ASPPA: What Is A "Generally Accepted Investment Theory"?

The proposed regulations would protect plan participant advisors against liability in the event that investments perform poorly.

The protection would apply only if the advice were provided through a computer model certified as unbiased; or through an advisor compensated on a “level-fee” basis – in such a way that advisor compensation would not depend on the investments selected by the participant.

A computer model arrangement would qualify if it were based on “generally accepted investment theories.”

The theories would have factor in historic risk and return data for different investments over defined periods of time; plus investment management fees and other fees and expenses, officials say.

“Rather than explicitly or implicitly endorsing a particular theory or methodology, ASPPA, CIKR and NAIRPA would instead like to encourage the DOL to continue to hold up a set of core fiduciary values,” Hoffman says. “Those values would include the need for portfolio diversification, investing for the long term, the payment of only reasonable fees for investment services and the need to keep potential conflicts of interest with respect to the advice given to a minimum. While particular investment strategies and products come and go, these core values remain the same and provide benchmarks against which all theories, styles and methodologies should be measured.”