Did Richard Dahab read my mind? His Jan. 20 Other Views commentary, "How money managers squandered talent and lost their vibrancy," was right on. The very reason Tremont concentrated on hedge funds in 1984 was because of the way the pension community evaluated money managers. As pension funds begin to invest in hedge funds, let's hope they do not try to pigeonhole styles.
I personally believe in rational "style drift." I want my managers to make money in all market environments.
co-chairman and co-chief executive officer
ERISA for public plans
There continues to be a desperate need for federal ERISA pension protection to cover government plans.
Several congressional subcommittees have recommended this protection. State and local governments have effectively lobbied against it. Again there is daily news regarding California pension plan raids. Politicians want to avoid required payments to CalPERS, the nation's largest pension plan, and CalSTRS, the teacher's plan.
The staff of CalSTRS recommended against the latest outrageous attempt - warning that reducing the required contribution "could result in reduced benefits for retirees down the road."
Both CalPERS and CalSTRS have political boards of directors. They are likely to ignore both staff and their members and vote the politics of the moment. As I write, politicians are maneuvering to elect Willie Brown president of CalPERS. This will ensure politicians can continue dipping into CalPERS retirement funds. Asked how it will be easier to pay these amounts 20 years from now, politicians cheerfully assure, "We'll pay it all back during the next Internet bubble."
Only federal ERISA pension protection can safeguard teachers and state and local government workers. I urge pension rights groups and Congress to vigorously support universal ERISA coverage. Even Enron employees had more protection than government workers.
Editor's note: Sean Harrigan, vice president of the United Food and Commercial Workers Union, defeated San Francisco Mayor Willie Brown for the presidency of CalPERS, Feb. 20.
Personal 401(k) advice
Re: "401(k) investment advice isn't working." Oct. 28, page 3.
As stated in the article, "defined contribution investment advice is a flop," "nobody wants to pay for it," "the biggest failure has been online services," and "the solution appears to be personal advice." Really? A flop? Especially in online services that nobody wants to pay for? Pretty heavy. Partly true, but misleading.
I have the perspective that sponsors are more than reluctant to embrace advice out of fiduciary fear and our overly litigious society. We all know that, but the article gives it little recognition. America's workers are more in need for assistance in the form of advice than they ever have been, and it is not simply the cost issue. It is a matter of focus and making it easy to access and use.
Education alone isn't enough; influencing attitudes and changing behavior is the course of action required. One major way we might be able to advance the state of the art is by getting Congress to get on with it and make it harmless for employers to support their employees and influence financial behaviors. Then we might find the cost issue can be solved. The underlying process costs can be embedded in the general fees of running a defined benefit or defined contribution plan. Make the delivery costs transparent to the user, just as we do for daily record keeping. Then subsidize real financial support to effect positive change.
The American work force really needs financial tools and financial coaching throughout their careers. And the best way to do that is align advice tools with a human adviser. So I do not think that the "solution appears to be personal advice." The solution is personal advice. In the health care area, we struggle with increasing costs, lack of coverage and an uninformed consumer. And there are a host of strategies rolling out to address this challenge. Most are good.
But we also know that the 80/20 rule is at work in medical care/costs. Twenty percent (or less) of the users consume 80% (or more) of the dollars. There is a relationship here to financial wellness. Perhaps 20% of the workforce has 80% of the information and advice smarts, while 80% might have a single-digit percentage ownership of knowing how to deal with their long-term financial security. They need assistance right now, and when they are age 40, 50, 60 and 80. We need to stop dealing with incidents and convenient issues and create a strategy to change our financial behavior.
Financial planning advice for all without employers' fear of liability risk has to occur. We have been struggling since Interpretative Bulletin 96-1, issued by the Department of Labor. We all know and accept the construct that the future world of work requires individuals to take full control early in life, and employers need to provide the motivation and means to act. Just as we all annually choose our medical plans and make those cost decisions, we need to annually check our financial health. A personal adviser is the answer. We don't take medicine without a professional doctor's advice; so too we ought to use online tools and online advice with a professional adviser on call.
Employers are in the best position to change worker behavior, and workers trust and look to their employers for direction and support. Let's get really constructive legislation and remove the shackles that bind employer action. Let's also enact the incentive to use pretax dollars to hire a financial coach. It isn't a revenue loser; it's an investment in our citizens financial health. It is in the nation's best interest.
Donald H. Sauvigne
Editor's note: Mr. Sauvigne is a self-employed strategic benefits consultant.