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CAPTRUST wakes up the 401(k) industry by buying $1-billion advisor/recordkeeper that adds the 'magic' to its arsenal

Freedom One's system offers 3(38) fiduciary management that allows the $85-billion Raleigh behemoth a way to take greater control of assets

Author Lisa Shidler January 9, 2013 at 5:25 AM
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J. Fielding Miller: This has that magic fit.

401(k) Stories

Stephen Winks

Stephen Winks

January 9, 2013 — 2:42 PM

The need for innovation in the 401(k) space is extraordinary as the DOL and Borzi will require fiduciary standing of advisors serving retirement accounts as a statutory imperative. Wall Street’s is inability to act in a fiduciary capacity is totally self inflicted. 338 is simply insurance which shifts fiduciary liability from the broker—a major innovation required by statute—essential for plan sponsors acting on behalf of their employees with fiduciary responsibility.

The other innovations that follow are profound. There is about 200 bps that need to be wrung out of 401(k) solutions which will make the major 401(k) solution players marginally profitable as they are presently structured, thus new generation record keepers like CapTrust will grow exponentially based on service, expert authenticated functionality and cost. Importantly the terribly expensive Target Date Fund option and the “to” or :through” controversey is rendered obsolete with totally customized portfolio construction at the participant level. CapTrust is not inhibited by any of the aversions of the the brokerage industry to fiduciary standing and none of the self serving interests of product manufacturers. This is the future of the financial services industry.

Low cost expert fiduciary counsel achieved in the retirement space raises the obvious questions of why this level of accountability, responsibilitty and professionalism is not available in taxable accounts. Indeed, the self defeating strategy of the brokerage industry to be insular to the best interest of the investing public and the fiduciary standing of its brokers and its reliance on expensive packaged product/solutions makes our largest broker/dealers the high cost low value added alternative to advisors who are actually accountable and responsible for their recommendations.

Harvard’s Clayton Christensen observes, “the biggest mistake make by established industry’s when faced with industry redefining innovation is to look at innovation in the context of their existing business model when a new business model waxin order.

The key to this innovation is process (expert authenticated prudent investment process), which Edwards Demming observed to the chagrin of Detroit, :if you can’t describe what you do in terms of process, then you don’t know what you are doing.” There are the questions emerging of the reliability of advice, technical competency and the trust and confidence of the investing public which will be resolved in the best interest of the investing public. There are lessons learned by Detroit in automobile manufacturing that are about to be relearned by Wall Street.


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