Outside voices and views for advisers

Apr 19, 2018, 4:55 PM EST

What a court decision teaches 401(k) advisers about choosing stable-value funds


By Marcia S. Wagner

In order to reduce their risk of fiduciary liability, 401(k) plan sponsors often seek to offer an investment menu that satisfies the requirements of ERISA Section 404(c), which eliminates the risk associated with investment choices by plan participants. One requirement of the Section 404(c) regulations is to offer a relatively safe investment vehicle, described as an "income producing, low risk, liquid investment." Many plans opt for a stable-value fund — in fact, 67% of 401(k) plans have a stable value fund, according to the Plan Sponsor Council of America. There are various types of stable-value funds: general-account contracts; separate-account contracts; and synthetic guaranteed investment contracts, or GICs. The fund may also be designated under a plan with a different title, such as a managed income portfolio. There are three salient features to many stable-value funds: • A stable-value fund generally consists of an... Read full post

Apr 19, 2018, 4:29 PM EST

A visit to India and the world's largest startup


By Joe Duran

I recently spent a week in four cities across India. The trip lived up to all my expectations: The Taj Mahal was stunning, Old Delhi chaotic, Jaipur majestic, and Mumbai vibrant. The highlight, however, was not geographic, but commercial. Our group spent an afternoon with the team at Jio, one of the fastest-growing companies ever. It was launched four years ago as a startup within one of the largest conglomerates in India, Reliance Industries, the country's largest oil company. Five years ago, its chairman had the brilliant insight that data was the new oil and set out on a mission to convert India into one of the most digital nations in the world. Jio's evolution is breathtaking and can provide lessons to any growth-oriented entrepreneur.... Read full post

Apr 18, 2018, 2:55 PM EST

One adviser's journey to becoming a citizen advocate


By Dale Brown

Some of the most rewarding experiences my team and I at the Financial Services Institute encounter as advocates for our industry come when we see the proverbial "light'" click on for our adviser members and we get a front row seat as they grow from concerned professionals to fully engaged citizen advocates for our cause.We were privileged recently to see this extraordinary transformation happen for adviser member Bradley Brown of Royal Paladin Group in Willoughby, Ohio.As a high school student in Ohio, Mr. Brown first read Cervantes' classic "Don Quixote" and became taken with the concept of heroic, chivalrous knights doing battle for those in need, for championing a cause and doing what's right.This passion has had a formative impact on his career as a financial adviser. When Mr. Brown left a position with a large wirehouse brokerage firm in 2010 to form his own advisory practice, he named it the Royal Paladin Group (a paladin is... Read full post

Apr 18, 2018, 10:37 AM EST

Investing in virtue is hard when few companies qualify


By Nir Kaissar

It's not easy being a socially conscious investor. To see why, look no further than Facebook Inc.By any reasonable ethical standard, the social media giant doesn't measure up. The Cambridge Analytica debacle and its aftermath revealed that Facebook is collecting far more information on its users — and even non-users — than it let on. And, as my colleague Shira Ovide pointed out, when CEO Mark Zuckerberg had the opportunity to come clean last week during two days of congressional testimony, he ducked questions about how the company operates.Facebook's wily ways appear to be catching up to it. According to a March 21-23 Reuters/Ipsos poll, only 41% of Americans "trust Facebook to obey laws that protect their personal information." An April 8-9 SurveyMonkey/Recode poll asked respondents which technology company they least trust with their personal information among Amazon, Apple, Facebook, Google, Lyft, Microsoft, Netflix,... Read full post

Apr 17, 2018, 10:53 AM EST

Will global macro finally shine?


