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Week In Review


SEC to Propose New Target-Date Fund Rule

The Securities and Exchange Commission will examine the risk exposure and marketing of target-date funds in the coming year, SEC Chairman Mary Schapiro told the Practising Law Institute.

"Not all target-date funds are created the same, and some with very near-term target dates lost substantial amounts of investors' money in 2008," Schapiro said. "In the year ahead, we are going to confront the issue of the potential for target-date fund names to confuse investors, or lull them into a false sense of security. I have asked the staff to prepare a rule proposal to provide additional information to investors when a fund includes a date in its name."

The SEC is also concerned that some target-date funds promote a "set-it-and-forget-it mentality-which is concerning," she added. "Given the growing prevalence of these funds as retirement tools, this is an initiative that will have a real impact on everyday Americans."

She added: "The past year has witnessed one of the most significant rule-making agendas in years-an agenda that shows we are willing to address challenging issues and make the tough choices. The year ahead will be no different."

The SEC will also return to the 12b-1 fee issue, Schapiro added.

80% of Companies Plan To Reinstate 401(k) Match

Many U.S. employers are increasingly losing confidence in their workers' ability to save for retirement and, as a result, plan to step up efforts to help workers maximize 401(k) savings, starting by reinstating the match, Hewitt Associates found. In fact, 80% of companies that suspended or reduced their company match are planning to restore it this year.

In addition, employers are adding automated tools and investment features, Hewitt found in a survey of 162 mid- to large-sized companies with 5.7 million employees. Forty-six percent are very or somewhat likely to add automatic rebalancing tools to their plan in 2010 to keep workers' portfolios within their target allocations.

Fifty-one percent currently offer online investment guidance, and 42% are very or somewhat likely to do so in 2010. Twenty-eight percent currently offer managed accounts that permit workers to delegate the overall management of their accounts to an outside professional, and 25% are very or somewhat likely to offer managed accounts in the coming year.

Fifty-four percent of the employers are less confident in their workers' ability to retire with sufficient assets, down substantially from 66% who were confident in 2009. And only 18% are very confident about their employees' ability to have enough retirement income to last throughout their retirement years.

"In the last 18 months, employees' 401(k) accounts took a serious financial hit due to the severe market downturn," said Pamela Hess, director of retirement research at Hewitt. "While there has been marked growth in 401(k) balances since the market recovery began, we still see too many workers not saving and investing in a way that will help them achieve their retirement goals. Employers are trying to do their part to help."

50% of Advisers Turning To Tactical Management

Fee-based financial advisers are grappling with the fallout from the crash of 2008 and see tactical asset management as the way to navigate the current market, according to a survey of 750 advisers by Jefferson National.

About 50% of the advisers are turning to tactical management, and 68% are feeling pressure to revise their asset management strategy. Sixty-six percent of the advisers said their clients are more confident with a tactical strategy, while only 34% said their clients are more confident with a traditional buy-and-hold strategy.

"In 2008, we saw the S&P 500 drop more than 50%, and there is a very real possibility that we could see more losses before a recovery is truly under way," said Laurence Greenberg, president of Jefferson National. "While the basic building blocks of good investing won't change-establish a goal, create a plan, follow a disciplined approach and don't overreact-our survey indicated that in today's volatile market, advisers are moving to the disciplined use of a tactical asset management strategy rather than a traditional buy-and-hold strategy."

Employment Trends Index Continues to Improve

The Conference Board Employment Trends Index rose in January by 1% to 93.2, the fifth consecutive month it has risen, and a sign of optimism. However, it is down 0.7% from a year ago.

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