Senate Bill Would Disclose Projected Income of 401(k) Balances

U.S. Senators Jeff Bingaman (D-NM), Johnny Isakson (R-GA) and Herb Kohl (D-WI) have introduced a bill aimed at helping Americans save enough so that they will not be in danger of outliving their retirement savings. The Lifetime Income Disclosure Act would require 401(k) plan sponsors to use an annuity model to project how much income an investor would have each month in retirement based on how much they have saved, patterned on the Social Security Administration's annual statements it has been mailing to all working Americans since 1989.

"It is estimated that half of American households will lack sufficient retirement income to maintain their pre-retirement standard of living," Bingaman said. "Yet, many Americas are unaware of their financial vulnerability. Our bill is a common-sense approach to empowering Americans, and helping them determine whether they are on a path to a secure retirement."

Isakson added, "Defined contribution plans such as 401(k)s are the retirement plans of the present and future. This bill will enable participants to receive additional, helpful information so they can better plan for their retirement."

AARP, the Retirement Security Project and the Women's Institute for Secure Retirement issued separate statements applauding the bill.

Gross on Track to Run Biggest Fund in History

As investors ran from stock funds and sought the safety of bond funds this year, PIMCO's Total Return fund ballooned to $199 billion in assets, and should its heady inflows continue at this pace, the fund will soon top the $202.3 billion record sister fund Growth Fund of America set in 2007.

Part of the reason for investors' overwhelming choice of this fund, run by Bill Gross, is its remarkable 4.8% return last year, compared with the 37% plummet in the Standard & Poor's 500 Index, not to mention that every fund sector and virtually every stock fund was in the red. Since its inception in 1987, Total Return has delivered an average annual return of 8.5%.

Year-to-date through October, Total Return attracted $42 billion of new cash, four times more than any other U.S. mutual fund, according to Morningstar data. This one fund accounted for more than 14% of the $297 billion that investors added to all bond funds in that time.

Putnam Cuts 104 Jobs, or 5% of Workforce

Putnam is laying off 104 people, or 5% of its staff, this month, primarily in operations and technology. However, three portfolio managers and 13 asset management support staff are also getting the axe. After the cuts, Putnam's total staff will number 1,827, which includes 63 new hires this year, including 12 investment professionals.

This is the third round of layoffs at the company since Robert L. Reynolds took over as chief executive officer in June 2008. Putnam cut 27 positions in November 2008 and 260 positions in February. Those cuts extended beyond operations, technology and investment products to include sales and marketing.

The three portfolio managers who are leaving are Brad Libby of the Putnam Municipal Bond Fund Series, David Gerber of the Putnam Global Industrials Fund, and Coo Way Law of the Putnam Global Telecommunications Fund.

A Putnam spokesman said the company is positioning for growth and plans to continue making strategic hires.

Labor Secretary Vows to Heighten Awareness of Annuities in 2010

U.S. Labor Secretary Hilda Solis said that one of her top regulatory goals for 2010 is helping to ensure people don't outlive their retirement savings by increasing public awareness of annuities. Solis also believes 401(k) plans should offer annuities. Insured Retirement Institute President and CEO Cathy Weatherford said, "In our current financial environment, the value of a guarantee has never been greater. With the dramatic declines in the financial markets, the value of guaranteed investment products has never been more apparent."

American Funds Ranks As Best Marketer: FRC

Financial Research Corp. has released its list of the top 10 asset management marketers, with American Funds taking top honors, followed by Franklin Templeton and Fidelity.

"Successful firms have adopted a relatively similar marketing strategy," said Amy Strong, research analyst at FRC and co-author of the study. "This may be in large part due to the fact that firms have tried many different marketing strategies, and it is also in part because firms are quick to adopt the successful strategies of their peers. This is particularly true for larger firms."

Yet, FRC looked for and gave high marks for "overall differentiation," Strong said. For example, Fidelity continues to provide strong support directly to clients, including advisers. "They also call advisers who place business with the firm regularly and generate client-friendly marketing pieces, which the majority of advisers noted as the No. 1 feature firms should add to their adviser-oriented websites going forward."

FRC also found that most advisers prefer to receive marketing and collateral sales support materials from wholesalers in person, rather than through the mail, e-mail, intranet or website. Nonetheless, most mutual fund companies increased the amount of materials mailed to advisers over the past year.

Advisers revealed a recurring theme of "abandonment," citing that asset manager support has dwindled, and that marketing materials are not adequately addressing their needs. FRC believes direct wholesaler interactions are the key to understanding and delivering on these adviser needs.

Advisers also said they would like websites devoted to them to portray a better understanding of market dynamics and investment options appropriate for current economic conditions.

In order, the top 10 asset manager marketers, according to FRC, are: American Funds, Franklin Templeton Investments, Fidelity/Fidelity Advisors, iShares/Barclays Global Investors, John Hancock, Prudential/American Skandia, OppenheimerFunds, The Hartford, BlackRock and JPMorgan Asset Management.

Nearly Half of Suspended 401(k) Matches Restored

Of the companies that have suspended matching contributions to their 401(k) plan, nearly half, 46.7%, have either already reinstated the match or plan to do so in the first quarter of 2010, the Profit Sharing/401k Council of America found. Among large companies, 52.7% have restored the match or plan to do so.

