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401(k) Stories

The days when RIAs were the outsiders at the 401(k) party are fast coming to a close. What's new is that the mass of 401(k) assets is getting critical at about $3 trillion; fiduciary advisors are getting appreciated; fat fees and questionable kickbacks are getting exposed and stepping out of line is getting dicier as the Department of Labor tightens the regulatory screws.

The old reasons why the 401(k) business is attractive are still in place: there are fresh assets pouring in every month and when employees leave jobs or retire, they produce rollovers that build up IRA accounts for financial advisors. The drawbacks of getting into the 401(k) business are still in place, too. Dealing with retirement assets is really a second line of business and it remains -- unless you overcharge with hidden fees -- a low margin business with high potential fiduciary liabilities.

Still, the outsourcers, infrastructure and accumulated knowledge for RIAs to capitalize on is growing daily and a the mega-shift of assets away from brokers is making the 401(k) business riskier and riskier -- to ignore.


Mark Boyko: In the case of a long-term account like a pension plan, a money market fund will not withstand scrutiny.

In new wrinkle, ERISA complaint of Edward Jones employees centers on failure to offer yield-chasing money market alternative

The 401(k) lawsuit in the name of 38,000 participants resumes the parade of lawsuits against the giant broker-dealer based on revenue sharing arrangements

September 6, 2016 — 6:04 PM UTC by Irwin Stein

Brooke’s Note: We talk ceaselessly about the high, often ludicrous, fees charged for the active management of equities in portfolios. These fees, coupled with 12(b)-1 fees, end up at the center of discussions about fiduciary care. But banks and brokerages also quietly rack up remarkable fees simply by marking up vanilla money market funds, loans and bond funds of short-term maturity. It’s banal stuff and we can all be lulled to sleep by ...

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Matt Fellowes: You have annuity companies coming out with new tools and fund companies but there isn't a solution out there that is really different.

With a 'unicorn' as the stated objective, Morningstar hijacks its own venture founder, backs him with VC funding and sends him out into an annuity world

HelloWallet founder Matt Fellowes left his team with eyes on extracting profits from baby boomers looking to spend down their nest eggs

August 12, 2016 — 5:55 PM UTC by Lisa Shidler

Brooke’s Note: When you read about the founder of a company with the postmodern name of HelloWallet pocketing a righteous chunk of $52 million to found a new company that involves putting investor savings into annuities, it is tempting to ask why its name is United Income and not GoodbyeWallet. When you are an editor of a publication with “RIA” in its name, you are supposed to introduce an element of skepticism whenever annuity ...

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Sheldon Geller: It is the plan sponsor, not Fidelity, who makes the fiduciary decision as to whether to offer the investment advice service to their employees.

Delta employees sue Fidelity for 'illegal kickbacks' from Financial Engines

The case may turn on whether Fidelity, by acting as recordkeeper and administrator, qualifies as a fiduciary and therefore breached its duty as it accepted Financial Engines' advice fees

July 6, 2016 — 6:58 PM UTC by Irwin Stein

Irwin’s Note: Brooke is constantly telling me to report what I see and to keep my opinions to myself. But, having been a practicing securities attorney for more than 40 years, and since my opinion here is about other attorneys, he has given me some leeway. This case revolves around what an investment advisor acting as a 401(k) fiduciary does with its fee after it earns it. Because it chooses to split the ...

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Jeff Carney is returning to his US retail roots as Personal Capital board member.

Personal Capital gets $75 million investment and an ex-Schwab retail chief in Jeff Carney

The Bill Harris-founded call-center RIA, which manages $2.4 billion in assets, hits it $500-million bogey for valuation

May 19, 2016 — 11:30 AM UTC by Lisa Shidler

Brooke’s Note: Personal Capital adds to a growing correlation between the uptick in people predicting the demise of robo-advisors and the uptick in the amount of capital that they are able to raise. We have really yet to see any company that can even remotely fit a “robo” label, which has stumbled as it sought more funding on all levels of the spectrum of virtual and automated advice. Betterment, mostly B-to-C; SigFig, mostly B-to-B ...

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Bing Waldert: 401(k) plans are difficult [when it comes] to generating income. You can set up a withdrawal but only at a certain age. If you need to take out a big chunk because of a big medical bill, you can't do that.

