Castle Rock Investing

Independent Guide, Trusted Partner.

Retirement Plans

What’s Going On?

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Source: Bloomberg
Source: Bloomberg

A fiduciary duty, the obligation to uphold the clients’ interest above all else, is Phyllis Borzi’s long sought and tunneled for goal that we at Castle Rock uphold and agree whole-heartedly with. Together, our standards are the highest in the retirement industry. She says that, like in the movie Groundhog Day, bad policies keep being relived over and over. We want to stop the origin of the problem: the poor incentive structure.

Her aim is to make incentives to advisors as straightforward as possible in retirement plans so that the resulting fees will not surprise retirees and leave them with less than they planned.

When investment advisors do not sign up to be fiduciaries to the plans they advise, it leads to corruption and changes the fee structures of these plans so that the retirees no longer have the same security after 65 (typical retirement age). Liability to the Plan Sponsor also changes, and the integrity of the investment advisor themselves is challenged as well.

One example of how the Plan Sponsors are hung out to dry is the John Hancock case, where unreasonable fees were not seen as criminal because of this legal loophole.

Sign your support for reform here at SaveOurRetirement.com!

 

Michele L. Suriano, Accredited Investment Fiduciary™, is president of Castle Rock Investment Company, a woman-owned SEC registered investment advisory firm serving qualified retirement plans. www.CastleRockInvesting.com

Are you In or Out?

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What sense does it make to pay for investment advice that comes from someone who is putting his or her interests before yours?

The Department of Labor, through Phyllis Borzi, is fighting to make sure that a loophole allowing conflicted advice to retirement plans is closed. As of last week, an online petition was started by consumer groups and retirement industry giants, including AARP, at httpss://saveourretirement.com/. The petition is to tell Washington to stand up to Wall Street and close the loophole.

We at Castle Rock are proud to endorse this petition.

The low returns that people often find in their 401(k) or IRA accounts are due to fees that are either hidden or “bundled” so that you need hire a detective to figure out who is getting paid and how much. Please do your homework when you look for an advisor for your retirement plan. In America, today, folks can pay for advice that is in conflict with their best interests and there is no law against it.

We are proud to put our clients’ interest first and maintain our independence from compromised business practices. If you support our work and want conflict-free investment advice to be the law of the land, please sign the petition at httpss://saveourretirement.com/take-action.html.

Are you in or out? Will you join the fight for qualified retirement investment advice?

 

Michele L. Suriano, Accredited Investment Fiduciary™, is president of Castle Rock Investment Company, a woman-owned SEC registered investment advisory firm serving qualified retirement plans. www.CastleRockInvesting.com

How May I Help You?

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Castle Rock is dedicated to making retirement transition easy for you. One of the best ways to do that is to be with you in retirement transition and throughout the different stages of your retirement. We are excited to announce that we will soon offer a Retirement Transition Service to ease the retirement process for individuals, and to provide our clients with the piece of mind that all participants are taken care of.

Because we want you to have a part in how we build this new service, please reach out to me at Ashley@CastleRockInvesting.com with your comments and goals for retirement. We will try to incorporate as much as we can into the best service for you.

Stay tuned as we introduce the details of this program!

Sometimes life isn’t fair…for a fiduciary.

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Sometimes the law isn’t fair.

But sometimes, it seems unfair because you don’t know the rules.

In the recent case of Santomenno v. John Hancock, poor understanding led plan sponsors to agree to terms that led to excessive fees charged by the service provider to the plan. Either the plan sponsors were unaware of what they signed up for, or the service provider duped them. On September 26, 2014, the Third Circuit Court of Appeals affirmed the District Court’s decision to grant John Hancock’s motion to dismiss, ruling that John Hancock was not a fiduciary – therefore, it was not required to watch out for imprudent or disloyal activities such as excessive fees.

Though the plan sponsors argued that John Hancock exercised fiduciary control over the retirement plans, the court found that it did not. John Hancock was granted considerable power over the plan, but it was not considered a fiduciary in the eyes of the law. Fiduciary status is very difficult to prove without written assumption of the role. Especially, as in this case, the accused can present written documentation that states: “we are not a fiduciary.” Of the three criteria necessary to prove fiduciary status, the plaintiffs could only present arguments for two – neither of which the court considered compelling. Without fiduciary status, John Hancock can still have authority to select certain funds or operate in a certain way and not have the responsibility of an ERISA-defined Fiduciary.

Paying excessive retirement plan fees can increase a fiduciary’s liability. Outside of a fiduciary role, however, no one is required to present a fair fee to the plan. So, if the service provider is granted the authority to change around investments that end up paying itself more than a reasonable amount, it isn’t required to refund any amount and act in the plan’s best interest. Excessive fees happened in this case because the plan sponsor irresponsibly allowed the service provider too much autonomy over the plan and too little liability to balance it out.

Before you give a service provider the authority to manipulate your fee structure, make sure that you perform your due diligence. Poor oversight can lead to excessive fees that you, as a plan sponsor, are responsible for. If you’re unsure about these decisions, find an expert who can negotiate, or at least shed some light on your arrangements. Castle Rock Investment Company does assume written fiduciary responsibility. We strive to provide responsible and well-researched guidance, so that you can operate your retirement plan with simplicity and ease.

 

Retirement Security with Simplicity and Ease

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While “Retirement Security with Simplicity and Ease,” is Castle Rock Investment Company’s tagline. nothing is actually easy or simple about figuring out retirement plans. To give an example, we are in the trenches this week – up to our ears in work.

Our team works tirelessly because we care about our clients’ employees’retirement accounts that they have worked a lifetime to save. We admire institutions that find the best way to organize their plans and we love what we do becausewe believe thatfinancial futuresshould not be dependent on the rats and super-rats of finance.

