Fiduciary Links: New studies highlight the impact of bad investor behavior
Posted by fi360 Team on August 05, 2013
>>>> “What are the forces that will shape the future of the investment management industry over the next decade?”
That’s the question used to introduce a new report from State Street that posits it is the investor who will be most influential in setting the tone going forward. For good or for bad, investors have greater access to information than ever before and, coupled with provocative headlines and chronic instability of the financial systems, that is resulting in their decision to take action. For advisors, this means a number of things. For one, it means taking a more personalized approach to defining success. It also will require advisors to better understand investor behavior. In general, when investors act unrestrained, they act irrationally and often counter to their own best interests. It is therefore incumbent upon advisors to demonstrate to investors in what ways they are adding value and what it will take to achieve their financial goals.
Examples of bad investor behavior are further reinforced by another study that also came out recently. In New York Life Retirement Plan Services’ State of the Retirement Industry report, survey results show that investors are not saving enough, not taking advantage of employer match programs, and are being significantly impacted by the loans they take against their plan. In fact, nearly 20% of participants have an outstanding loan balance. That group is also more likely to make further decisions that negatively impact their retirement outcomes.
In short, these reports are furthering the narrative that a great opportunity exists to improve the state of retirement in America if the professionals involved in managing their investments can personalize the decision-making process and help investors understand how best to achieve their retirement goals.
Now on to the best links of the week:
News and columns from the leading trade, consumer, and mainstream media:
- For wealthiest clients, a rise in direct investing. [InvestmentNews]
- Judge dismisses case challenging Dodd-Frank’s Constitutionality [InvestmentNews]
- Senate confirms Stein, Piwowar to SEC with full term for White [InvestmentNews]
- SIFMA questions SRO status of stock exchanges [InvestmentNews]
- The hunt for a pension crisis fix [ThinkAdvisor]
- Bob Clark says that despite any criticism of the “Yale letters,” Professor Ayres has successfully brought some much needed attention on the cost of 401(k) plans [ThinkAdvisor]
- Knut Rostad says last week’s conviction in the Abacus case matters and should inform fiduciary rulemaking [ThinkAdvisor]
From the organizations/associations/government/academia:
- SEC adopts amendments to financial responsibility rules for broker-dealer. [SEC]
- SEC tightens custody rules for broker-dealers [SEC, coverage from IN]
- We often look to medicine as the ideal fiduciary environment, but research shows that doctors aren’t immune from conflicts of interest. [Social Science Research Network]
- Looking to the future, it will be investors who determine the direction of investment management over the next decade. [State Street Center for Applied Research]
- SEC Chair Mary Jo White testifies that fiduciary rulemaking coming, but other mandatory rules also on the front burner [Senate Banking Committee, coverage from IN]
- 401(k) “leakage” is a crisis that threatens participants’ retirements [New York Life Retirement Plan Services, see press release and coverage from ThinkAdvisor]
From the blogs:
- Trending topics for ERISA plan sponsors [FiduciaryNews]
- Compounding: the 401(k) equivalent of cruise control [FiduciaryNews]
- New SEC Commissioner Michael Piwowar is a proponent of cost-benefit analysis for regulation [IN’s Washington Insider blog]
- Ron Rhoades attends the Garrett Planning Network’s 13th Annual Retreat, and his thoughts on what this group of 300 advisors are doing different. [RIABiz]
- In the final installment of a four-part series, Ron Rhoades writes about what the 8 pillars of a FINRA-replacing entity for RIA oversight look like, and how personal accountability is key. [RIABiz]
- Read the third article in a six-part series published by Paladin, and written by Mark Mensack: The Real Deal: ERISA 402(a) Named Fiduciary & ERISA 3(38) Investment Manager.
Articles your clients are reading (or should be):
- 7 rules of thumb for retirement planning. [US News]
- How to distribute your retirement funds in your later years. [US News]
- Retirement savers must learn the “f” word, fiduciary [US News]
- With stock market highs and bond market woes, here are a few thoughts on investor strategies. [The Chicago Financial Planner]
- Former actuary, current Stanford Scholar breaks down the fiduciary standard for a consumer audience [CBS Moneywatch]
Have a link we missed? Leave them in the comments section or email us at blog@fi360.com. For more of the best links during the week, make sure you follow us on Twitter.
