Week In Review
March 16, 2009
Don't Regulate Money Funds Like Banks: Fed Chairman
Unlike his predecessor, Paul Volcker, the current chairman of the Federal Reserve doesn't believe money market funds should be regulated like banks, with reserve requirements and mandatory insurance. However, Ben Bernanke does believe they should have limited insurance and be subject to such investment restrictions as only buying short-term, liquid securities.
"He's being more measured in his remarks," Joan Swirsky, an attorney with Stradley Ronon Stevens & Young, told Bloomberg. "He's not throwing out the baby with the bathwater."
The Investment Company Institute has said that if strict restrictions were imposed on money market funds, it could potentially kill the industry. The ICI welcomed Bernanke's more measured approach and acknowledged some reforms were necessary.
"We agree with Chairman Bernanke that money market funds play a crucial role in the U.S. economy and appreciate his comments on the need to increase the resiliency of the money markets, generally, and money market funds, in particular," said ICI spokesman Gregory Ahern.
The ICI's working group on money market funds, headed by Vanguard Chairman John Brennan, is scheduled to deliver its findings by the end of the month.
SEC Examiners Scrutinize Fund Firms' Asset Custody
The Securities and Exchange Commission is reportedly scrutinizing asset management firms' custodial arrangements to ensure that they are properly protecting customers' assets. The SEC is also planning on-site visits to speak with those executives in charge of safeguarding assets. The action comes on the heels of the Bernard Madoff $50 billion and R. Allen Stanford $8 billion fraud.
Fidelity to Hold Seminars On Saving in a Downturn
Fidelity Investments is treating investors' unease with the markets as an opportunity to help them revisit their retirement goals, risk tolerance, household budget and preparedness for job loss, by holding 500 seminars around the nation, offering online tools and running ads.
Called "Guide to Personal Savings," the campaign emphasizes taking control of one's financial health and not losing sight of preparing for retirement.
"Last year, Fidelity conducted 1.3 million financial guidance interactions with Americans, and we anticipate the number of investors in need of help this year will be greater," said Kathleen A. Murphy, president of personal investing at Fidelity. "The volatility of the market has left many Americans uncertain of how to tackle short- and long-term financial goals. In response to this tremendous need for financial guidance, we've launched a national program that harnesses new and existing Fidelity resources."
The seminars, which will be free and held at the firm's brokerage centers, will cover such topics as "Quarterly Market Updates," "Wise Choices for Your 401(k)," "Building a Retirement Roadmap" and "Putting Your Financial Future on Track." They will not only cover retirement but also mortgages, credit cards, college savings, auto loans and emergency funds. For investors in 401(k) plans, Fidelity will offer in-person seminars at offices in major cities.
Schwab Offers Guidance To 401(k) Investors
In response to the market downturn and wide confusion among investors about what they should do, Charles Schwab has published a number of articles on its website offering guidance. Schwab is also holding seminars at its branches, town hall discussions and webcasts.
"When it comes to investing, Schwab is here to help investors build a plan that's well thought out and can be maintained over time," said Mark Riepe, senior vice president with Schwab Center for Financial Research.
In "Seven Ways to Take Control of Your Retirement in Rough Times," Riepe says those in or near retirement should certainly reassess their willingness to withstand both volatility and risk. That said, investors must be mindful of the "risks associated with cash," he added. "Cash-heavy portfolios typically tend to be less volatile, but we believe they also have poor, long-term return prospects."
Investors also need to revisit the overriding goals for their portfolio and current cash-flow needs and structure it accordingly. Remember, Schwab says, a 65-year-old has a life expectancy of another 19 years and may need equity exposure to make their portfolio last.
Especially now, Schwab says, "check the quality of your holdings [and] your portfolio concentration. Now is a particularly opportune time to review your specific holdings. [Rid your portfolio of] securities and mutual funds with poor prospects for the future."
For younger investors who are still contributing to their 401(k)s, Schwab emphasizes the long-term performance of the market in an article titled, "Tips for 401(k) Investing in Today's Volatile Market."
Yes, Schwab admits, "it's an uncomfortable time to be an investor" but now is not the time to give up on the markets. "Keep doing the right thing. Don't succumb to the market roller coaster," Schwab advises. And it tells retirees, yes, it's important tothink about risk and rebalance investments, but investors would be doing themselves a disservice by bailing out of equities entirely, Schwab says.