Ramifications of the Edward Jones 401(k) Lawsuit

edward-jonesLast month, the media reported that Edwards Jones is being sued by a company participating in their 401(k) plan for purportedly making employees pay high fees for investment management and record keeping services. These fees allegedly cost millions in retirement savings.

The intricacies of this case are long and unique and create a bit of a quandary within the financial services market. One of the interesting back stories of the case surrounds how the relationship between Edward Jones and the mutual fund companies might have influenced the choice of 401(k) plans.

The organization has two levels of partnerships, namely partners and preferred partners. It has been reported that when preferred partners are “kept happy” there is a financial benefit for Edward Jones. The suit also alleges that the preferred partners receive millions in revenue sharing payments in return for providing fund managers greater access to information about business practices, additional marketing support and educational presentations, and increased interaction with financial advisors at Edward Jones.

These allegations suggest that because of their relationship, funds from the preferred partners are being included in the Edward Jones employee 401(k) plans. It is also interesting to note that of the 53 separate investment options in the employee 401(k) plans, 40 are managed by an Edward Jones partner or preferred partner. The lawsuit suggests that because of these relationships, the firm profits through revenue sharing arrangements from the product partner.

It will be interesting to see how this lawsuit plays out and what effect it might have on future cases. We believe it could open a floodgate of similar suits and that this is just the tip of the iceberg.  The bottom line in all of this is to work with an advisor who follows the fiduciary standard and you won’t run into these situations.

 

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How are you Celebrating Fiduciary September?

celebrateIn 2012, the Institute for the Fiduciary Standard implemented Fiduciary September as a way to recognize the importance of fiduciary duty within the capital markets. The purpose of this month-long recognition was not only to celebrate advisors who hold their business practices to the fiduciary standard, but also to create awareness regarding the magnitude of responsibility all financial advisors have to act in the best interest of their clients when making decisions on their behalf.

At Financial Fiduciaries, we believe that 2016 is a crucial year for us to recognize this important month. We are in a historic time with regards to the Fiduciary Standard. This past April, the DOL issued its final rule regarding the expansion of the definition for the “investment advice fiduciary,” under the Employee Retirement Income Security Act (ERISA) of 1974. The elements of the new ruling include the following:

  • Significant expansion of  the conditions in which broker-dealers, investment advisers, insurance agents, plan consultants and other intermediaries are treated as fiduciaries to ERISA plans and individual retirement accounts (IRAs) and are not allowed to receive compensation variations based on the investment choices made or recommend proprietary investment products missing an exemption.
  • New exemptions, modifications or revocations in the quantity of existing exemptions, addressing those activities.
  • Retaining the ERISA distinction between non-fiduciary investment education and fiduciary investment advice.

We look forward to seeing how this new ruling will change the way advisors work with clients to provide the best possible investment advice for their specific circumstances. If you have questions about fiduciary duty and how it might affect your investment planning, we would be more than happy to discuss this with you!

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Beverage of Choice

ca-2016-8-15-beverage-of-choiceWhich is America’s most popular alcoholic beverage: beer, wine or liquor?  The Gallup organization found that beer is America’s choice when it comes to alcoholic consumption, and that has generally been true since the polling company has been asking the question.  Today, 42% of Americans answered “beer” when asked which beverage they drink most often, compared with 32% naming wine, and 20% who prefer one of a variety of liquors.

Although the statistics have been relatively consistent, wine actually out-polled beer by a percentage point in 2005, and beer and wine were essentially equal in the hearts of Americans in 2011 and 2013 before beer suddenly broke out into the lead again.

The statistics mask some interesting gender differences.  Overall, blending the results from 2010 through 2016, 54% of men reported preferring beer, vs. 23% of women.  50% of women preferred wine, vs. just 18% of men.  A higher percentage of men—22% vs. 18%—preferred liquor.

Of course, these statistics only apply to people who drink alcohol.  The survey found that a surprisingly high percentage—35%—of Americans totally abstain from consuming alcohol—a percentage that has remained generally consistent since 1937.

