Watch BidMoni Demo Fiduciary Shield at FinovateFall 2019

FinovateFall 2019 was held in New York City from September 23-25.  Finovate showcases the top tech innovations and provides a unique insight into the future of the fintech industry.

BidMoni was selected as a product demonstrator for FinovateFall 2019 to demonstrate the many ways Fiduciary Shield is changing how advisors engage the 401(k) market.

CEO Stephen Daigle provided a live demonstration of Fiduciary Shield within the 7-minute Finovate format.

Click here to view the entire 7 minute demo!

2 Cool Fintech Tools at FinovateFall

2 Cool Fintech Tools at FinovateFall

Startups presented a souped-up platform for retirement plan advisors and a family budgeting tool for financial services firms to use with clients.

Landmark Settlement in the Longest Running Erisa Lawsuit

ABB, Workers Get Early Approval for $55M 401(k) Settlement

Posted April 3, 2019, 1:08 PM
Landmark settlement in the longest running Erisa lawsuit, what were the conclusions:
  • Recordkeeping fees were excessive causing losses to participants (failure to bid and monitor service providers).
  • The plan replaced funds with proprietary, underperforming funds offered by the recordkeeper.
  • Indirect revenue received from funds must be paid back to plan participants.

 

This creates a foundation for breaches and penalties moving forward. Advisors and firms are going to be forced to change their way of doing business.

 

Click here to read the full story.

 

Litigators Share What They Investigate for Filing TDF Lawsuits

Litigators Share What They Investigate for Filing TDF Lawsuits

A litigation firm has listed what it is investigating for potential lawsuits over target-date funds (TDFs) in retirement plans, and an ERISA attorney make suggestions for how plan fiduciaries may avoid such suits.

By Rebecca Moore

There’s been a recent wave of lawsuits over the target-date funds (TDFs) being offered in 401(k) plans recently.

A settlement in a lawsuit accusing Franklin Templeton of self-dealing in its 401(k) plan requires it to add a nonproprietary TDF option to the investment lineup in addition to the plan’s qualified default investment alternative (QDIA)—the LifeSmart Target Date Funds. More recently, a lawsuit was filed alleging fiduciaries of the Walgreen Profit-Sharing Retirement Plan selected and kept TDFs in the plan that underperformed their benchmarks. And, last week, retirement plan fiduciaries at Intel were accused of failing to properly monitor and evaluate “unconventional, high-risk allocation models” adopted within the company’s custom target-date funds.

On its website, litigation firm Cohen Milstein says it is investigating a number of issues concerning the selection and offering of TDFs. The firm shares what it is looking for:

Improper Investment Strategy: The firm says, “The actual investment strategy (e.g. the allocation between equities and bonds) may not be same as the fund advertised.  The fund may be pursuing a far riskier investment strategy than participants and plan sponsors are led to believe, even as plan participants near retirement.”

Click here to read the full article.

Zeroing In On Fiduciary Risk Factors For 401(k) Advisors

The following article was featured on Financial Advisor Magazine.

Zeroing In On Fiduciary Risk Factors For 401(k) Advisors

AUGUST 19, 2019 

 
1. How did you personally become involved in fintech and what do you do on any given day?

Like many entrepreneurs, I found myself facing a challenge in my business. There are so many opportunities to grow a successful financial advisory practice today. Advisors are inundated with product offerings, and with growing regulatory scrutiny it is increasingly difficult to operate efficiently. I wanted to create something that would improve both the workflows of fiduciary advisors and the outcomes of retirement plan participants.

As co-CEO I wear many hats and am very fortunate to have a strong experienced team surrounding me. We are constantly improving our technology—setting that agenda and vision is critical. I manage all of the recordkeeper relationships on our platform and my co-CEO and partner, Michael Steffan, has been focused on growing our footprint with advisors. 

2. What does your firm do/offer within the fintech sector?

Fiduciary Shield by BidMoni is an end-to-end fiduciary technology serving 401(k) advisors. 401(k) Prospector is a feature that identifies fiduciary risk factors on more than 800,000 plans. Advisors can geolocate plans, search by employer, search for service providers and even identify plan decision makers and connect with them via LinkedIn.

Advisors can request proposals from more than 20 recordkeepers through BidMoni's Fiduciary Shield platform. Advisors are able to download and analyze proposals with a simple and transparent interface. Automated plan monitoring reports are issued quarterly to help advisors and plan sponsors meet their ongoing requirement to monitor plan fees. All proposals, reports, forms and important documents are stored securely to help plan fiduciaries meet their obligations under ERISA.
 
3. How do you feel consumers (or if more relevant for your firm – businesses) are adapting to the facet of fintech that your company operates within?

A recent survey by the National Association of Retirement Plan Participants revealed that only 16% of participants trust financial advisors. The top driver of trust is fee transparency. Pairing transparency with a process that drives better fee results is a no brainer. Employers and advisors utilizing BidMoni's Fiduciary Shield platform are very pleased with the simplicity in which critical fiduciary data is presented and how easy it is to make an informed decision.

To view the full article click here

Here's why so many workers are suing employers over 401(k) plans

Here's why so many workers are suing employers over 401(k) plans

Russ Wiles | Arizona Republic |  

You would think most investors are fairly happy with their results, 10 years into a rising stock market and with solid gains delivered by bonds, too. But that apparently isn't the case at a lot of 401(k) workplace retirement plans.

Unhappiness over high fees, inappropriate investment options and other issues have led to a spike in lawsuits in recent years, according to a study by the Center for Retirement Research at Boston College. The flip side is that many 401(k) programs have gotten better in recent years, partly because of increased litigation risk.

These trends affect nearly two in three adult workers with money invested in 401(k)-style plans, which have replaced traditional pensions as retirement mainstays in the workplace. The plans feature tax-saving benefits and allow workers to contribute money automatically from each paycheck. Many employers offer matching funds to encourage further saving.

But unlike traditional pension plans, where managers hired by employers call the shots, workers in 401(k) plans must make investment decisions on their own (although some companies provide guidance). Poor investment choices, high fees, a lack of transparency and other problems can lead to subpar results and dissatisfaction.

Backlog of cases -- 60% pending

Not surprisingly, 401(k) lawsuits, which are typically class-action cases, jumped when the economy soured and the stock market tanked roughly a decade ago.

From eight lawsuits filed against employers in 2006, the numbers surged to 18 in 2007 and 107 in 2008,  before declining for the next five years, according to the Boston College report authored by George Mellman and Geoffrey Sanzenbacher.

But since bottoming at just two lawsuits in 2013, litigation has risen again, with 56 suits in 2016 and 51 in 2017, the two most recent years tracked.

Of the roughly 430 cases evaluated by the Boston College, 60% are still pending, 20% were dismissed/closed, 16% were settled/decided, and 4% are on appeal. In an interview, Sanzenbacher said he sensed the trend of increased 401(k) litigation is continuing, though the researchers haven't included more recent numbers.

Click here to continue reading.

 

 

The Secure Act

The SECURE (Setting Every Community Up for Retirement) Act passed the House recently and is pending in the Senate. There are a number of provisions of the act: some good, some bad, and some could go either way.

 

Tax Credit for Companies Starting a New Plan  (they got it right!)

 Reducing taxes while helping your employees save for retirement. A good deal for all!

 The act would increase the business tax credit for small businesses starting a new retirement plan from the current cap of $500 up to a limit of $5,000 in certain circumstances. This has the potential to encourage more small businesses to offer retirement plans. The credit is the lower of $5,000 for first 3 years or $250 times the number of non-highly compensated employees (making under $125,000 and not a 5% owner of the business). BidMoni estimates that employers can start plans for as little as $500 based on 401(k) marketplace data. This provision is certainly a win for over 1 million businesses (and their employees) without a 401(k) plan.

 

Multiple Employer Plans (MEP) ( can be good but buyer beware)

 The act has a provision that allows unrelated small employers to band together in an open multiple employer plan. This means companies that are completely unrelated can now join forces to share administrative costs and other savings. Currently employers in an MEP must have something in common such as being in the same industry, the same geographic region, etc.

 Allowing small plans to band together for more favorable pricing sounds like a no-brainer, but MEPs are not new to the defined contribution industry and aren’t without drawbacks. One includes limitations on plan design flexibility for individual companies in the MEP arrangement.

So, where have we seen MEPs before? Who remembers this New York Times article regarding the retirement plans offered to many teachers around the country? Non-ERISA plans (State Government, k-12, Universities) have had access to MEPs for decades. They not only failed to drive down costs, many are paying higher fees because of them. Let’s hope this provision doesn’t turn into the same marketing ploy that ended up taking advantage of our nation’s educators. Even with an MEP option, it’s imperative for employers and advisors to shop their options in order to evaluate the best service provider for their plan.

 

Annuity Provisions  ( fail)

 Here’s where it gets ugly. This provision pushes to continually offer annuities within a 401(k) plan as if the plan participants don’t have access to a lifetime income option anywhere else.

Almost every bank, insurance agent, broker dealer, and even RIA offer annuities. With so many different outlets available outside of a 401(k) to purchase an annuity, why would there be any justifiable need to build them into 401(k)s and waive fiduciary liability for the plan sponsors? This just seems irresponsible.

 If participants in a 401(k) want to put their money into an annuity, there are no obstacles in their way and no shortage of opportunities for them to do so without having to build it onto their plan. Employees can set up an annuity in multiple situations: upon retirement from their company, if they quit working for their company, or when they turn 59 ½ while still working.

