Thanks to Pinterest, I now have a wonderful platform for cataloging these various charts and graphs for easy review, reference and reflection.

Gratke Wealth on Pinterest: http://pinterest.com/gratkewealth/

Source: DShort.

Feb 02, 2012 — The U.S. Department of Labor’s (DoL) Employee Benefits Security Administration (EBSA) issued a final rule on 408(b)(2) fee disclosure Thursday. —

The DoL also announced a three-month extension to the rule’s effective date, meaning service providers must be in compliance by July 1, 2012 for new and existing contracts or arrangements between Employee Retirement Income Security Act (ERISA)-covered plans and service providers.

“As President Obama has said, we’re at a make or break moment for the middle class and those trying to reach it,” said Secretary of Labor Hilda L. Solis.

“What’s at stake is the American value that hard work pays off. The common-sense rule that we are finalizing today will shed light on the true costs of 401(k) accounts and ultimately reward those working hard and saving for retirement.”

Solis continued, “This rule, and its companion participant-level fee disclosure rule, will greatly increase the level of transparency in retirement plans. When businesses that sponsor retirement plans, and the workers who participate in those plans, get better information on associated fees and expenses, they’ll be able to shop around and make informed decisions that will lead to cost savings and a larger nest egg at retirement.”

The DoL’s rule requires service providers to furnish information that will enable pension plan fiduciaries to determine both the reasonableness of compensation paid to the service providers and any conflicts of interest that may impact a service provider’s performance under a service contract or arrangement. It requires disclosures of direct and indirect compensation certain service providers receive in connection with the services they provide.

The rule applies to those service providers that expect to receive $1,000 or more in compensation and provide certain fiduciary or registered investment advisory services, make available plan investment options in connection with brokerage or recordkeeping services, or otherwise receive indirect compensation for providing certain services to a plan.

The DoL also announced that in the near future it intends to publish for public comment a separate proposal that would require service providers, in addition to providing the required fee and investment expense information, to furnish a guide or similar tool to assist plan fiduciaries in identifying and locating the potentially complex information that must be disclosed and which may be located in multiple documents.

The DoL said the three-month extension of the effective date of the final rule was provided to allow service providers sufficient time to prepare for compliance. Service providers not in compliance as of July 1, 2012 will be in violation of ERISA’s prohibited transaction rules and subject to penalties under the Internal Revenue Code. (see DoL Extends Applicability Dates for Fee Disclosure Rules).

The effective date of the final rule works in conjunction with the compliance date of the department’s participant-level disclosure regulation (29 CFR § 2550.404a-5), which requires plan administrators to give workers who direct their retirement accounts in 401(k)-type plans easy-to-understand information to comparison shop among the plan investment options available to them.  Due to the extension of the effective date of the final rule announced Thursday, plan administrators for calendar year plans now must make the initial annual disclosure of “plan-level” and “investment-level” information (including associated fees and expenses) to participants no later than August 30, 2012, and the first quarterly statement (for fees incurred July through September) must be furnished no later than November 14, 2012.

Plan sponsors and service providers with questions about the final rule can contact EBSA’s Office of Regulations and Interpretations at 202-693-8500.

A fact sheet on this regulation is also available on EBSA’s website at http://www.dol.gov/ebsa/newsroom.

Tara Cantore

“The benchmarking process creates the standard for plan sponsors and service providers to follow. It serves as the window into the reasonableness of a 401(k), helps to gauge the plan’s efficiency, determines if the fees are in line with their peer group and identifies what can be done to make any fixes, if required.”

… Tom Kmak, CEO and Co-Founder, Fiduciary Benchmarks, Inc.

Checklist to begin benchmarking will include:

• Plan Assets
• Number of Participants
• Years the plan was bid or last reviewed
• Company industry
• Plan type
• Uses auto-enrollment
• Offers employee match
• Percentage of plan assets in indexed funds
• Percentage of plan assets in managed plans

As pending 2012 401k fee disclosure legislation comes to fruition, and fees are disclosed first to plan sponsors and then later to participants, independent 401(k) plan benchmarking is the best way for the employer to gauge the success of his/her retirement plan.

Source: DC Focus, Summer 2011, Blackrock, Inc.

Safely reducing debt and clearing the way for economic growth in the aftermath of the global credit bubble will take many years and involve difficult choices, as MGI’s 2010 report showed.

Two years later, major economies have only just begun deleveraging. In only three of the largest mature economies—the United States, Australia, and South Korea—has the ratio of total debt relative to GDP fallen. The private sector leads in debt reduction, and government debt has continued to rise, due to recession. However, history shows that, under the right conditions, private-sector deleveraging leads to renewed economic growth and then public-sector debt reduction.

These are the principal findings of MGI’s latest perspective on deleveraging, which revisits the world’s ten largest mature economies to see where they stand in the process of reducing debt ratios (United States, Japan, Germany, France, United Kingdom, Italy, Canada, Spain, Australia, and South Korea). It focuses in particular on the experience and outlook for the United States, United Kingdom, and Spain—three countries covering a range of deleveraging and growth challenges. It also examines the relevant lessons from history about how governments can support economic recovery amid deleveraging, and identifies six key markers business leaders can look for to monitor progress of specific countries.

