Visions

Employers offer voluntary plans to help attract, retain and motivate employees. The tax deferral is valuable, but it is at risk. Without the tax incentive, the system will contract if not collapse. The agenda-driven media continues to distort the importance and competitiveness of 401(k) plans. Retirement plans have also become both a distraction as well as a liability. Some employers are reevaluating the cost-to-benefit of their programs along with their commitment. Like private employer DB plan sponsors, DC plan sponsors are at risk of being pressured out of the system.

Unbiased advisors who are in a position to add value have the best opportunity to capture BOR changes, but leveraging a prying event can accelerate the process. Vendor instability, declining account balances, the growing interest in guaranteed income options, increased claims against fiduciaries, reduced class certification requirements and a plaintiff friendly court system can all be used as a catalyst for change.

Identifying undervalued assets with recovery potential and teaming them with efficient, low cost and transparent investment vehicles is where advisors should be focusing today. Portfolio risk must also be identified, managed, rewarded and tailored to the individual. Dollar cost averaging into something that has become cheaper, but is unlikely to recover, will not produce the desired results. Given the unprecedented financial crisis, a traditional recovery is unlikely.  Performance will be driven by tactical asset allocation in the years ahead and this will make the advisor's role more important.  Advisors have few practical options to apply tactical asset allocation at the plan level, but skilled advisors can execute the strategy at the individual level. 

The independent CFDD will leverage its immense network of intellectual capital and provide contemporary strategies to help advisors generate new business and increase profitability. The new CFDD Inner Circle TeleConference Program will elevate industry standards and help advisors color their world "success green." The ongoing series of clearly defined steps will be devoted solely to business development. The program will provide advisors with unmatched technical & sales expertise and focus exclusively on areas with meaningful growth potential.

ERISA does not require plan sponsors to obtain fiduciary insurance nor does it require RIAs to obtain third-party coverage for fiduciary services. Furthermore, ERISA does not require RIAs to disclose their lack of coverage. The overwhelming majority of small plans lack fiduciary insurance and most advisors lack affirmative fiduciary coverage in their existing policy.

Advisors are looking for direction and, while change is never easy, improving returns could require a break with tradition. The new trends could actually benefit advisors, but the industry has entered a Darwinian mode and those who fail to adapt risk marginalization or worse. The CFDD remains the only industry conference host willing to address controversial subjects, including those that challenge commonly accepted practices. Given the unprecedented financial crisis, the 2009 agenda will focus on the shifting marketplace dynamics. As cutting edge events, the CFDD’s conferences have never been just another conference.

Advisors that fail to adapt to changing conditions and deliver reasonable returns could become marginalized. As structural changes become more recognized, alternative approaches to asset allocation and asset classes, including commodities, ETFs & other investment vehicles, will play a larger role. To reduce volatility, a growing number of plan sponsors are already questioning their asset allocation and default options. In addition to retirement income products, some are adding nontraditional asset classes while others are considering tactical asset allocation strategies.

It is always difficult to talk about uncomfortable issues and major changes. Nevertheless, the nation, our economy, the investment markets, the retirement plans industry and our individual practices are facing major challenges. We can't adapt and manage the challenges facing us today unless we identify, analyze and discuss them. Ignoring the changing landscape is not a solution.

The pool of DC plan assets has peaked, but it will remain huge. Opportunities still exist, but they will come at the expense of others and in the non-traditional markets. A mature retirement plans market and a transitioning economy demand that we operate at the top of our game. Going forward, advisor success will be determined by business management skills, efficiency, liability management, marketing skills and the development of non-traditional growth opportunities.

Based on activist judges, fiduciary breach charges of excessive fees, LaRue, new rollover litigation and new participant disclosure litigation, we expect a significant increase in litigation against plan sponsors that will subsequently increase small plan terminations. The DOL’s lookback provisions and failure to encourage the early dismissal of litigation will also add fuel to the fire.