Nobel Prize-winning economist Edward Prescott examined international labor market data and showed that changes in tax rates on labor are associated with changes in employment and hours worked.  From the 1970s to the 1990s, the effective tax rate on work increased by an average of 28% in Germany, France and Italy.  Over that same period, work hours fell by an average of 22% in those three countries.  When higher taxes reduce the reward for work, you get less of it.

Principles for Economic Revival – Wall Street Journal

Via Roland Manarin

First Trust Economics Blog: The factory sector blow away consensus expectations in August, accelerating its expansion and growing for the 13th straight month. The ISM’s employment index came in a 60.4, the highest since 1983.

Yesterday, the Case-Shiller index, a measure of home prices in the 20 largest metro areas around the country, showed an increase of 0.3% in June and is up 4.2% in the past year.

Via Roland Manarin

Key Point:  Notice how there has been job creation every month since the start of 2010.

Via Curren Webb

In their August 30 issue, Barron’s released its 2010 list of the Top 100 Independent Advisors and Roland Manarin was again included.

Congrats Roland!

Click here to watch the video version of this post.

How are you managing your fiduciary liability?

The biggest responsibility 401k plan sponsors have is to offer plan participants access to full investment diversification.
Here’s the simple truth: By selecting and monitoring the investment options to create a diversified plan, a plan sponsor – that’s you the business owner or trustee – is establishing themselves as a fiduciary.

“But Don,” you say.  ”I don’t do any of that.  My investment provider handles everything so I don’t have anything to worry about.  My fiduciary liability is fine.”

This is incorrect.

Many business owners who sponsor 401k plans hold onto the belief that by hiring a financial advisor, broker, or insurance agent to select and monitor investments, they have relieved themselves of their fiduciary obligation to their plan.

This is not the case and it causes many business owners to be unaware of the litigation risk they’re incurring.

The evidence to all this is stated in a plan’s service agreements.  There you will find that most investment providers are there to assist or help the plan sponsor select the investments in the plan; and not to make the investment selection decisions.

So that becomes the key fiduciary responsibility a plan sponsor has when offering a 401k plan.

Now tie that to ERISA.  If a sponsor doesn’t have the required expertise to make those investment decisions, they are required to go out and hire that expertise.  And this is where many plans fall short.

Look at many 401k plan committees.  They are staffed by people who are very knowledgeable in the industry they work but they’re not investment experts.

The only way for a plan sponsor to remove the fiduciary obligation of investment selection and monitoring is by hiring a qualified professional, such as an ERISA 3(38) investment manager, who acknowledges in writing that they are taking on that fiduciary responsibility, and who then takes full discretion of those duties within the 401k plan.

Only now does the plan sponsor no longer have the fiduciary responsibility, and the inherent liability, for making the investment selection decisions.

A lot of providers are out there waving the fiduciary flag.  “Oh, you want a fiduciary?  We’ll be a fiduciary for you.”

Before you decide on that provider, make sure you first understand what that means.

Written by Don Davidson

“…I think this obsession with the trade deficit and “net exports” can be traced to the fact that the calculation of Gross Domestic Product treats exports as positive and imports as negative, but maybe that’s not the only way to measure economic performance.  Fisher Investments summarized it this way: ”Focusing on net exports is simply wonky. We benefit in myriad ways from importing goods others make more cheaply and efficiently. Plus, increased imports is a sign of economic vibrance!”

>> More On Total Trade vs. Net Exports

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Via Dave Blair

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Via Roland Manarin

Professional Independent Fiduciary Matthew Hutcheson joins me to discuss the effectiveness of the existing company retirement plan paradigm, common conflicts of interest in the 401k market, appropriate fee disclosure formats and an overview of Modern Portfolio Theory.

Listen here:  Talk 401k with Don Davidson

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Articles and resources mentioned in this episode:

- Hearing on fee disclosure before the United States Department of Labor

- Other papers and articles published by Matthew Hutcheson

Via Don Davidson

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One prudent fiduciary practice for all retirement plans it to routinely benchmark the plan against other options in the marketplace.  We offer a unique solution that we feel is a good benchmark to use.

Today we’re looking at ways to avoid being dragged into 401k litigation and review a recent lawsuit involving a company charged with failing to negotiate lower fees for their plan participants.

Also we’ll share recent thoughts from financial author and columnist Dan Solin and his argument on why 401k plans should offer participants the opportunity to invest in pre-allocated portfolios of low-cost stock and bond index funds

Listen here:  Talk 401k with Don Davidson

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Articles and resources mentioned in this episode:

- Essential, But Often Ignored, Principles of 401k Fiduciary Risk Management

- Author and Financial Columnist, Dan Solin

- Los Angeles Times article on the Edison International 401k lawsuit

Via Don Davidson

We’re proud to announce the launch of a new podcast specially for business owners, plan trustees and the individuals responsible for running a company’s 401k plan.

Enter Talk 401k with Don Davidson…. a weekly conversation focusing on 401k best practices and prudent fiduciary standards.

The first two episodes are currently available on iTunes so have a listen and send any thoughts or comments to don (at) manarin.com.

Episode 1 – Responsibility for Investment Selection; ERISA 3(21) & 3(38) investment fiduciaries; “Defined Benefit-ization” of Defined Contribution Plans

Guest:  Scott Pritchard, AIFA – Managing Director of Retirement Plan Consulting Service at Capital Directions

Summary:  Plan sponsors cannot eliminate their fiduciary liability but there are ways it can be managed and reduced – Partnering with an investment fiduciary can help reduce fiduciary liability as we cover the roles and responsibilities of an ERISA 3(21) investment advisor and 3(38) investment manager – Are there better alternatives to target-date/lifestyle mutual funds? – Plus much more

Episode 2 – Benchmarking your 401k; Plan Costs; Department of Labor Fee Disclosure Rules

Guest:  Tom Kmak – CEO of Fiduciary Benchmarks

Summary:  Benchmarking a company 401k plan involves much more than simply evaluating the cost – In today’s 401k space, plan sponsors must look at much more that presents the overall value the plan is delivering to participants – What do the Department of Labor’s recent fee disclosure rules mean for business owners and the retirement plans they offer?

Via Don Davidson