Sources:

http://www.gallup.com/poll/194144/beer-reigns-americans-preferred-alcoholic-beverage.aspx?g_source=Well-Being&g_medium=newsfeed&g_campaign=tiles

http://www.forbes.com/sites/niallmccarthy/2016/08/12/beer-is-still-americas-favorite-alcoholic-beverage-infographic/?utm_source=TWITTER&utm_medium=social&utm_content=543534392&utm_campaign=sprinklrForbesMainTwitter#66068e5946e1

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Costs of Living — What is a dollar worth?

ca-2016-8-15-costs-of-livingIf you answered that it’s worth a dollar, you must be living in Illinois.  A research report by U.S. Bureau of Economic Analysis found that the prices for a particular basket of goods and services—food, transportation, housing and education—are higher in some states than others.  Illinois came in at almost exactly the average; a $100 bill will buy $100.70 worth of the items.  People living in the District of Columbia, the nation’s most expensive area, would have to pay, on average, $118.10 for the same basket of items.

The chart shows how costly these basic necessities are in each state.  Hawaii, New York, New Jersey, California, Maryland, Connecticut, Massachusetts and Alaska are all expensive places to live, on average, while the dollar goes further in Mississippi (where you would pay just $86.70 for the BEA’s package of goods and services), Arkansas, Alabama, South Dakota, Kentucky, West Virginia, Ohio and Missouri.

Sources:

http://www.bea.gov/newsreleases/regional/rpp/rpp_newsrelease.htm

http://taxfoundation.org/blog/real-value-100-each-state-2016

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Communicable Stress

fearBy all accounts, stress—and its accompanying emotional mix of frustration, anxiety and fear—is bad for your health.  When you experience stress in your body, you release increased amounts of glucose from our liver into your blood, and your body produces cortisone, which is actually toxic to your system.  Your heart rate goes up, sending more enriched blood to your muscles.  Your immune system kicks into high gear, and you stay in this high-alert state which is only designed to help you combat real threats, depleting you physically.

Now, researchers have discovered that stress is contagious—that is, you can catch it from those around you, and even from the evening news.

Researchers at the Max Planck Institute for Cognitive and Brain Sciences conducted an experiment where they gave individuals a series of very challenging arithmetic questions and interviewed them—in both cases, in order to induce direct stress.  They had another group of subjects watch the test and interviews through a one-way mirror.  They found that 95% of those subjected to direct stress experienced the physical symptoms, but so, too, did 26% of the observers.  Later, they discovered that 24% of their subjects experienced stress simply watching television programs depicting the suffering of other people.  (Think: Evening news.)

How do you combat this contagious health risk?  Heidi Hanna, a psychologist and author of Stressaholic: 5 Steps to Transform Your Relationship With Stress, recommends, well, ten actual steps.

First: create a place where you can think without being disturbed.  This is difficult in open-plan offices, of course, and it explains why so many great ideas are hatched in the relative isolation of the shower.

Second: when you interact with people, give them your full attention.  If you set aside your smartphone and focus on that co-worker or spouse, it short-circuits the stress-producing message that the other person is not important.  And it may reduce the stress of trying to do too many things at once.

Third: get to know when you’re feeling stressed, and ask yourself if you’re picking it up from someone else.  If so, you can either help that person or limit your time together.

Fourth: Practice meditation, and give your brain a few minutes to get out of work mode.

Fifth: Make sure you get up from your desk to walk around and stretch every hour or two, and twice a day climb some stairs or otherwise get your heart rate up.  If you sit too long, less oxygen gets to your brain, which can trigger a stress response all by itself.

Sixth: Don’t go too long without eating.  If your blood sugar goes down, it sends a message to the brain that there’s a shortage of food, which can trigger an automatic stress response.

Seventh: Don’t schedule every minute of your time.  Allow time between meetings to prepare for your next encounter and to check and resolve email messages.

Eighth: Practice gratitude.  That means avoiding the tendency to focus on the negative by redirecting your focus to things that are going right in your life.

Ninth: Redefine stressors as challenges.  If you see that looming deadline as a challenge, but you know you have the resources to meet it, it generates adrenaline.  If you worry about the deadline, you produce cortisone, the inflammatory stress hormone.

Tenth: Set a good example for others by practicing good stress “hygiene” and refusing to infect others.  The better you take care of yourself, the more others will be able to avoid stress.

 

Sources:

http://www.forbes.com/sites/nickmorgan/2016/08/11/other-people-are-leaking-their-stress-to-you-and-that-may-make-you-sick/2/#6cb43c4429e5

http://time.com/84080/stress-contagious/

http://www.inc.com/minda-zetlin/stress-is-more-contagious-than-flu.html

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Fasting for Health

fastingDo you fast—that is, do you give up food periodically?  If you don’t, you should probably consider changing your habits.

