standard, Donald Trone, a long time fiduciary advocate argues that creating a "Uniform Fiduciary Standard" will lead to the opposite of its intended purpose, it will institutionalize mediocrity. Trone says:
Most decision-makers fall into the advisor/trustee ranges, and for this group, a uniform fiduciary standard will make sense. However, when we consider the unique attributes of a steward, it’s clear that a uniform fiduciary standard will have the effect of institutionalizing mediocrity.
Trone leaves us with this parting thought:
The leaders of the fiduciary movement have centered their debate around a principle: “The best interests of the client.” Principles appear at the top of the pyramid. In contrast, the broker-dealer community has argued for a harmonization of rules—the lower portion of the pyramid. As it stands today, it appears that the broker-dealer community is going to prevail. If so, at some point in the future we will have a uniform fiduciary standard consisting largely of rules, and the uniform standard will fall within the lower portion of the governance hierarchy. There will be a significant gap between the uniform fiduciary standard and what we refer to as stewardship. There will no longer be a progression between professional standards; there will be the masses who are subject to a uniform fiduciary standard and the industry elite who will voluntarily adopt the higher stewardship standard.  
I encourage you to read the full article at Financial Advisor Magazine titled "Uniformity = Mediocrity."

Scott Dauenhauer, CFP, MSFP, AIF

Wednesday, November 13, 2013

Make Big Commissions Selling Annuities To Our Nation's Veterans!

This advertisement arrived in my e-mail inbox on November 11th, Veterans Day.

The annuity industry has sunk so low that they are actively marketing a program to sell high commission annuity products to our nation's Veterans by partnering with a Non-Profit Charity.

As if our nation's Veterans didn't have enough to deal with when working with the they'll have annuity agents chasing them around.


Scott Dauenhauer CFP, MSFP, AIF

Friday, November 01, 2013

House Votes Against Fiduciary Standards

A bill passed 254 - 166  through the House of Representatives on Tuesday  which works to undermine the future retirement security of Americans.

The bill, with the Orwellian title "The Retail Investor Protection Act" (RIPA - I call it the R.I.P Act or Rest In Peace) seeks to do anything but protect "retail investors."

RIPA seeks instead to interfere with the Fiduciary Rulemaking process at the Department of Labor and Securities and Exchange Commission, delaying or eliminating any process where all financial advisors would be required to place the interest of their clients first.

Surprising as it might be, currently only a subset of "advisors" are required to be "fiduciaries," placing the best interest of their clients first.  The majority of the industry has NO duty of law to place their clients interest ahead of their own.

RIPA seeks to continue to allow salespeople to give financial advice that may be self serving and then to disguise the intent of the Act by giving it a name like "Retail Investor Protection".

The "Wall Street Over Main Street Act" might be a more apropos name.

We've apparently learned nothing from the financial crisis. Instead of looking out for the little guy, this act does all it can to ensure that the little guy never gets a fair shake.

The  good news is that it's unlikely to get support in the Senate and would be veto'd by the President even if it did.

This is yet another sad legislative day in the House or Non-Representatives.

Scott Dauenhauer CFP, MSFP, AIF

CalSTRS Releases RFP For 403(b)/457(b) Recordkeeper

The California State Teachers' Retirement System has released their first Request for Proposal for their 403(b) and 457(b) programs (collectively named Pension2) since 2006.

Submissions are due by December 19th, 2013.  Vendors interested in bidding on the program may find the information they need here.

The incumbent recordkeeper is TIAA-CREF and they are eligible to bid.

As part of the background CalSTRS states:

CalSTRS administers a hybrid retirement system which includes a defined contribution program, known as Pension2, to complement the defined benefit members receive as their primary means of retirement. Pension2 allows certified and classified California school employees to set aside savings in low-cost, flexible funds selected by CalSTRS. Pension2 offers several investment choices to certified and classified California school employees: 403(b)(7), Roth 403(b)(7) and 457(b). As of September 30, 2013, Pension2 has over 10,000 participants with over $500 million in assets. 
Meridian Fiduciary Consulting (of Meridian Wealth Management, my firm) is the consultant.

Scott Dauenhauer, CFP, MSFP, AIF