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Allan Henriques
President and Chief Executive Officer Would you like an analysis of your company's current 401(k) plan? Contact Allan Henriques at allan@smart-investor.cc for a complimentary assessment. 
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Why Investment Advice Isn't Always "Investment Advice" Common sense sometimes flies out the window in the regulation of retirement plans. For example, investment advice isn't always considered "investment advice" under the Employee Retirement Income Security Act of 1974 (ERISA). Assistant Secretary of Labor Phyllis C. Borzi explained this in testimony delivered on July 26, which appeared in an edited format in Investment News. ERISA says people who deliver investment advice to private-sector employee benefit plans are fiduciaries with all of the related responsibilities. This includes defined contribution retirement plans such as 401(k) plans. But there's a whopping flaw in the Department of Labor (DOL) rule that defines investment advice. " … [A]dvice about investments is not considered … 'investment advice' merely because, for example, the advice was only given once, or because the advisor disavows any understanding that the advice would serve as a primary basis for the investment decision," Borzi said in her testimony. This meant many advisors could avoid fiduciary responsibility, which resulted in conflicts of interests that have hurt plan participants. Participants in smaller 401(k) plans pay higher expenses on average than participants in larger plans, according to study results announced in a press release by Financial Research Corporation (FRC). But this may change as the result of greater awareness of costs. "The average participant-paid costs as a percentage of assets for the smallest plan groups was more than three times those of the very largest plans," said FRC. Even small differences in expenses can make a big difference in 401(k) investors' long-term returns, as Smart Investor has discussed in "One Percent Can Make a BIG Difference to Your 401(k) Plan Participants."
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