Investment Adviser Training Dallas TX

 A defined benefit plan, funded by the employer, promises you a specific monthly benefit at retirement.defined benefit plan  A defined contribution plan, you and/or your employer contribute money to your individual account in the plan.defined contribution plan

 401(k) Plans ◦ Safe Harbor ◦ Simple ◦ Automatic Enrollment  Profit Sharing Plans  Employee Stock Ownership Plans  SEP  Simple IRA

 401(k) plans, profit-sharing plans, and employee stock ownership plans face no limit on the amount of employer securities they hold, as long as it is provided for in the plan documents.  Employer stock option need to make informed decisions about whether to invest in that stock.  A plan can buy or sell employer securities from a party-in-interest, such as an employer, an employee, or other related entity as described above (which would otherwise be prohibited), if it is for fair market value and no sales commission is charged.  Traditional defined benefit pension plans have limits generally is not permitted to hold more than 10 percent of its assets in employer stock.

Under Federal law, your plan must allow you to begin receiving benefits*  the later of - Reaching age 65 or the age your plan considers to be normal retirement age (if earlier)  Or - 10 years of service  Or - Terminating your service with the employer

 Plan’s fiduciaries will include the trustee, investment managers, and the plan administrator.  Plan Fiduciary – Anyone who exercises discretionary authority or discretionary control over management or administration of the plan, exercises any authority or control over management or disposition of plan assets, or gives investment advice for a fee or other compensation with respect to assets of the plan.

 Acting solely in the interest of plan participants and their beneficiaries, with the exclusive purpose of providing benefits to them;  Carrying out their duties with skill, prudence, and diligence;  Following the plan documents (unless inconsistent with ERISA);  Diversifying plan investments;  Paying only reasonable expenses of administering the plan and investing its assets; and  Avoiding conflicts of interest.

 A description of each investment option, including the investment goals, risk, and return characteristics;  Information about any designated investment managers;  An explanation of when and how to request changes in investments, plus any restrictions on when you can change investments;  A statement of the fees that may be charged to your account when you change investment options or buy and sell investments; and  The name, address, and telephone number of the plan fiduciary or other person designated to provide certain additional information on request.

 Employers may decide to hire an investment adviser to offer investment advice tailored to individual participants. These advisers are fiduciaries and have a responsibility to the plan participants.  However, if an employer or service provider provides general financial and investment education that is general in nature, it is not acting as a fiduciary. This may include interactive investment materials or information based on asset allocation models.

 Fiduciaries that do not follow the required standards of conduct may be personally liable.

 ERISA’s fiduciary standards, mean that fiduciaries must establish a prudent process for selecting investment alternatives and service providers to the plan;  Ensure that fees paid to service providers and other expenses of the plan are reasonable in light of the level and quality of services provided;  Select investment alternatives that are prudent and adequately diversified;  Monitor investment alternatives and service providers once selected to see that they continue to be appropriate choices.

 The plan may deduct fees from your defined contribution plan account. Plan administration fees and investment fees can be deducted from your account either as a direct charge or indirectly as a reduction of your account’s investment returns.defined contribution plan

 Plan Administration Fees.  Investment Fees.  Individual Service Fees.

 Mutual Funds  Collective Investment Funds  Variable Annuities  Pooled Guaranteed Investment Contract (GIC) Funds

 Sales charges (also known as loads or commissions). These are basically transaction costs for buying and selling shares. They may be computed in different ways, depending on the particular investment product.  Management fees (also known as investment advisory fees or account maintenance fees). These are ongoing charges for managing the assets of the investment fund. They are generally stated as a percentage of the amount of assets invested in the fund. Sometimes management fees may be used to cover administrative expenses. You should know that the level of management fees can vary widely, depending on the investment manager and the nature of the investment product. Investment products that require significant management, research, and monitoring services generally will have higher fees.

