More On Legal & Compliancefrom The Advisor's Professional Library
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
A study of more than 150 advisors who focus on the retirement marketplace has revealed the key criteria in the selection of qualified default investment alternatives (or QDIAs) and the outlook for retirement savings in the current market.
The poll, prepared in conjunction with Putnam's annual 401(k) Golden Scale meeting of top financial advisors and consultants, indicates that asset allocation is the most critical factor in selecting target-date funds, after performance. Other criteria, in order of importance, are expense ratios and "glide path."
"In the new era of qualified default investment alternatives, 401(k) advisors and consultants strongly favor target-date type products, and have given careful consideration to their evaluation process," says David Tyrie, managing director of retirement services for Putnam Investments. "What's clear, too, from our poll is that plan sponsors are increasingly concerned with fiduciary issues. They are relying more heavily on advisors and consultants to provide fiduciary support through their service model or in the form of fiduciary toolkits, fiduciary insurance, or other programs."
The poll also shows that nearly 50 percent of advisors and consultants serve as fiduciaries to the plans they manage. And while the majority of plan participants, 85 percent, continue contributing to their 401(k) plans, more than 20 percent have decreased contributions and some 5 percent have stopped saving in these plans.
Despite the challenging economic environment, Tyrie notes, participants are continuing to save for retirement (89 percent) and plan sponsors are continuing to provide matching contributions (85 percent), according to respondents. But there are indications that participants are struggling as 21 percent are now contributing at a lower rate and 4 percent have stopped altogether.
sJanet Levaux, MBA/MA, is the managing editor of Research; reach her at email@example.com.