COLLECTED WISDOM™ On Investment Advice For Participants

Congress May Yank Investment Advice Provision from Pension Bill - Summary: Lawmakers in Washington are discussing scrapping the conflicted-advice provision of the 401k Fair Disclosure and Pension Security Act of 2009, a move that would be welcomed by many in the financial services industry. Located at: Workforce.com (free registration may be required), November 2009. Click on headline to read full article.

Use of Advice Results in Higher Returns for Plan Participants - Summary: Charles Schwab released data showing that 401k participants who receive some type of assistance with choosing their investment line-up, whether through advice services, target-date retirement funds, or plan-sponsored asset allocation models, receive a significantly greater rate of return than those who choose to go it alone. Located at: Charles Schwab , December 2007. Click on headline for full article.

Investment Advice: Understanding the Rules - Summary: In response to great demand, the Pension Protection Act of 2006 (PPA) authorized the providing of investment advice to participants by advisers, including situations where their compensation could involve potential conflicts of interest. And yet, few advisers have decided to offer this service to plans. Why? Because the rules are unclear, at best. Located at: Reish Luftman Reicher & Cohen, February 2007. Click on headline for full article.

Avoiding Investment Advice Hazards - Summary: Plan sponsors and providers are steadily increasing the investment services for plans and participants, including investment advice. However, plan sponsors, investment advisors and providers must be careful to avoid running afoul of the nondiscrimination and prohibited transaction rules in the Internal Revenue Code and in Title I of ERISA. Located at: Reish Luftman Reicher & Cohen, June 2004. Click on headline for full article.

Advisory Opinion 2001-09A; SunAmerica - Summary: This is commonly called the SunAmerica opinion and deals with how financial services firms can provide asset allocation advice. It was issued before the Pension Protection Act of 2006 was passed by Congress. Located at: U.S. Department of Labor, December 2001. Click on headline for full article.

Interpretive Bulletin 96-1; Participant Investment Education - Summary: This interpretive bulletin sets forth the views of the Department of Labor (the Department) concerning the circumstances under which the provision of investment-related information to participants and beneficiaries in participant-directed individual account pension plans will not constitute the rendering of "investment advice" under ERISA. This guidance is intended to assist plan sponsors, service providers, participants and beneficiaries in determining when activities designed to educate and assist participants and beneficiaries in making informed investment decisions will not cause persons engaged in such activities to become fiduciaries with respect to a plan by virtue of providing "investment advice" to plan participants and beneficiaries for a fee or other compensation. Located at: U.S. Department of Labor , September 2003. Click on headline for full article.

401k Participants Need Investment Advice - Summary: Fear of adding to their fiduciary liability has led many 401k plan sponsors to err on the side of caution, providing only limited information to plan participants rather than risk being accused of providing investment advice. In reality, however, plan sponsors may face greater risk by not offering advice than if they do. Located at: 401khelpcenter.com, May 2004. Click on headline for full article.

Investment Advice And Fiduciary Liability - Summary: Fiduciary liability continues to be the primary reason most plan sponsors don't provide plan participants with investment advice, but are these concerns justified? Located on: 401khelpcenter.com, April 2004. Click on headline for full article.

Investment Guidance or Advice: Developing the Right Strategy for Your Employees - Summary: In the midst of the 'perfect storm' in the financial markets – created by factors such as the bursting of the tech bubble, Sept. 11, and corporate accounting scandals – employees are aware that investing isn't as easy as it appeared to be in the 1990s, and many are now anxious for help in managing their retirement accounts. Plan sponsors are equally anxious to help them, but many are concerned about the fiduciary liability that may be associated with giving investment advice or are baffled by the myriad of advice products appearing in the marketplace. This article will help plan sponsors to develop a well-designed investment guidance or advice program that properly matches employee needs with preferred solutions. Located on: Aon Corporation. Click on headline for full article.

An Analysis of Investment Advice to Retirement Plan Participants - Summary: This white paper examines the investment advice currently provided to participants in self-directed retirement plans (401k, 403b, etc.) by financial service firms and investment advisory services. It finds much of the advice to be logically flawed and dangerously misleading. There exists a strong bias in favor of investing retirement savings in the stock market without insurance against a market decline. The paper concludes that in view of the limited ability of the general public to handle the complex task of investing for retirement, financial firms will have to design safer products with a small number of choices that are easily understood. Located on: The Pension Research Council. Click on headline for full article.

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