Wealth Management Resource For The Affluent

In 2010, the Department of Labor had issued preliminary rules about 401(k) fee disclosures. On February 2, 2012 the Department of Labor issued the long-anticipated final fee disclosure regulations for 408(b)(2) which require services providers in retirement plans to make available written disclosure of their services and fees.   What’s surprising is that 2 days after the release of these final fee disclosure regulations, the Treasury Department releases information in support of, “Annuitizing Your 401k”. 

For those retired or nearing retirement and concerned about how to retain purchasing power and preserve their wealth and lifestyle during inflationary cycles, there are prudent portfolio strategies to consider during what is often known as the “distribution phase”.  Now is the time to think about the impact inflation might have on your retirement income plan.  These 6 strategies can help to build a comfortable retirement in the wake of today’s volatile business, investment and inflationary climate.

The Department of Labor recently released the final fee disclosure regulations regarding 408(b)2.   The effective date was moved from April 1, to July 1, 2012.  Plan participants will have to wait an additional 90 before they learn what their company sponsored retirement plan is actually costing them.  Unfortunately many feel they pay nothing or nominal fees are will truly be surprised once these fees are disclosed.  The worse part is, the final regulations still allow enough loopholes for service providers and unapprised plan sponsors to hinder employee retirement efforts.

Just when you were about to get out of international stocks, international markets have outperformed US so far this year as highlighted in Barron’s.  My firm adheres to a strict discipline of global diversification.  Removing the emotion and rebalancing into asset classes that seem to be “dead” has helped provide clients with a more consistent investment experience.

EBSA (Employee Benefits Security Administration) has announced that it will push new fee disclosure regulations aimed at stopping service providers from charging excessive, hidden fees while engaging in prohibited transactions and conflicts of interests, back to July 1, 2012.  The ones who will suffer from this change are the 72 million plan participants who will now have to wait even longer before they are made aware of the fees they pay in their 401k plan. 

Kodak currently has a 401k lawsuit pending against them. A Kodak employee is suing the company's top executives and board members, alleging they failed to safeguard workers' 401(k) retirement plans from the stock collapse.  In the suit, it's alleged that "A prudent fiduciary facing similar circumstances would not have stood idly by as (the retirement plans) lost tens of millions of dollars."  As a plan sponsor, it is your duty and responsibility to act as a prudent fiduciary.  With that said, here are 8 guidelines to help prepare you for upcoming Department of Labor regulations.

I recently finished a book which was given to me as a gift from a good friend of mine titled “Cowboy Ethics- What Wall Street Can Learn from the Code of the West.” The book was written by James P. Owen, a 40-year veteran of Wall Street and ex hedge fund manager. He points out that so many investors are disgusted by the misdeeds of a few and suspicious of the industry at large. The book explores the possibility of Wall Street looking back to a simpler time when a handshake was enough to seal a deal, and right and wrong were as clear as black and white. The book poses the question- what if executives, portfolio managers, analysts, and traders decided that things aren’t for sale? What if every major investment firm agreed to live by the principle that the client always comes first?

Plan sponsors need to realize that they are a fiduciary of the company's retirement plan and reviewing the quality of your plan is not optional.   401k hidden fees are at the forefront of new DOL regulations because service providers have taken advantage of plan participants for far too long.  However, it is the plan sponsors willingness to actually do their due diligence and review information that is provided and to take appropriate action in regards to providing the best possible plan experience for employees.  Failure to comply with the many detailed requirements of the new regulations generates personal liability for the plan fiduciaries.

The DOL has said that it’s digging in its heels when it comes to the April 1, 2012 deadline.  60 days later, plan sponsors will have to provide plan participants with something many plan participants have never seen…what they pay for their 401k plan.  Rest assured this will open the flood gates to 401k lawsuits. An AARP study done last year, found that 71% of workers who were surveyed truly believed they weren’t paying anything for their 401k plan.  However, truth be told, there are so many hidden and excessive fees that can be found in a 401k that plan participants can end up foregoing over half of their retirement income since compounding costs and excessive fees can devastate any savings effort.

A comprehensive retirement income strategy will help protect your investments from inflationary pressures.  This is because Inflation impacts nearly all retirement-based investing vehicles. Consider this high-level view of some of those most common: