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Week in Review


BoA Snags Jeffrey Carney From Fidelity Investments

Jeffrey Carney has joined Bank of America as president, retirement and global wealth and investment management client solutions.

Carney was previously president of Fidelity Retirement Services, in charge of defined contribution and defined benefit accounts, along with non-qualified plans and health savings accounts.

In addition, Mark Benson, central region division executive at Banc of America Investment Services, BoA's retail brokerage, has been promoted to chief operating officer, reporting to Carney.

Before being named president of Fidelity Retirement Services, Carney was president of Fidelity Personal Investments and president of Fidelity Investments Canada. Before that, he held senior-level positions with Toronto Dominion Bank, TD Evergreen Investments, TD Securities, Company Assistance Limited and Merrill Lynch Canada.

Fidelity Retirement Services lost another high-level executive in July, Michael Sternklar, who joined Mercer Human Resource Consulting.

Replacing Carney is Scott David, formerly an executive vice president at Fidelity Retirement Services.

Giuliani Wins Majority in Advisers' Presidential Poll

Asked which of the presidential candidates they would select as having a positive impact on the U.S. economy and investing, 36% of financial advisers point to Rudy Giuliani, followed by Mitt Romney (30%), John McCain (15%), Barack Obama (7%), Hillary Rodham Clinton (7%) and John Edwards (5%). This is according to a quarterly survey, the "Brinker Barometer," released by Brinker Capital. For the second quarter, the firm interviewed 250 financial advisers affiliated with insurance companies and independent broker/dealers, as well as those in sole practice.

When asked the opposite-who is likely to have the worst effect on the U.S. economy and investing-Clinton topped the list (60%), followed by Edwards (13%), Obama (12%), Giuliani (6%), McCain (6%) and Romney (4%).

As far as economic optimism is concerned, 81% said they either were "highly confident" or "somewhat confident" about their economic outlook, up sharply from 72% who said so in the first quarter.

"Hearty economic optimism, strong opinions on the presidential election candidates and the impact of Washington policies on client accounts dominate the second quarter's Brinker Barometer results," said John Coyne, president of Brinker Capital. "Clearly, advisers are not reticent to express their views, which give us valuable insight into the mindset of the individuals responsible for making investment decisions on the majority of America's discretionary investing assets."

Asked what issues have the most negative impact on their clients' accounts, the largest majority of advisers cited Washington policies (51%), followed by geopolitical developments (50%), stock market volatility (47%) and oil prices (37%). The three factors cited as having the least impact were lower interest rates, deflation and housing prices.

Asked which investments are gaining the most favor among them and their clients, managed money accounts topped advisers' rankings at 70%, followed by alternative investments (52%), exchange-traded funds (45%) and stock mutual funds (39%). Investments losing most favor are stocks (29%), bonds (28%) and bond mutual funds (13%).

Turning Point Seen in Mutual Fund Fee Lawsuits

Judging from recent summary judgments, a growing number of courts are rejecting the argument that mutual fund companies charge retail investors more than institutional investors, The National Law Journal reports.

Two recent cases, involving American Express Funds and Oakmark Funds, are signs of an "industrywide assault" against such arguments, said Rob Skinner, a defense lawyer with Ropes & Gray, who is involved in both cases. "This is the first time that judges have concluded that plaintiffs could not make their case [after discovery]. We're hopeful this means the tide is turning on these cases."

In the American Express case, plaintiffs said the firm breached its fiduciary duty by charging excessive advisory fees and failed to pass economies of scale onto investors. As a result, they wanted the firm to return all fees not covered by the statute of limitations. But the judge said that even if the firm's underwriters, distributors and investment advisors had undertaken a neutral, arm's length bargaining process, there is no proof that the fees would have been lower.

In fact, the judge said that the board took pains to set fees at a median rate for comparable funds and did, in fact, share economies of scale and use performance-incentive adjustments to cut fees.

"Plaintiffs have failed to establish a genuine issue of material fact regarding whether the fees charged were so disproportionately large that they bear no reasonable relationship to the service rendered," the judge wrote.

In the Oakmark case, the judge conceded that the plaintiffs established that fees paid on similar funds varied, but they failed to prove that another provider would have provided better services.

"What matters is whether there is a fundamental disconnect between what the funds paid and what the services were worth. On this score, plaintiffs have not set forth an issue of fact that, if resolved in their favor, could lead to a finding that [the investment advisor] breached its duty," the judge in the Oakmark case said.

Failed Amaranth Faces $291 Million in Penalties