December 15, 2015

Will a Broader Fiduciary Definition Help Us Save for Retirement?

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In 1974 the Department of Labor passed the Employees Retirement Income Security Act (ERISA) to protect pension plan investors, which eventually came to govern 401(k) plans and other similar defined–contribution plans. The retirement savings landscape has changed significantly over the past forty years, characterized by a shift from defined benefit pension plans to defined contribution plans, which put the retirement savings onus on individual savers and investors. More recently, the DOL’s has proposed a Conflicts of Interest Rule, or more commonly called the “Fiduciary Rule,” to better protect retirement savers by modernizing ERISA and expanding the definition of fiduciary.

Coldstream, as an investment advisory firm, is already held to the highest fiduciary standard of care under the Investment Advisors Act of 1940. We take our fiduciary role very seriously by always putting the needs of our clients above our own and treating each and every client with loyalty and care. Broker-dealers and insurance companies currently are held to a lower “suitability” standard, which only requires that a particular investment be suitable for the client.

Under the Fiduciary proposal, all retirement related investments and activities, including, for example, annuities held in an IRA, 401(k) rollovers and plan or participant advice, regardless of whom it comes from, would be considered a fiduciary act. Whether you think the DOL’s Fiduciary Proposal is paramount or utopian, rest assured that Coldstream continues to work diligently to mitigate potential conflicts of interest.


We Are All Fiduciaries

401(k) plan governance is complex.  It can be fraught with risk for business owners who may not have the resources to allocate to continual plan oversight.  Keeping up with ever-changing DOL mandates is a daunting task for business owners also wearing the plan sponsor “hat.” They must pick and monitor a suitable, well diversified investment lineup, choose appropriate Qualified Default Investment Alternatives (QDIA’s,) comply with new 408(b)2 fee disclosure requirements, and file form 5500 annually to name but a few functions. While the ultimate fiduciary responsibility will always lie with the employer, hiring qualified professionals in a fiduciary capacity can shift a significant portion of the administrative and fiduciary burden off the employer.

Coldstream’s Fortress retirement plans do just that. We offer professionally designed risk-based portfolios and asset class based investment options which are simple to use and help alleviate participant and employer frustration. Our plans are 404(c) compliant, deliver participant education materials, and provide due diligence monitoring reports to the employer at regularly scheduled trustee meetings. Coldstream can assist plans in a 3(21) fiduciary capacity where some investment discretion remains with the employer, or we may be engaged in a 3(38) capacity in which we take full investment discretion and the employers residual duty is simply to monitor that we are doing an acceptable job.

Lastly, let us not forget that we are all fiduciaries and influence our own retirement destiny.  Make sure you are contributing as much as possible to your employer sponsored plan and be mindful to not to forfeit your employers matching contribution by contributing less than the match ceiling (typically 3-4% of base pay).  Re-visit your asset allocation regularly and ask for assistance if you feel uncomfortable making your own selections.

For more information on the proposed Conflicts of Interest Rule or Coldstream Fortress Retirement Plans, contact Rich Merrifield.

BY RICH MERRIFIELD, Relationship Mgr. & Wealth Planner

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