 Begin by establishing an objective process to aid in your decision making. This process should include an understanding of the fees and expenses you will pay and a review of those charges as they relate to the services to be provided and the investments you are considering.  Before negotiating with prospective providers, think about the specific services you would like from a service provider (e.g., legal, accounting, trustee/custodian, recordkeeping, investment management, investment education or advice). Include the types and frequency of reports you wish to receive, communications to participants, meetings for participants, and the frequency of participant investment transfers.  You will also need to consider the level of responsibility you want the prospective service provider to assume, the services that must be included in any retirement plan, the possible extras or customized services you wish to provide, and optional features, such as loans, Internet trading, and telephone transfers.  Once you have a clear idea of your requirements, you are ready to begin receiving estimates from prospective providers. Give all of them complete and identical information about your plan and the features you want so that you can make a meaningful comparison. This information should include the number of plan participants and the amount of plan assets as of a specified date.  In addition, ask each prospective provider to be specific about which services are covered for the estimated fees and which are not. To help in gathering information and making comparisons, you may want to use the same format for each prospective provider.  Once you have selected a service provider or investments, be prepared to monitor the level and quality of the services and performance of investments to make sure they continue to be reasonable and they suit the needs of your employees. Make sure that you receive information on a regular basis so that you can monitor investment returns and service provider performance and, if necessary, make changes.

 Certain transactions are prohibited under the law to prevent dealings with parties who may be in a position to exercise improper influence over the plan. In addition, fiduciaries are prohibited from engaging in self-dealing and must avoid conflicts of interest that could harm the plan.

 Some prohibited transactions include:  A sale, exchange, or lease between the plan and party-in-interest;  Lending money or other extension of credit between the plan and party-in-interest; and  Furnishing goods, services, or facilities between the plan and party-in-interest.  Fiduciaries are also prohibited from:  Using the plan’s assets in their own interest;  Acting on both sides of a transaction involving the plan; or  Receiving money or any other consideration for their personal account from any party doing business with the plan related to that business.

 Available to all participants on a reasonably equivalent basis;  Made according to the provisions in the plan;  Charge a reasonable rate of interest; and  Be adequately secured.

 Findings included in a report by the staff of the U.S. Securities and Exchange Commission released in May 2005, however, raise serious questions concerning whether some pension consultants are fully disclosing potential conflicts of interest that may affect the objectivity of the advice they are providing to their pension plan clients.  The SEC examination staff concluded in its report that the business alliances among pension consultants and money managers can give rise to serious potential conflicts of interest under the Advisers Act that need to be monitored and disclosed to plan fiduciaries.

 Department of Labor and the SEC have developed the following set of questions to assist plan fiduciaries in evaluating the objectivity of the recommendations provided, or to be provided, by a pension consultant.

 Are you registered with the SEC or a state securities regulator as an investment adviser? If so, have you provided me with all the disclosures required under those laws (including Part II of Form ADV)?  Do you or a related company have relationships with money managers that you recommend, consider for recommendation, or otherwise mention to the plan? If so, describe those relationships.  Do you or a related company receive any payments from money managers you recommend, consider for recommendation, or otherwise mention to the plan for our consideration? If so, what is the extent of these payments in relation to your other income (revenue)?

 Do you have any policies or procedures to address conflicts of interest or to prevent these payments or relationships from being a factor when you provide advice to your clients?  If you allow plans to pay your consulting fees using the plan’s brokerage commissions, do you monitor the amount of commissions paid and alert plans when consulting fees have been paid in full? If not, how can a plan make sure it does not over-pay its consulting fees?  If you allow plans to pay your consulting fees using the plan’s brokerage commissions, what steps do you take to ensure that the plan receives best execution for its securities trades?

 Do you have any arrangements with broker-dealers under which you or a related company will benefit if money managers place trades for their clients with such broker-dealers?  If you are hired, will you acknowledge in writing that you have a fiduciary obligation as an investment adviser to the plan while providing the consulting services we are seeking?  Do you consider yourself a fiduciary under ERISA with respect to the recommendations you provide the plan?  What percentage of your plan clients utilize money managers, investment funds, brokerage services or other service providers from whom you receive fees?