Highlights of the research include:

• The deleveraging process has only just begun in most countries. Based on data up to Q2 2011, total debt has actually grown across the world’s ten largest mature economies since the 2008–09 financial crisis, due mainly to rising government debt. Only three countries in the sample—the United States, Australia, and South Korea—have seen the ratio of total debt to GDP decline.
• The deleveraging processes in Sweden and Finland in the 1990s offer relevant lessons today. Both endured credit bubbles and collapses, followed by recession, debt reduction, and eventually a return to robust economic growth. Their experiences and other historical examples show two distinct phases of deleveraging. In the first phase, lasting several years, households, corporations, and financial institutions reduce debt significantly. While this happens, economic growth is negative or minimal and government debt rises. In the second phase of deleveraging, GDP growth rebounds and then government debt is gradually reduced over many years.
• The historic deleveraging episodes reveal six critical markers of progress: the financial sector is stabilized and lending is rising; structural reforms unleash private-sector growth; credible medium-term public deficit reduction plans are in place; exports are growing; private investment has resumed; and the housing market is stabilized and residential construction revives.
• As of January 2012, the United States is most closely following the Nordic path towards deleveraging. Debt in the financial sector has fallen back to levels last seen in 2000, before the credit bubble, and the ratio of corporate debt relative to GDP has also fallen. US households have made more progress in debt reduction than other countries, and may have roughly two more years before returning to sustainable levels of debt. Deleveraging in the United Kingdom and Spain is proceeding more slowly, and these countries could face many years of gradual debt reduction ahead.
• Understanding the course of deleveraging will be of critical importance both to business leaders, who will need to take a granular approach to strategy, and to governments. The report examines implications for business strategy and suggests that current macroeconomic models do not fully capture the impact of deleveraging on demand—so companies must develop their own views of how deleveraging is proceeding to find pockets of opportunity in the near term. Overall growth in the time of deleveraging is likely to be restrained, but the pace of debt reduction varies across nations and sectors and from place to place within nations. No single country has all the conditions in place to revive growth.

As we can see, the deleveraging cycle has a long way to go and should ‘figure’ into everyone’s asset allocation strategy (ies), David Gratke

Source: Clark Capital Management, Inc Q4 Navigator Report

This bluntness begs the question to employers who are sponsoring a retirement plan;

Do you know what fees you are paying inside of your 401k Plan?

Our competitive fee benchmarking service brings transparency to plans sponsors regarding their retirement plan; how much is your company paying in 401k fees?

Excerpts from a recent Employee Benefit News article on ‘Investors Will Scream‘ found below.

The new Department of Labor 401(k) fee disclosure rules that go into effect on April 1 will radically shake up the industry, according to Tom Gonnella, senior vice president of corporate development at Lincoln Trust, who gave six predictions for the defined contribution industry in 2012.

“The sound of all those envelopes being torn open — and the collective gasps, screams and confusion likely to ensue, as plan sponsors and participants see the true cost of their retirement investments spelled out in black-and-white for the first time — will echo throughout the financial services industry,” Gonnella says.

The biggest screamers? Highly compensated C-suite executives with six-figure 401(k) balances, Gonella says. “This C-suite sticker shock will cause a wave of 401(k) reevaluations by companies looking at everything from changing plan administrators, to lowering investment expenses (a whopping 84% of a plan’s cost), to reallocating overall expenses across the plan structure,” he says.

According to Gonella, 401(k) fee disclosure is not the whole story. “The disclosure of investment costs actually incurred by participants is not required by the new DOL regulation,” he says. “The DOL only requires the disclosure of the expense ratios and the amount per $1,000 that it would cost participants to be invested in the fund. Once sponsors and participants get a taste of disclosure they will want more — and regulators will be pressed to provide it.”

This intense focus on fees will also lead to a new brand of 401(k) consultant to work with sponsors, Gonnella adds.

(READ: Gratke Wealth, LLC)

The forthcoming new fiduciary standard that the DOL is expected to determine sometime in 2012 will force investment advisers and plan administrators to either embrace open architecture — or exit the DC business altogether, Gonella says.

He also believes that while target-date funds will continue to be popular, another, more customized version in the form of customized asset allocation models, will gain traction in 2012.

Contact Us to begin benchmarking your 401k plan fees against the industry.

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This post is for Americans who know nothing about the debt crisis in Europe.  I am going to try to provide a big picture framework and draw attention to what I think should matter most to Americans.  If you have expertise in this topic I hope you’ll help me improve my analysis.  This topic is somewhat new for me.

I think of the European debt crisis in three layers:

1. national debt crises in several European countries;
2. a structural crisis of the Eurozone; and
3. potential banking crises in Europe and the U.S.

At the same time the U.S. Fed is requiring the biggest banks to test a scenario in which U.S. GDP declines eight percent and the unemployment rate jumps to 13%. I hope they are also requiring the American banks to prove they can survive if their European counterparts fail or if liquidity suddenly dries up.  These stress tests, and corrective actions demanded of any American banks that fail the tests, are the most important thing American policymakers can do now to protect the American economy from the worst case scenarios in Europe.

From an American economic self-interest perspective, this bottom layer of the European debt crisis is by far the most important. If events in Europe could cause American banks to fail, American policymakers need to know this and deal with it before disaster strikes.

(Hat tip to the students in my Stanford Business School class who have been helping me learn and think about the European crisis and how to explain it.)

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The Family Financial Website will allow you, the client, to create, for the very first time, a holistic view of your entire financial ‘picture’. You will be able to receive targeted financial guidance from Gratke Wealth on any or all of your financial positions regardless of the location of such asset or liability.

As an example; get help managing self-directed accounts such as your employer sponsored 401(k) plan or employer sponsored stock option plans. By having a complete view of your financial picture, including all assets and liabilities, you will be ‘educated, empowered and enlightened’ to make better, more targeted decisions about your financial life!

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