Why luring 401(k) assets to IRA rollovers in a post-DOL-rule world remains child's play, which keeps $7.6 trillion in the IRA game and growing

Clients still hate 401(k) inflexibility around withdrawals and the DOL granted advisors the upper hand in getting clients to sign away protections with regard to pricier products

April 20, 2016 — 8:25 PM UTC by Lisa Shidler

Brooke’s Note: Sometimes the DOL rule hubbub gets so clamorous that we’re distracted from the nub of conflict. The Department of Labor declared that assets migrating from a 401(k) plan to an IRA account remain precious retirement assets that should be invested accordingly. Hence, such assets will be subject to laws that make sure any playing around by financial advisors at investor expense is penalized. Gulp. But when a new rule rife ...

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Edward Siedle: Overstaffing, underfunding, a lack of transparency and too much politics [are unacceptable].

The exit of CalPERS' turnaround CEO Anne Stausboll raises the question of whether the pension Goliath's changes are too little, too late and mostly superficial

Stausboll made a big showing of cutting hedge funds and other active managers but her last big act was to pay up for a New York office tower, funded by the sale of a diversified real estate portfolio

April 18, 2016 — 8:12 PM UTC by Irwin Stein

Brooke’s Note: That cluck-clucking you hear in the wake of the DOL rule is the sound of chickens coming home to roost. The fowl began to scatter in 1978 when 401(k) system was put in place as a means of improving on state and company pension plans. The old defined benefit plans were albatrosses around company necks because these pension plans needed to deliver the goods to employees as guarantors. What they did ...

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William Hurley: We're really focused on small businesses that can't afford administrative responsibility. They can't afford the fiduciary risk. They can't afford the cost to offer this to their employees.

Robo-deal catapults Goldman Sachs into defined contribution business that's as downmarket as it gets

The Wall Street giant buys Honest Dollar, which makes SEP IRAs easy for 1099-receiving workers

March 21, 2016 — 7:29 PM UTC by Sanders Wommack

Brooke’s Note: If you are Goldman Sachs, you don’t worry about buying goodwill, clients or branding. You don’t even worry about culture — you have a serviceable one that gets deals done and inspires books. But that culture may not extend too well to serving the mass market — namely the people who clean the windows of Goldman Sachs’s buildings or zip its employees around cities via Uber and Lyft. Fortunately for Goldman ...

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Margaret Hartigan: We are now in the next phase which is identifying and onboarding our first customers.

As Pershing struggles to get a robo firmly fixed in the RIA frame, NextCapital rushes in to blur the picture

The Chicago 401(k) robo will use Pershing custody to go after the retail market and Pershing has hopes it'll work with its mega-RIAs

February 23, 2016 — 9:25 PM UTC by Lisa Shidler

Brooke’s Note: Can Pershing become robotically relevant? Can NextCapital hobnob its way to success by focusing on giants by convincing them it can disrupt the disrupters by beating them to the robo disruption? All that and more is contained in this article, which involved navigating a thicket of jargon that we translated as best we could into English.

Pershing Advisor Solutions LLC has signed on a second robo partner and will soon add a ...

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Chieh Huang: At Boxed, we're a technology company at heart, so working with Betterment is a natural fit for us.

Betterment adds 50 firms to its new 401(k) plan -- and IBM and Marcia Wagner connections

Smaller companies with Betterment-ish-sounding names like Earnest Operations and Boxed are the early guinea pigs but big dogs are on the robo's 401(k) board of directors

January 27, 2016 — 7:24 PM UTC by Lisa Shidler

Brooke’s Note: The skepticism of the legacy 401(k) world toward what Betterment is doing in the 401(k) business is so total and thick with certainty. The two experts quoted here give more than a taste of that. First prize is 50 new small 401(k) plan sponsors. Second prize is 100 new small plan sponsors. These are, to some eyes, nuisance accounts. But on the argument’s other side are two mighty ...

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Duane Thompson: Its harshest critics might compare the process to a giant anaconda that, having swallowed its prey, now lies motionless for several months as it slowly digests its meal.

Snakes and ladders: What to expect in the unexpectedly triumphant final DOL fiduciary rule

Whether converted or just plain exhausted, the staunchest opponents are standing down to make way for the new rule that will go into effect in 2017

December 18, 2015 — 12:28 AM UTC by Guest Columnist Duane Thompson

Brooke’s Note: I admit it. I was agog to learn that DOL had, in effect, prevailed in creating a new fiduciary rule as of 2017 — one with teeth and one that will be difficult to dislodge. Maybe I was jaded by endless alternating bouts of hope and despair. But I shouldn’t have been, not entirely, given that I had literally just read this Duane Thompson article reprinted below in IMCA’s magazine that ...

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