Week in Review
August 4, 2008
The Senate doesnt like either campaign, each of which ran in the Washington area. TIAA-CREF has since pulled its ads, but Fidelity, claiming all of its communications go through legal review, is still running them.
The problem, according to Sen. Herb Kohl (D-Wis.), chairman of the Senate Special Committee on Aging, is that the ads mislead people who are retiring into thinking that it is imperative for them to roll their TSP money into an IRA. The reality, Kohl says, is that the TSP charges a mere 15 cents for every $1,000 in the plans, and that might be a better choice for investors.
Arbitration Panels Lose Industry Rep Requirement
Investors alleging wrongdoing by their stockbrokers can choose to go to court or face an arbitration panel of three people, including one person from the brokerage industry and two from the public.
Some investors and their lawyers say the existence of an industry panelist on the arbitration panel is unfair.
For the next two years, the Financial Industry Regulatory Authority will run a pilot program offering some investors the choice of having their cases heard by three people from the public, with no industry representative present.
Mary Schapiro, CEO of FINRA, said her agency will compare the results of the cases with those who have an industry representative. We are going to try to measure it and understand what the differences are between all-public and nonpublic arbitrators, she said. We will survey the parties, look at how cases settle in the two different forums, and look at what customers opt for.
A recent study released by the Securities Industry Conference on Arbitration found that most investors view the current securities arbitration forum as biased and unfair, according to Karen Tyler, president of the North American Securities Administrators Association. Even without this pilot, we would hope that FINRA would agree that the immediate removal of the mandatory industry arbitrator is a critical step toward restoring investor confidence in the fairness of the securities arbitration process.
Majority of Funds Still Use Manual Processes
Nearly 80% of fund administrators are concerned with the manual process in current use for reporting and documenting fund information, according to a survey by data management firm Confluence.
These administrators feel the manual process hinders their ability to control errors, and 77% are concerned that the manual data entry affected their ability to meet deadlines.
In response, 25% are hoping to unify their funds administration into one database within the next year. The survey interviewed 115 C-level and other management professionals.
Fund administrators are responsible for financial statements, pricing reports, investor marketing reports and a variety of other documents. Despite all of this paperwork, and the increased regulation and increased supply of investments products within the industry, manual spreadsheets continue to be the primary form of documentation.
Approximately 26% of managers said they rely on spreadsheets for more than half of their fund administration processes and another 23% said they rely on them for 26% to 50% of processes.
Overall, the survey found that fund administrators desire to automate fund administration to minimize errors, 84%; to control administration costs, 54%; to improve data integrity, 72%; to increase scalability of operations, 71%; and to allow staff to spend more time on strategic issues, 72%.
Retirement Assets Reach $17.6 Trillion: ICI
Despite difficult market conditions, Americans continued to save more for retirement last year, according to the Investment Company Institute. Assets held in individual retirement accounts and employer-sponsored defined contribution plans, including 401(k) plans, increased 11% from the previous year, the mutual fund trade group said. That growth lifted total U.S. retirement assets to $17.6 trillion at yearend, the ICI said.
Last year, assets held in employer-sponsored retirement plans made up 64% of all U.S. retirement assets, the trade group said. Investors held $4.5 trillion in defined contribution plans, accounting for 40% of employer-sponsored plan assets. That total included $3 trillion of assets held in 401(k) plans, a 10% increase from a year earlier.
Lifecycle and lifestyle funds, which gradually become more conservative as the investor approaches a predetermined retirement date, continued their rapid growth last year, with assets in those funds reaching $421 billion.
Forty-six percent of lifestyle fund assets and 88% of lifecycle fund assets are held in retirement accounts, the trade group said. Net retirement account inflows into mutual funds increased 23% from a year earlier, to $184 billion.
Long-term funds, which include equity, hybrid, and bond funds, garnered the bulk of the inflows, though retirement account flows to money market funds increased to $54 billion, according to the institute.
State Street Launches 10 International ETFs
State Street Global Advisors, the Boston investment management arm of State Street Corp., has launched 10 international sector exchange-traded funds. The funds, which have just began trading on the American Stock Exchange, are benchmarked to a series of Standard & Poors international equity indexes.