Advisors Off The Hot SeatóFor Now

Advisors seem to be off the front burner of rulemaking at the Securities and Exchange Commission, at least for now, thanks to new SEC Chairman William H. Donaldson, who is making corporate accountability his first priority at the commission. That's good news for advisors who saw Donaldson's predecessor, Harvey Pitt, go out in a blaze of new proposals that could have seriously altered advisor regulation.

One of Pitt's last proposals before stepping down asked whether the industry needed a new self-regulatory organization. He implied the National Association of Securities Dealers could fill that bill or at a minimum oversee new annual audits Pitt believed should be required for advisors.

Needless to say, the advisory profession is hoping that Pitt's proposals go the way of his chairmanship. "There's no reason right now to think Donaldson is planning to carry these forward," says Duane Thompson, director of government affairs for the Financial Planning Association.

Thompson says however, that trying to get a read on Donaldson's agenda is "a little like reading tea leaves at this point." That may change soon. Thompson and the FPA have requested a meeting with the new SEC chairman and have been told it would be scheduled soon.

So far, Donaldson has indicated that he will move cautiously, if at all, on both the investment advisor and mutual fund regulation fronts. In fact, the former chairman and CEO of the New York Stock Exchange told lawmakers during confirmation hearings that he believes existing rules have worked pretty well over the years and may not need much tinkering.

For now, Donaldson seems more inclined to let new corporate governance laws take effect instead of piling on more rules. In one of his first public appearances after being sworn in, Donaldson told economists at the 2003 Washington Economic Policy Conference on March 24 that "corporate scandals have exacerbated the roughly $7 trillion collapse in the aggregate market value of American corporations over the past few years." He added, however, that "sweeping new legislation has already been enacted and expectations of corporate America and Wall Street have changed."

Lobbyists for the financial services industry say that Donaldson, a former Nixon Administration official and founder of Yale University's Graduate School of Management, is cautious, highly intelligent and unlikely to advance new regulations simply for regulation's sake. With book-cooking scandals continuing to dominate the headlines, improving accounting standards and the quality of financial reporting is likely to dominate his early agenda.

FPA Providing Services For Families Of Military Personnel

A Financial Planning Association support center founded to help September 11 victims is now reaching out to military families.

"With our service men and women courageously fighting overseas, we would like to give something back to show our appreciation," says FPA President David Yeske. "Helping families with important financial planning considerations while their loved ones are away is one way we feel we can make a difference."

The National Financial Planning Support Center, which has handled 1,200 requests for planners since it was founded shortly after the September 11 attacks, will offer three services to military personnel and their families, says FPA spokeswoman Brooke Harrelson.

The first is the "Ask a CFP Professional" program, which hooks callers up with CFPs who can handle questions about any financial issues, Harrelson says.

The other two services also offered by the center are educational brochures, including one specially geared toward issues of concern for military families, and a speakers bureau, she notes, adding that many of these services are also open the public.

The FPA is working with the Defense Department and the National Military Families Association to inform members of the military about the services says Harrelson.

A special Web site, at, has also been set up to help military families deal with financial issues.

Among the planners who has volunteered to receive referrals as part of the new initiative is Brian Oard, senior financial advisor at Gold Coast Securities in Thousand Oaks, Calif. Oard, a former Marine Corps officer and veteran of Operation Desert Storm, says military people and their families are undoubtedly facing unique financial dilemmas as a result of the war in Iraq.

Portman-Cardin Proposes Tax-Advantaged Annuities and Advice

Representatives Rob Portman (R-Ohio) and Ben Cardin (D-Md.) have made both accumulation and preservation the centerpiece of their latest retirement planning bill-the Pension Preservation and Savings Expansion Act of 2003. On the advice front, the bill (HR 1776) would allow employees to pay for retirement planning advice on a pre-tax basis (similar to legislation the bipartisan duo introduced the last session of Congress). To encourage more baby boomers to conserve their nest eggs, the legislation also offers a "Lifetime Annuity Payout" proposal, which would reduce retirees' tax bills from the income tax rate to a long-term capital gains rate if they select a lifetime payout option on their retirement plans.

Congressman Cardin said in a phone interview that the bill is an important next step toward encouraging Americans to save for their retirement. "It's part of the solution," says Cardin. "We have to take the pressure off Social Security for future generations and the best way to do that is to encourage both individuals and employers to save more and create more plans."

It's also crucial, says the House Ways and Means Committee member, to raise the required minimum distribution age for IRAs and retirement plans from age 70 1/2 to 75, another provision of the bill. "People are living longer, and they need to keep their savings longer, especially after the recent stock market environment," Cardin says. Other highlights of the legislation include:

Making today's retirement savings opportunities permanent. All of the advances Portman and Cardin helped to create in the 2001 tax bill are set to expire in 2010, including the saver's tax credit, which this new bill will expand in amount and eligibility, making it available to middle class taxpayers. The new bill would increase single filer eligibility to $30,000 and joint filer eligibility to $60,000 and increase the maximum amount of the credit to 60% of the first $2,000 in contributions.

Accelerate increases to IRA contributions to an immediate $5,000 level and eliminate marriage penalties in IRA and Roth IRA rules.

