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| Fred Thompson's Humorous Commentary On The Economy and Charles Schwab's $118 Million Fine With The SEC! |
Ok401k, Inc. | February, 2011 |
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Greetings!
President Ronald Reagan I believe once said that the scariest words you could ever hear were; "We are with the government and we are here to help you!" Well, TV star and former Senator Fred Thompson has taken this one step further and provides his take on President Reagan's famous quote with this hilarious video. I highly suggest you take an 8 minute vacation and hear from Fred himself on his parody on the government helping all of us in America today. Click on the hyperlink below to take you to this wonderful parody. Make your kids listen to it!
Also, how would you like to pay a $118 million dollar fine to the government? Well Charles Schwab's YieldPlus got the Schwab empire into hot water with the SEC cops. Since I am in the 401k consulting business I would be very curious as to how many participants with Charles Schwab 401k plans sold by Charles Schwab brokers in and outside Oklahoma had this fund offered to them? Yes, Charles Schwab has it's own 401k TPA/recordkeeper. So, you think Schwab makes more money if this fund is offered in their 401k plans rather than another Ultrashort Bond fund? Yes, Morningstar classifies this fund as an Ultrashort Bond fund. It's a continuing problem in America today. 401k vendors that push their own home cooking (proprietary funds) inside the 401k plans they sell instead of an outside fund choice that may be better. This Schwab YieldPlus fund melted down in 2007 and 2008 at the same time coincidentally Principal's own proprietary real estate fund which was offered of course in their own Principal sold 401k plans. Charles Schwab was investigated and found from the SEC's point of view wrong and had to pay a $118 million dollar fine. As of today Principal has not had to pay one dime to state or federal regulators let alone one 401k participant in their fund which I called famously in one of our previous newsletters the "Hotel California" 401k investment. Investors can check in but they cannot check out. As soon as Principal saw 401k participants begging for their money they froze withdrawals in September of 2008.
My professional acquaintance Edward Siedle who writes for Forbes takes a shot at retirement plans sold to city, county and state governments by Nationwide and ING and other insurance company vendors in another story below. Employer groups that are sponsored by government entities are called 403(b) and 457 plans. They are quite similar to 401k plans but the bottom line is that they have less governance or responsibility to their participants. On the other hand, 401k Advisors and the employer 401k committees we work with have a direct fiduciary responsibility under ERISA to the 401k plan participants and their beneficiaries. Unfortunately, these government entities have a "pass" from ERISA. They don't have to abide by ERISA like 401k plan sponsors. Edward provides an enlightening commentary about how the people that supervise these city, county and state governments run plans may not be looking out for the best interests of their participants by selling out to insurance company vendors. Check out this commentary. It's strong and excellent.
Enjoy!
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| Fred Thompson's Hillarious Commentary On The Budget
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| Charles Schwab YieldPlus Fund
"Yields" a $118 Million Fine With The SEC.
The big question for state securities regulators in Oklahoma and around America is..."How many 401k plans had the Schwab YieldPlus fund in the 401k plans sold by Charles Schwab agents or other advisors?" If I was the securities regulator in Oklahoma and any other state I would be very curious because as the top cop in my state, the job of any securities regulator is to protect investing citizens from bad actors or investments gone sour right? Prominent mutual fund giants like Charles Schwab sell 401k plans and have their own TPA/recordkeeping. They have some good mutual funds but one went really really bad during the real estate melt down in 2007 and 2008. The 401k plans they sell are sold directly by a Charles Schwab agent or perhaps thru an independent advisor. So, It only makes sense that any 401k vendor that owns their own funds will make more money on their own proprietary funds sold in the 401k plan right? If I was an investigator with any state securities division or Department of Labor I would be really interested on how this fund got into any 401kplan as appropriate for employees to invest in. The Schwab 401k vendor? The Schwab broker? Whoever recommendes any investment in a 401k plan and provides advice is typically viewed as a fiduciary on the 401k plan. Is it possible there may be a conflict of interest and a violation under ERISA that governs 401k plans? We all know state treasuries across America are if not broke in dire need of some spare cash. If Charles Schwab is handing out millions to the SEC for mistake, I may want to get in line as a state regulator and make a name for myself.
Trouble started to brew for Schwab with the fund near the end of 2008. A retired emergency room physician from Hawaii, who lost more than $150,000 of the $510,000 he invested in Schwab's YieldPlus Fund in his 401(k), filed an arbitration claim at that time seeking recovery of his losses and damages. | |
Schwab marketed its YieldPlus Fund to retirees and others as a safe and conservative "cash alternative". but, you read a propsectus on any mutual fund that says, ""cash equivalent investments" that had "only marginally higher risk than money market funds." What would you think? Risky? Moderately risky? Or kind of safe for grandmas money like a money market? Those words in quotations are the ones Schwab used, yet in 2008, their YieldPlus fund lost incredibly nearly 35% according to a report in the Wall Street Journal by writer Jason Zweig.