 On the whole, employees would look to draw lifetime income after they no longer work, not while they’re still on the clock and saving for retirement. Something is amiss with forcing this into these plans. Not to mention, most 401(k)s at a plan level are already annuity platforms sold by insurance companies. The 401(k) industry doesn’t lack annuities, it actually needs far less of them.

 I applaud Congress for addressing the retirement crisis and there are potential benefits to some of these provisions but more transparency and attention to detail is needed to ensure the best interest of employees is truly at the forefront of this legislation

Fidelity Responds to Allegations of Secret Kickback Payments

Recently, Fidelity found themselves making headlines for reasons they probably wish they weren't.  They are currently facing investigations and multiple lawsuits regarding their fee arrangements with the various investment managers offered via the Fidelity FundsNetwork platform.

 

Is Fidelity a fiduciary?

 

Does Fidelity's fee practice meet ERISA's strict reporting guidelines?

 

What do you think?

 

      

 

Fidelity says it's entitled to alleged 'secret payments' in 401(k) plans
Given the thin margins in the retirement business, firm says it was justified in cutting deals with money managers to boost profits


Jul 9, 2019 @ 2:51 pm

By Greg Iacurci
  
Fidelity Investments said it is legally entitled to payments it receives in connection with 401(k) investments and that the collection of such fees has become necessary for record keepers given the prevailing economics of the industry.

 
Fidelity, the largest record keeper of workplace retirement plans, made these claims in a filing asking a federal court to dismiss a lawsuit alleging the fees caused the Boston-based firm to profit at the expense of customers' retirement savings and breached its fiduciary duty.

 

A participant in T-Mobile USA Inc.'s 401(k) plan, Andre W. Wong, sued Fidelity in February, claiming that mutual funds and other investment products offered through Fidelity's FundsNetwork platform are required by the firm to pay "kickbacks" if revenue-sharing payments made to Fidelity fall below a certain level.

 

Those payments, Mr. Wong argued, increase investment costs for participants and weren't properly disclosed. Other plan participants have since filed similar class-action lawsuits against Fidelity.

 

Addressing their consolidated complaints, Fidelity said plaintiffs "try to dress up their claims by repeatedly referencing 'secret payments' or 'secret kickback payments.'"

 
However, the fee is nothing more than an "arm's length" payment negotiated with certain money managers, and such compensation negotiations don't mean Fidelity is acting as a fiduciary, the firm said. Fidelity negotiated its "infrastructure fees" with asset managers on the FundsNetwork platform in 2017.

 

In addition to legal reasons, there are "practical" justifications to reject the notion that Fidelity has fiduciary status, the company said, due to squeezed profits among record keepers.

 

"As is clear from the public record, retirement plan service providers operate at increasingly thin margins, and to continue in business they must negotiate arrangements that allow them some amount of profit," Fidelity said in the filing, made July 1 in the U.S. District Court of the District of Massachusetts.

 

"If plaintiffs' view of fiduciary status were correct, then service providers like Fidelity could not profit from the services they provide to plans: They could not charge the plans anything more than cost," it added. "If that were the case, there would be no service providers left in business."

 

More of these sorts of fee arrangements are cropping up between record keepers and asset managers. Empower Retirement, for example, last year launched a platform called Empower Select, requiring mutual-fund providers to pay for fund distribution, which also helps Empower offer the product to small and midsized 401(k) plans at a reduced price point. The platform has some requirements around use of in-house investments, advisers said.

 
Principal Financial launched a product in May that also requires clients to use some proprietary funds.

 

Such moves are largely in response to fee compression, advisers said. Median record-keeping fees have fallen by half over the past decade — to $59 per participant in 2017 from $118 in 2006, according to consulting firm NEPC.

 

Further, plan sponsors and their advisers have shifted away from using record keepers' in-house investments due to fiduciary concerns, depriving the firms of more revenue.

 

"I think the pendulum has swung so far one way, starting a number of years ago with the move away from proprietary products, I think it's swinging back the other way," said Brady Dall, an adviser at 401(k) Advisors Intermountain.

 

Fidelity has been targeted in other fee lawsuits in the past. One, for example, alleged the firm took payments from managed account provider Financial Engines. That suit was ultimately dismissed.

 

The firm also gained attention last year for charging some employers a fee on 401(k) assets held in Vanguard Group investment funds, which some advisers felt was meant to push clients to adopt its own funds more readily.

 

Webinar Replay: Stress Free 401(k) Prospecting

00:00     Intro/Finovate Announcement
02:25     Subscription Options
03:00     401(k) Prospector
04:05     Example 1:  GE 401(k) Overview Page
05:00     Connecting to GE HR Manager on LinkedIn
10:30     Example 2:  Norfolk Hardware 401(k) Overview Page
11:30     Connecting to Norfolk Hardware HR Manager on LinkedIn
13:30     LinkedIn Messaging Ideas