Accelerate retirement plan contributions so that next year individuals can contribute $15,000 to their 401(k) plans and $10,000 to their Simple plans. The bill would also allow employees to roll $500 in unused flexible spending account funds into their retirement plans. The catch-up contribution limits would also be accelerated to allow savers age 50 and over to make the full $5,000 plan catch-up and $1,000 IRA catch-up beginning in 2004.

Allowing rollovers directly to a spouse's retirement plan, facilitating rollovers to non-spouse beneficiaries, ensuring rollover rights for workers who make after-tax contributions and permitting rollovers from retirement plans to Roth IRAs.

Increase women's retirement security by ensuring that a spouse's pension benefits earned during the period of marriage are available at divorce.

Allow retirees to use pre-tax pension payments for retiree medical premiums and allow 401(k) sponsors to pre-fund retiree medical benefits.

Expand small-business pension coverage by improving and streamlining the rules for existing SIMPLE and SEP retirement plans and creating a new reverse-match SEP.

Revitalize defined benefit plans by instituting a new interest rate benchmark for pension calculations based on conservative long-term corporate bond rates. The new rate would replace the current 30-year Treasury bond rate, which has fallen since the discontinuation of the bond.

Continue the regulatory simplification that Portman and Cardin have begun in past bills with the reform and simplification of retirement plan rules.

LPL COO Is Named President

LPL Financial Services has appointed its chief operating officer as president, replacing one of the firm's founders.

Mark Casady will take over as president while retaining the title of chief operating officer, the company says. He joined LPL about a year ago.

Dave Butterfield, the president of LPL since it was founded in 1989 through the merger of the Linsco and Private Ledger brokerage firms, will assume the new role of vice chairman. Butterfield founded the company with Todd Robinson, the firm's chairman and chief executive.

LPL is the largest independent broker-dealer in the nation, with 800 employees headquartered in Boston and San Diego and another 4,500 professionals in 2,100 branch offices.

Americans Slightly Less Confident About Retirement

The majority of Americans remain confident about their ability to retire comfortably, but the ranks of those who are worried about their golden years continues to grow, says a new survey.

Among the findings were that 16% of workers feel "not at all" confident that they will have enough money saved for retirement-up from 10% in 2002, according to the 13th Annual Retirement Confidence Survey. In 1993, by comparison, this group made up only 6% of respondents.

About 21% say they are very confident about having enough money to retire comfortably, slightly down from 23% in 2002, the survey says. Overall, 67% say they are either very or somewhat confident they will retire comfortably.

"Data over the past decade continues to show that Americans are chronically optimistic about their retirement prospects despite a variety of market conditions, but market declines over the past few years seem to have made people more cautious," says Dallas Salisbury, chief executive and president of the Employee Benefit Research Institute (EBRI).

The survey was conducted by EBRI, the American Savings Education Council and Matthew Greenwald & Associates. It consisted of random interviews with 782 works and 218 retirees aged 25 or older in January.

Among the other findings:

Stock market difficulties have not had as deep an impact on retirement confidence as might be expected. Authors of the survey suggest this may because many workers' retirements are not tied to the equity markets. Nearly half of respondents, 48%, say they have no stocks or mutual funds.

Sixty-one percent of workers have not calculated how much money they will need for their retirements. Thirty-six percent say they've done a calculation, but either don't remember or don't know its result. The survey also indicates many workers are using faulty methodology, or even guesswork, to figure out their retirement needs.

The trend of workers putting off their retirements seems to be continuing. While 25% say they will retire at age 65, another 25% say they will leave work at 66 or later. That's up from the 18% who said they were looking at a 66-or-older retirement age in 2002. Seventy percent say they plan to do some type of salaried work after retirement.

Advisor-Owned Trust Company Completes Offering

National Advisors Trust Co., formed by a large group of leading financial advisors, has raised $2 million from a recently completed second offering. Another 26 financial advisory firms purchased 1,818 shares. The expansion brings the total number of shareholder firms to 108 nationwide.

National Advisors Trust, based in Overland Park, Kan., was formed and federally chartered in October 2001 by 82 independent financial advisors to provide trust and custodial services to their clients. Its effort to raise additional funds came surprisingly soon after the firm opened about 18 months ago with $6.8 million in capital.

According to David Roberts, president and CEO, the trust company now has assets of more than $600 million and expects to grow to $1.5 billion by year-end, making it one of the largest independent trust companies in the nation. "We have had a very strong response to our mission of providing a comprehensive selection of trust and custodial services exclusively to the clients of our shareholder firms," says Roberts.

Although advisors are entering the trust business in many different ways, Na-tional Advi-sors Trust is a unique undertaking. It is believed to represent the largest group of advisors to have pooled their resources to form a trust company. It only provides services to advisors who are shareholders, and its fees are far lower than most trust companies.

Corrections And Amplifications

Edelman Financial Services Inc. of Fairfax, Va., charges a one-time fee of $800 for a comprehensive financial plan and an annual fee of $400 that begins in the second year. The firm's fees were incorrect in a story, "The Outsider," that ran in the March 2003 issue of Financial Advisor.

Curian Capital LLC offers a program for advisors in which they get an advance on their clients' accounts. The asset management fee an advisor collects from a client is used to pay back the advance. An example in a story in the April issue should have read: Curian will pay a 2.4% advance, or $2,400, to an advisor with a $100,000 client account. Principal and interest on the loan would be paid back as follows: The account's 1% asset management fee would be applied the first year, 0.75% the second year and 0.75% the third year.