  • We have the highest quality assurance procedures. Michele Suriano, President of Castle Rock, and Kristen Sanchez, Director of Communications, read and ask questions about every piece of material that is posted to our website or that is distributed to our clients.
  • We solve problems in a collaborative work environment. There simply isn’t enough space or time to sweat the small stuff here and we are always available to clients for resolving issues with their funds or for responding to their concerns about economic conditions, etc.
  • We complete projects on a timely basis.
  • Our flexible framework makes accurate work a top priority. Once I misunderstood an assignment and wrote about the wrong topic. Michele, our President, helped me re-organize my workflow to avoid such errors in the future. Not only do we strive for our work to be timely, it is also consistent and accurate.
  • We have strong working relationships with our clients. We spend time sharing information with our participants. Outside of our quarterly visits, we also offer educational services and comprehensive investment advising.
  • We utilize our resources efficiently and thoroughly. If we don’t know an answer, we will find one. We meet monthly to discuss improvements to our communications strategy and to brainstorm new ways to improve our client experience.
  • More than anything, we encourage our clients to know where we stand among our fellow pension advisors. We strongly believe in the work that we do and we are proud of our unique fiduciary role with our clients. A good fiduciary will re-evaluate their professional relationships at least every three years and we encourage our clients to challenge us and do the same.

We work very hard to make retirement simple and easy. So, from the bottom of a heap of binders, sticky notes, and pages – thank you for the opportunity to work for you. If there’s anything we can do to make planning easier, please let us know.

 

Save Up to Break Stuff: Retirement Saving Should Not be Taken Lightly

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By: Katherine Brown, Research Associate, Castle Rock Investment Company

My grandmother loved to drive. After they took away her license, she enthusiastically offered the use of her 1989 Crown Victoria to anyone who was visiting her, whether they had a car of their own or not. She also purchased a motorized scooter to get around her elegant, eerily silent retirement home. Often, the only sound was the elevator music playing through the halls and the whirring of the small motor on her scooter.

My grandmother loved to drive fast. Gran’s scooter was notorious for knocking down other nursing home residents, potted living and plastic plants, and the occasional painting from a wall. Ever the charmer, she would convince the staff not to take away her precious wheels. And she always paid for the damage that she caused because her husband and children set up a generous retirement fund for her.

This chart is intended for hypothetical illustration only, and is not intended to be representative of the past or future performance of any particular investment. It assumes a 7% average annual total return with no withdrawals or distributions, and reinvesting of all dividends and capital gains. Actual rates of returns cannot be predicted and will fluctuate. It does not reflect an actual investment, nor does it account for the effects of taxes, any investment expenses or withdrawals. Returns are not guaranteed and results may vary. Investment returns cannot be predicted and will fluctuate. Investor results may be more or less.These stories aren’t possible without comfortable retirement savings. Rather than a funny family story, this could easily be a sad tale of an elderly woman who crashed into something and had to move out of her residence because the cost of damages were too high. In a worldwide Future of Retirement survey, 18% of US citizens said they would never be able to retire from all paid employment.

You don’t know where your passions will take you, or whether your spouse’s bad driving will become the stuff of family legend. Saving for retirement should not be taken lightly. Though you may not like to think about growing old, you will need an income one day when you’re no longer capable of earning one. Care for your 401(k) by saving as early as you can.

In case you can’t picture it, Merrill Lynch offers a free face aging service on their website. If you’d like to peek into the future and see what you’ll look like at 90, try it out.

 

Katherine Brown completed a Master’s degree in Global Finance, Trade, and Economic Integration from the University of Denver. Her research and writing focus on international monetary economics and central banking. She can be reached at Katherine@castlerockinvesting.com.

408(b)(2) Regulation Checklist

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The Department of Labor (“DOL”) published its final Section 408(b)(2) regulation in February, prescribing the disclosure requirements that are required from retirement plan service providers. Fiduciaries and service providers of covered plans must ensure to abide by the new regulation by July 1, 2012. Now that you have had a chance to review the regulation, expect the disclosures to cross your desk soon.

Castle Rock Investment Company (CRIC) has compiled a checklist to help plan sponsors determine if they are responsible for a covered plan and outline the steps necessary to ensure that fiduciaries have fulfilled their new obligations. You will need to establish a process to keep track of the disclosures as they flood your desk since a summary roadmap is not required yet. Please contact us at 303-725-7086 for a copy of the checklist.

Please plan to attend our workshop on May 10th where we will teach a step-by-step-process for plan sponsors that want to take a hands-on approach in fulfilling their 408(b)(2) obligations. Please be on the lookout for more details on this informative event.

If you have any questions, or need assistance, please feel free to contact me at 303-725-7086.

Best Regards,

Michele L. Suriano, QPFC, TGPC, AIF®
President

What is a BrightScope Rating?

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They began by developing an algorithm, the BrightScope Ratings™, to assess the quality of a retirement plan on the company level.  It takes into account 200+ unique data inputs per plan to calculate a single numerical score to define 401k plan quality.    The algorithm runs simulations for each plan in order to determine how quickly each 401k plan will get the average 401k participant to retirement.  Factors include company contributions, fees, investment menu quality, vesting schedules, and eligibility periods.
As a plan sponsor you can subscribe to their Plan Management Dashboard which was launched in July 2009 in order to view the underlying BrightScope data and calculations and do a thorough fee analysis that benchmarks each fee you are paying.  In September 2009 BrightScope also launched Advisor Central as a prospecting tool for brokers and advisers to purchase data on a subscription basis to target retirement plans with low rankings.