Morningstar classifies this fund as an Ultrashort Bond fund in the Short Term Fixed Income category. At the end of 2007 there were 71 Ultrashort Bond funds an investor or 401k participant could pick
to invest their money in. Hmmm, do you think the term Ultrashort or Fixed Income category means anything to an investor these days?
Pimco, Ridgeworth and Wells Fargo are top fund families and like Charles Schwab have Ultrashort Bond funds. And, the Ultrashort Bond funds from Ridgeworth, PIMCO and Wells Fargo performed much better than this Schwab fund during the recent real estate meltdown. So, why were one of the Ultrashort Bond funds from one of those prominent fund families not considered? Do you think Schwab makes more money offering this proprietary fund instead of some other Ultrashort Bond Fund? 401k sponsors have to be aware of how funds are selected and offered. Do they get the entire universe of fund families and if not, why not?
At Ok401k we try to work with quality 401k vendors that don't push their own proprietary funds and that the fund selected are truly top performers in their category. 401k plan sponsors sometimes pick insurance agents or stockbrokers that cannot select and monitor funds. These agents are typically commissioned brokers who will not function as a fiduciary advisor. Ok401k will help a 401k plan sponsor with this important function and more.
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| Department of Labor Proposes Target Date Fund Disclosures
According to the DOL, an employer may now have to document how they selected the Target Date Funds offered to their employees. Are you ready? | |
On November 30, 2010, the DOL published a proposed rule requiring additional disclosures on target date fund investments offered in participant directed 401k plans. Here is a summary of high points you have to know about the Target Date Fund offered in your 401k plan according to the DOL:
- An explanation of the fund's asset allocation, how the allocation will change over time, and the point in time when the fund will reach its most conservative allocation.
- A chart, table or other graph illustrating how the asset allocation changes over time
- If the fund has a date as part of its name, an explanation of the age group for who the fund is designed.
- A statement that the participant may lose money by investing in the fund.
The next one is called the Ok401k rule which we practice and recommend to our 401k clients and is not part of the DOL's Target Date fund proposed rules. All Target Date funds should not assume they are managing the 401k participants money PAST retirement. The 401k Target Date Fund should be managed "TO" and not "THRU" the retirement date. The vast majority of 401k balances leave an employer upon the employee's retirement and do not stay with the 401k vendor. Therefore our Ok401k rule states that the Target Date fund should be most conservative at the retirement date with an exposure of no more than 30% equities. For example a 2020 Target Date fund "morphing" to its most conservative asset allocation in 9 years would have an exposure of only 30% at the employee's retirement date in the year 2020. |
| Six Ways To Measure The Success of Your 401k Plan.
How do you measure the effectiveness and quality of your 401k plan? Newslweek magazine has a great story that Ok401k recommends you check out. Click on the hyperlink below | |
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| Edward Siedle Goes After Nationwide and ING For Selling High Priced Annuities to Cities, Counties and States!
This hard hitting story in Forbes by my professional acquaintance Ed Siedle is an interesting view point that the cities, states and county participants have been getting pounded by high unnecessary fees from insurance companies. Ok401k agrees because we have seen government run retirement plans up front and personally. Check out this story at Forbes.
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 | | Ed Siedle. America's Top "Cop" on Hidden Fees in Retirement plans! |
Click Here For Ed's Story In Forbes |
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Thank you for being one of 4000 readers in and outside Oklahoma that read our monthly Ok401k newsletter. Hope your having a great 2011!
Sincerely,
Terrence Morgan
Ok401k, Inc.
(405) 603 4986
terrencemorgan@ok401k.com |
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Terry Morgan, AIF
President, Ok401k | | Ok401k provides employers with a wide range of fiduciary consulting services on their 401k plan. We are independent and do business with all 401k providers. |
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Terrence Morgan, AIF is a Registered Representative of and offers securities though Wilbanks Securities, Inc. Member FINRA & SIPC. Securities activities supervised from Wilbanks Securities, Inc. at 4334 Northwest Expressway, Suite 222, Oklahoma City, Ok. 73116. (405) 842 0202. Fee based through Wilbanks Securities Advisory. Fiduciary status requires employer being given WSA ADV form Part II and a fee agreement must be established. |
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