By Joseph Burns

Following the Federal Reserve's latest decision to increase its benchmark interest rate in March, and as a growing number of central banks around the world reverse their policies of monetary stimulus, advisers and investors should take the opportunity to reassess alternative investment strategies. Global macro funds may be poised for a resurgence as the market cycle shifts from one of calm to increasing uncertainty.Global macro encompasses a vast array of trades that hedge funds can pursue to take advantage of changing economic and geopolitical policies. Trades can include stocks, bonds, currencies, commodities and derivative instruments. Hedge fund managers often make decisions based on indicators such as interest rates, exchange rates, unemployment, industrial production, foreign trade and liquidity flows in constructing their portfolios. Returns are often driven by changes in fiscal and monetary policy or market structure derived... Read full post

Apr 17, 2018, 10:01 AM EST

Using smart beta in an outcomes-oriented portfolio


By Mannik S. Dhillon

It's no secret that the active versus passive debate is not black and white. There are many flavors of both active and passive management, and thus the supposed competition between the two — as often framed by pundits — is a tad simplistic. Before selecting any investment strategy, advisers would be better served by determining what each portfolio is lacking or what can benefit it. In other words, advisers should start by solving for an outcome and then select the best strategy for the job, based on the client's defined objective or the inherent limitations of an existing portfolio. In many cases, there is room in an outcomes-oriented portfolio for both passive and specialized active strategies, as well as some potentially promising approaches that bridge the gap between the two. One blended approach that continues to gain momentum is strategic beta. Often called smart beta, strategic beta refers to a group of indexes and ... Read full post

Apr 11, 2018, 4:31 PM EST

Are 401(k) advisers the next DOL targets?


By Fred Barstein

The Chicago office of the Department of Labor seems to be targeting 401(k) plan advisers and, if one firm's experience is a guide, the office appears to be targeting large regional firms rather than less experienced advisers. Specialized retirement plan advisers should take note: This local initiative will likely become a trend, and plan advisers can take steps to prepare for that eventuality. A large regional firm, Sheridan Road, which is based in Chicago and had over $12 billion in defined contribution assets under management as of 2017, is one firm that just went through a DOL audit. Though there were no fines issued, the time and legal fees involved in the 2-year-plus investigation proved expensive."The DOL was looking to get their arms around how retirement advisory practices operate," Jim O'Shaughnessy, managing partner at Sheridan Road, told me. The scope of the audit included:• Whether the adviser was acting in a fiduciary ... Read full post

Apr 10, 2018, 5:58 PM EST

Financial advisers' empathy gap


By Nick Richtsmeier

Sometimes a cliché is best captured in a picture. On my colleague's phone was a black Bentley, chrome logo glistening in the sun. The car belonged to one of his most successful clients, but it wasn't the presumptive price tag that was jarring. The custom license plate read, "NVSTWME," surrounded by a frame stating, "My other car is a yacht."Photographic evidence of people's worst assumptions about financial advisers: extreme affluence, simplistic value proposition, garnished with a touch of hubris. Truth is, the majority of people in financial services do not carry themselves with this kind of swagger (or drive Bentleys, for that matter), so the literal content of the image is not what was telling. It was what the image represents: a version of this industry that is primed for disruption. Three such opportunities are exemplified in my friend's photo and applicable to the broader industry:1. Value confusion. As Americans' decision-... Read full post

Apr 10, 2018, 5:01 PM EST

Technology must reinforce trust, or else


By Ron Carson

Look around that desk of yours for a moment. Think about your personal relationships, your work, your family and even your own daily habits. Technology plays a role in every aspect of your life, sometimes without your even knowing it. We're in the midst of a paradigm shift — one that admittedly has made me think as much about the human condition as the technology changing it.... Read full post

Apr 10, 2018, 1:12 PM EST

The emperor of financial planning has no clothes


By Michael Ross

Financial planning is rapidly becoming a universally recognized profession. Over the past 20 years, the CFP certification has become widely acknowledged and respected among the general public and the financial community. The CFP Board, while far from perfect or flawless, has done a pretty credible job overall of stewarding the progress of financial planning as a profession and the CFP mark as its gold standard. Sadly, it does appear that they have not mustered the courage to address the one big hole remaining, a blanket no-exceptions fiduciary standard for all CFP licensees. The Financial Planning Association was formed in 2000 by the merger of the IAFP, a financial trade organization, and ICFP, a professional organization. I was a member of both the IAFP and ICFP, and I am currently serving as the president of the South Florida chapter of the FPA. Back then, more often than not "financial planning" was a throw-in or cheap add-on to... Read full post

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