"Tad Borek" <borekfm[at]pacbell.net> wrote in message
news:j3Ngf.23199$q%.21852[at]newssvr12.news.prodigy.com...
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A minor point: Section 401(k) arose out of the Revenue Act of 1978, not the
Employee Retirement Income Security Act (ERISA) of 1974. See, e.g.
http://ebri.org/pdf/publications/facts/0205fact.a.pdf

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FWIW, I agree with your sentiment - I think it leads to customers being
misled about how much they can or (in the case of brokers) cannot trust the
service provider.
--
Mark Freeland
nNeEwTs[at]sonic.net

Dennis wrote:
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Dennis,
The technical/legalese answer is that someone who advises a 401k plan
(including making specific investment recommendations to an
employee-participant) is by definition a "fiduciary" under ERISA. ERISA
is the law that created, among other things, 401k plans.

"Fiduciary" is an old legal term that comes up in the law of agency,
trusts, and some other contexts. It's sort of the "do unto others"
concept turned into law. A fiduciary is required at all times to "act in
your best interest" and minimize conflicts of interest, and that sets a
fairly high legal standard. A fiduciary is a lot easier to sue
(successfully) than a non-fiduciary. So many professional financial
advisors bend over backwards to avoid being labeled a fiduciary, to
avoid the potential liability. What are you paying a financial advisor
for, if not advice that's in your best interest? Good question.

In the world of financial advice this is a very big issue at the moment,
not just with 401k plans. The SEC recently approved what's called the
"Merrill Rule" (named after Merrill Lynch) which allows stockbrokers to
charge fees on client accounts (rather than commissions) but avoid
registering as investment advisors. They don't want to register as
investment advisers because by definition advisors are also fiduciaries.
This ticks off registered investment advisors (like myself) because it
allows stockbrokers to act as if they're advisors with their clients,
but avoid any actual liability when doing so.

-Tad

"jIM" <noreplysoccer[at]hotmail.com> wrote in message
news:1132584237.031019.121250[at]g43g2000cwa.googlegroups.com...
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FWIW - this is one of the reasons many advisors use the "fund of fund"
concept with a risk questionnaire developed by the fund.

Gene E. Utterback, EA, RFC

my wife works in HR and give many of the new hire orientations. She is
the LAST PERSON anyone should take investing advice from. I fill out
all her 401k documents for her

she is not allowed to give advice anyway for legal reasons (if she
gives person A advice X and person B advice Y, she did not treat both
employees equally). Too much legal problems if she gave advice (both
sets of advice may have been correct, but that's for a judge to decide.

Here's the rub, plan sponsors are now getting sued by participants because
they failed to give any direction.

ERISA section 404c makes the sponsor liable, so now more plans are looking
for planners to give direction and use lifestyle funds to for CYA purposes.

"Dennis" <winterqqqq[at]hotmail.com> writes:

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She's saying that many employers don't like to let financial services
give any advice to the employees, because the employer is (rightfully,
IMHO) worried about getting sued by ingrate employees who screw up and
want to blame the employer for allowing the financial services company
to give them advice.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

I was just listening to Terry Savage on Bob Brinkers program. They were
talking about 401k's and how the retirement landscape has shifted from
defined benefit over to do do-it-yourself investing in 401k plans and
so on. She said " financial services companies just give them a menu of
mutual funds and then say "oh by the way we are not allowed to advise
you."

What is she saying there? Is she saying that financial services
companies are just doing a hit-and-run job and not working with the
employees or is she saying that financial services companies are not
legally allowed to advise but can only show a list of funds. If the
agent is licensed to sell mutual funds, why cant they advise- assuming
that they do not represent that they are getting into full-fledged
financial planning. What are the rules of engagement and fine lines to
be understood here.

Thank you.

Dennis