Overall, 76.8% of companies match their employeesí contributions, the council found. In addition, the majority of participants continued to participate in their employerís plan and maintained deferral levels.

More plan sponsors suspended or reduced non-matching company contributions than matching contributions and more large companies with more than 5,000 participants than small companies suspended contributions.

The data also revealed a clear correlation between availability of matching company contributions and participation rates; 72.9% of companies that suspended their match experienced a decrease in plan participation versus only 14.4% of those companies that maintained matching contributions.

And overwhelmingly, plan sponsors stepped up to help their participants understand market volatility, with 54.3% increasing their employee education efforts. The council said, "It is impressive that companies not only stepped up their support of participants while facing fewer resources, but they evaluated the specific needs of their employees and customized their support to meet those needs."

Recession Raises Demand Retirement Advice

Investors are changing their lifestyles and some are delaying retirement as a result of the financial crisis, according to a study by the Financial Planning Association.

The annual survey of financial advisers' perceptions of the retirement income distribution market, which was conducted by Diversified Services Group, polled financial planners with clients who are in or near retirement and found that 40% of clients had to change their lifestyles this year, most likely as a result of the economic downturn.

These lifestyle changes include 18% of clients who delayed their retirement and 6% of clients who had previously retired and returned to work because of the economic climate over the past year. Rising healthcare costs also concerned many retirees.

The recession, coupled with a large number of Baby Boomers retiring, increased the demand for retirement income planning, with almost half of the planners' surveyed saying they gained four to 10 new retirement income clients in the last year.

Sixty-three percent of respondents provided retirement income planning advice, services and products to more than half of their client base in the last year.

Gen Y More Conservative About Finances: Fidelity

Generation Y, those between 22 and 33, have taken the financial crisis to heart and have become more conservative about their finances, Fidelity found in a TNS Global survey of 1,017 people in that age bracket who hold a job and earn at least $15,000 a year.

Despite the fact that 75% of Gen Y'ers feel secure about their job, 70% are very concerned about their finances and have set a goal of daily money management and budgeting as their biggest focus. Sixty-four percent check their checking account balances online before making a purchase of $300 or more.

Twenty percent have a balance of $10,000 or more on their credit card, and 25% believe they will never be free of credit card debt during their lifetimes. Forty-one percent said the economic crisis has made their generation more conservative about their personal financial situation and their employment choices. They are now more reluctant to job hop, with 25% hoping to stay with their current employer until retirement, up from 14% of those surveyed in 2008.

While 75% still say that work-life balance still drives their career choices, workplace benefits have taken on greater importance. Sixty-two percent carefully review benefit packages before accepting a job, and 64% said such packages impact their job loyalty.

Surprisingly, paid vacation was not the No. 1 concern, with 82% ranking health insurance first, followed by 68% ranking vacation time, and 57% access to a retirement savings plan.

However, 47% said that grappling with current everyday costs such as paying the mortgage or credit card is a more crucial obligation than saving for retirement. At the same time, the number of Gen Y'ers most focused on saving for retirement has risen to 18%, up from 13% in 2008.

"The change in the mindset of young workers has been remarkable," said Brad Kimler, executive vice president of Fidelity's consulting services business. "Their attitudes and views toward their employer and finances are now more conservative and reflective of their parents' generation."

Gloves Come Off In 529 Plan Fee Fight

Managers of 529 college-savings plans have always competed on fees, but the latest round of the bidding war promises to be the most intense.

To attract and retain state contracts, wealth management companies-particularly Fidelity Investments and its primary rivals, Vanguard Group and TIAA-CREF-have been lowering fees on the plans. Fidelity fired the latest salvo on Tuesday, slashing its program management fees by a third to a half for its five state-sponsored 529 plans, including both its direct-sold and adviser-sold plans.

In devising the cuts, observers say, Fidelity had the industry's top prize in mind: the New York contract, the largest direct-sold 529 plan in the country, now run by Vanguard but seemingly up for grabs. The New York 529 plan can be rebid in September 2010, and all the companies that administer 529 plans are eyeing it.

"Fidelity didn't just lower its fees out of the goodness of its heart," said Andrea Feirstein of AKF Consulting Group. "I think there are two things going on: Fidelity is trying to encourage people to save money for college, since 529 college plans were an industry that the financial market meltdown of 2008 really hurt. By cutting fees across all their plans, Fidelity is also sending a message to their competitors that they are in this space to stay and they are not going to lose any market share."

While noting that "the only state coming up for bid is New York," Jeff Troutman, Fidelity's vice president for college planning, said that although the company is "not specifically looking at New York, over the course of the last 18 months or so, as states have launched RFPs, fees are certainly front and center."

For its direct-sold plans in New Hampshire, California, Massachusetts, Delaware and Arizona, Fidelity cut program-management fees in half, or 15 basis points, for its index portfolios, and a third, or 10 basis points, across its actively managed portfolios. Index-portfolio fees now range from 0.25% to 0.35% of plan assets. Actively managed portfolio fees now range from 0.59% to 1.04%. Fidelity has $14.3 billion of 529 assets under management.


(c) 2009 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

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