Wealth Think

How far the 401(k) has come since employers first introduced the savings plan in 1981. And how far it has yet to go. 401(k)s, I predict, will become universal in our lifetimes, supplanting all forms of pension plans.

Besides learning that investors have not bailed out of their 401(k) plans, contrary to scare-mongering media reports, there was one other surprising moment at this month's General Membership Meeting of the Investment Company Institute. And that was when Richard Davis, chairman of U.S. Bancorp, looked directly at ICI President Paul Schott Stevens and urged him to prompt his member mutual fund companies to figure out how the financial crisis has affected various age groups.

Asking investors to properly maneuver their 401(k) plans in a market like this is akin to an airline pilot stepping aside and telling passengers to take the controls mid-flight. Workers never asked for so much responsibility in controlling their own retirement future, and most have no idea what to do now that the plane is losing altitude. In fact, most investors seem to be in shock and are doing nothing at all. A persistent problem with the mutual fund industry is the lack of education among its customers about how to manage their own retirement savings. Ignorance was bliss when equities were historically delivering 10% average returns, but the tide has turned. The first wave of Baby Boomers realized they did not have enough savings and decided to bet on risky equities to make up for the shortfall. That gamble backfired when equities in nearly every asset class plummeted last year. Now vastly underfunded as they approach retirement, most Boomers are skeptical they will ever get it back. Financial information is very confusing to the uninitiated. The vocabulary is difficult, the products are complicated, and the professional advice isn't always right. If the fund industry can encourage its customers to become more financially savvy, without stepping on any conflict-of-interest tripwires, its investors will be able to shop for the best products at the lowest cost and keep more assets under management. Younger workers-particularly those in my generation-are getting an early and valuable lesson about market volatility. Buy-and-hold investing is obsolete in an era where one bad year can wipe out 20 years of gains. Younger workers still have plenty of time to more than make up for losses, but will be wary going forward of future bear markets. These investors are plugged in to a myriad of information available instantly at their fingertips. As technology continues to advance, this will lead free-thinking investors who will be able to take responsibility for learning how to navigate their savings. Funds would be wise to become the source and the inspiration for that learning. (c) 2009 Money Management Executive and SourceMedia, Inc. All Rights Reserved. http://www.mmexecutive.com http://www.sourcemedia.com/

The mood at the Investment Company Institute ’s 50th Annual General Membership Meeting in Washington, D.C., earlier this month, themed “Our Foundations, Our Future,” was markedly upbeat. Certainly, this is welcome and refreshing, especially following the dot-com crash of 2000-2001, the mutual fund scandals of 2003-2005 and this year’s subprime credit crisis hitting the financial services industry and Wall Street, in particular, so hard.

At the Securities and Exchange Commission's meeting on April 17 and 18 in Washington, D.C., open only to chief compliance officers, SEC chief examiner Gene Gohlke announced that mutual funds can now add forensic testing to their SEC exam checklist of funds' own annual internal compliance reviews.

A number of news events in the past week alone indicate without question the U.S. economy is at a dangerous inflection point, but so far, no one-no economist, analyst, fund manager, regulator, legistator, president or CEO-is willing to put together the pieces to talk about something other than snapshot first-quarter, year-over-year or historical trendline data that make a case for the return of the markets.

As the U.S. economy continues to sink, the general public, presidential candidates and the media have been quick to label corporate executives as Public Enemy No. 1.

With ink from the news of the 2008 Recession already drying in the textbooks and the Big Chill on Wall Street overriding Hookergate glee, it's time, as they say, to think outside of the box.

The U.S. economy is like a zebra that has stumbled into a spot of quicksand. The more it struggles, the faster it will sink, but if the zebra can be patient, help may come along sooner than it knows.

In lockstep with a broadened direction by insurance firms to strip off the complex bells-and-whistles riders and bonuses of the recent past and to issue packaged retirement income solutions-and meet the demands of the new buzzword: decumulation-the other publication I edit, Annuity Market News just relaunched on Friday as Retirement Income Reporter.