Nevin's Data "Points"

It’s an undisputed fact that the vast majority of retirement plan participants never rebalance their accounts. It’s one of the reasons that that initial investment decision, particularly in a default situation, is so crucial. And most of us would guess that those participants who do make changes probably make a mess of it. However, new research from the Vanguard Center for Retirement Research tells a different story. Their report indicates that “traders” outperformed nontraders by 0.55% on an annualized basis. Not that we should draw much comfort from that result. First, only 17% of the one million or so participants in the Vanguard sampling were “active” traders (averaging just a bit under three trades each, but most did only one)—and, according to the Vanguard researcher, on a risk-adjusted basis, these same traders fared no better than nontrading participants. In effect, the extra risk they took on—during the relatively mild investing climate of 2003 and 2004—wiped out the be

There appear to be two great debates of our time—Is global warming (oops, I mean global climate change) real? and How much do people need to save for retirement? The former is beyond the scope of this column, of course (watching the public debate, I’m not certain but that it is beyond the scope of many so-called experts on the subject). As for the latter point, every so often, some academic emerges with proof that people don’t need to save as much as “common wisdom” suggests they should. The issue was most recently addressed in a column in the New York Times titled “Are Americans Saving Too Much for Retirement?”—a column that was quickly picked up in syndication across the country. Of course, what are usually taken to task are the assumptions imbedded in those ubiquitous retirement calculators, the notion that one must accumulate a sum able to replace 70% of one’s preretirement income in retirement, and the ministrations of retirement plan providers and advisers who, ostensibly, stan

On Friday, the Department of Labor issued a Field Assistance Bulletin on the “Statutory Exemption for Investment Advice.” These FABs, which essentially are designed to give DOL personnel in “the field” guidance on the interpretation of the law, provide incredibly valuable information for anyone who works with qualified retirement programs—and this one is no exception. Three Issues This particular FAB dealt with three issues: • Did the investment advice provisions of the Pension Protection Act “invalidate or otherwise affect” prior DOL guidance on the subject? • To what extent are the standards for selecting and monitoring a fiduciary adviser (as defined by the PPA) different from the standards applied to those who offer advice outside those provisions? • For purposes of an “eligible investment advice arrangement” under the PPA, is an affiliate of a fiduciary adviser subject to the level-fee requirement? The answers to the first two were relatively straightforward. The FAB plainly stat