Why?  A variety of researchers have begun studying the health benefits of fasting, and they’ve made some interesting discoveries.  When you skip eating for a day or two, your brain seems to respond by adopting new pathways, and also producing beneficial proteins that promote the growth of neurons and the strength of the synaptic connections between them.

The researchers also found that fasting stimulates the production of new nerve cells from stem cells, and may also increase the number of mitochondria (the energy-producing part of cells) in neurons.  That raises the neurons’ ability to maintain strong connections with each other, improving learning and memory ability.

Additional studies by researchers at the University of Southern California showed that cycles of prolonged fasting—such as our cave-dwelling ancestors endured between successful hunting expeditions—induced the regeneration of the human immune system.  Fasting seems to shift stem cells from a dormant state to a state of renewal, and meanwhile recycles damaged immune cells.  The effect is to replenish the human immune system against diseases.

But don’t you get hungry when you don’t eat for a day or two?  Some researchers have suggested that you can get most of the health benefits of fasting simply by cutting down your food intake to one-fourth of your normal daily calories for two days a week, while eating normally on the other days.  Another possibility that seems to work is to restrict your food intake to between the hours of 11:00 AM and 7:00 PM each day— not eating during the hours outside of that time.  Or you can simply not eat one day a week and get the benefits directly.

Source:

http://www.collective-evolution.com/2015/12/11/neuroscientist-shows-what-fasting-does-to-your-brain-why-big-pharma-wont-study-it/?utm_content=buffer63b1d&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

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In Celebration of Labor Day

labor-dayEvery year, we celebrate a long labor day weekend, and mostly take for granted the remarkable economic engine that employs 125.89 million Americans.

Recently, Forbes magazine tweeted a number of Labor Day statistics that will probably surprise you.

Most Americans work in one of five different sectors:

14% in professional and business services
13.5% in production and manufacturing
13.4% in state or local government
13.2% in healthcare and social assistance
11.0% retail

Most of us work long hours:

Less than 40 hours – 8%
40 hours – 42%
41-49 hours – 11%
50-59 hours – 21%
60+ hours – 18%

Some of the lowest-paid jobs have the slimmest gender pay gap:

Office/administrative support (Men’s average salary: $30,301.  Women’s: $28,462)
Community/social services (Men: $40,502.  Women: $37,561)
Healthcare support (Men: $25,415.  Women: $22,079)

In 2015, 24% of employed people did some or all of their work at home.

What are the highest paying jobs in America?  The MyPlan.com website lists the top 300 jobs in term of average salary, and the top of the list is dominated by medical professionals:

Anesthesiologists: $258,100
Surgeons:  $247,520
Oral surgeons: $233,900
Obstetricians and gynecologists: $222,400
Orthodontists: $221,390

Radiologists, Pathologists, Neurologists, Allergists and Immunologists, Urologists, Preventive Medicine Physicians, Ophthalmologists, Hospitalists, Sports Medicine Physicians, Physical Medicine and Rehab Physicians, Nuclear Medicine Physicians and Dermatologists all finish in a tie for sixth ($197,700), and you have to go all the way down to number 22 on the list, to Chief Executives, before you reach a non-medical professional on the list.

Lawyers come in way down at number 38 ($136,260), Physicists come in at number 50 ($118,500), Economists at number 77 ($109,230), Art Directors at 105 ($101,990), Veterinarians at 112 ($99,000), Automotive Engineers at 171 ($88,190) and video game designers at 190 ($87,310).

Finally, according to the U.S. Census Bureau, there are 5.4 million companies that provide employment for American workers, with an annual payroll totaling $5.6 trillion, or roughly $48,997 per employee.  A surprising 8.9% of these employer firms (481,981) have been in business for fewer than 2 years, and only 3.1% of them (167,917) have existed for more than 16 years.  Most firms (78.5% of the total) employ fewer than ten workers, while 17,982 companies employ 500 or more Americans.

Sources:

http://www.myplan.com/careers/top-ten/highest-paying.php

http://www.census.gov/newsroom/press-releases/2016/cb16-148.html

http://www.statista.com/statistics/192361/unadjusted-monthly-number-of-full-time-employees-in-the-us/

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