Category: Archive

These pieces were all written during my prior tenure as a retirement plan consultant. While the information conveyed is hopefully still relevant, it is also dated. I no longer work as a financial advisor, and these articles are here strictly for whatever entertainment value they may have. Please seek ALL tax, legal and financial advice elsewhere.

Less Than Zero

In this case, it’s not really a waiver but a deferral of fees and, as stated in the last sentence of the footnote, applying these additional deferred fees on the fund could well have the affect of keeping the interest paid to investors down for a lengthy period.

A Turtle With a Piano on it’s Back

Stable value funds are soap box racers that now face constraints that will limit their top speed. Our money market funds will soon have the performance attributes of a pinewood derby car dressed up as a turtle, with a smallish piano on its back. I haven’t read the official pinewood derby rule book as of yet, but this does not sound like a winning configuration.

It is What it is But it isn’t What it Ain’t

A number of money market funds already post their actual daily asset values. Floating NAV money market funds have been in place for several years in Europe. As this latest reform essentially only involves about a third of the money market universe (prime funds) and will be phased in over two years it is hard to predict what impact this will have – particularly with the dearth of available options for those looking for what they believe to be a risk-free rate of return.

As Goes the Cantaloupe

It might also help to recall that almost all of these tax breaks were passed because they included a “sunset” provision which would roll them back to the original levels — only to have the sunset later removed by our elected officials

Magic 8-Ball

That leaves us with the ambiguous, often conflicting set of answers to the questions within the realm of 401(k)s. The best path forward is likely one that involves many questions, as well as documentation of those questions and the answers that emerge. The ability to make a choice comes at a price – “Without a doubt.”

When Investing Meets Revenue Sharing: Part One

Where does the money generated by this fee go? To put it another way, who am I paying? The chart below shows a typical split of how this 1% annual operating expense is allocated. This is the basic framework of how investing meets revenue sharing.

Bathing in Risk – the 90 Day Equity Wash

The takeaway for investors is that the paranoia on the part of the stable value managers has resulted in real life limitations. Many employers will offer only a stable value or money market option – not both. If there is no competing option, then there is no need for an equity wash.

What is a Stable Value Fund?

Stable value and money market funds have more differences than similarities. These differences do not necessarily make one better than the other but it is fair to say that the average stable value fund should credit a higher rate of interest than the average money market fund over the long haul.

A Matter of When, Not If

When it comes to the long term, most of us would instead prefer to think of the here and now. The longevity of a star manager is finite — a matter of when, not if.

Context is Worth 80 IQ Points

Descriptors like fast are, in my view, problematic for the same reason that ratings for things like 401(k) plans are unreliable: they lack context.