Annuities keep gaining respectability as a retirement solution

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Your 401(k) plan would be annuitized for two years upon retirement, if the authors of “Increasing Annuitization of 401(k) Plans with Automatic Trial Income” have their way.

“Workers could opt-out at retirement or after those 24 months. But the authors expect that few would,” said the Tax Policy Center’s Howard Gleckman in “A New Annuity for 401(k)s.” He concluded “the new scheme is a big improvement over what we have now” because it would provide a steady income stream similar to that from defined benefit plans.

Of course, noted Gleckman, post-retirement annuitization doesn’t fix the problem that “all of the pre-retirement risk would be on workers, rather than their employers.”

I’ve noted in “Annuities gathering steam in professional journals“ that annuities seem to be gaining respectability as a retirement solution. 

SRI: A new requirement for fiduciaries?

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Ten years from now, a fiduciary may feel bound to consider the tenets of socially responsible investing (SRI), predicted Peter Kinder, president, KLD Research & Analytics.

That may sound crazy. But back in the early 1800s, it seemed crazy for prudent investors to use common stocks in pension funds, noted Kinder.

Kinder co-presented with Cheryl Smith, executive vice president of Trillium Asset Management, on “The History and Future of Socially Responsible Investing” to the Boston Security Analysts Society on June 5.

Kinder qualified his remarks later, writing:

What I intended to say is that fiduciaries may have the duty to consider much the same factors as Social Investors have.

It is highly unlikely that fiduciaries will have to consider them as values (as social investors traditionally have). Rather, they will apply them among the data they bring to bear in an investment decision. This distinction also implies that fiduciaries may decide that other considerations outweigh the ESG criteria.

Put differently, analysis of social criteria by fiduciaries will not have the status of, say, fundamental analysis. Rather, it will take its place alongside cash flow analysis under the tenets of an analytical approach.

Smith noted that SRI’s role is growing in investments by foundations, pension funds, 401(k) plans and individuals. About 6%-7% of high net worth investors use SRI methods. That number rises to 9%-10% for the ultra high net worth. She suggested that the trend toward SRI will trickle down to the less affluent.

The time will come when not evaluating a company in terms of SRI’s criteria will be as inconceivable as not checking the company’s balance sheet, said Smith.

Obama vs. McCain on tax policy

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Looking for an analysis of Obama vs. McCain on tax policy?

The Tax Policy Center offers a “A Preliminary Analysis of the 2008 Presidential Candidates’ Tax Plans.”

Having written about the alternative minimum tax (AMT), I was interested to see that both candidates would make the AMT “patch” permanent. By the way, I developed a lot of respect for the Tax Policy Center as a resource when I did research on the AMT. The center pulls together information that’s not available elsewhere.

P&I picks best financial blogs

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According to the staff at Pensions & Investments magazine, the top three financial blogs are:

  1. The Big Picture
  2. DealBreaker
  3. Infectious Greed

That’s according to to “Pensions & Investments’ Best Blogs and how they got that way,” which also lists some other top blogs.

But blogs get mixed reviews from P&I’s audience. “Turns out some tout the virtues of having fresh and sometimes entertaining voices and unique perspectives not found in typical Wall Street research, while others eschew blogs as unnecessary,” reported Drew Carter in “Ranking the blogs.”

What do you think? Are blogs useful to you?

Investment industry in denial about ethics

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There’s a disconnect between what investment managers say about ethics and what they actually do, said Jim Ware of Focus Consulting Group in his presentation on “Ethical Leadership in the Investment Firm” to the Boston Security Analysts Society.

Investment firms ranked ethics as one of their top five values in surveys conducted by Focus Consulting. That’s good. “We believe that ethics and integrity should be the spine of your organization for it to be sustainable,” said Ware.

But, in practice, investment firms don’t always take the high road when confronted with ethical challenges, both routine and extraordinary. In his presentation, Ware listed nine common ethical challenges that investment firms may fail. Many of them concern marketing, such as “putting the best spin on personnel changes” or “hiding the salient features of a product.”

I wonder if there’s an investment firm on earth that hasn’t tried to spin personnel changes.

Read more about ethics in Ware’s article, “Ethical Leadership in the Investment Firm.”

"Pension Plans Say Thank You Subprime for Return to Overfunded "

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The subprime crisis has an unexpected silver lining.

The resulting demand for high quality corporate bonds has improved the funding status of corporate pension plans. “The combined pensions of S&P 500 companies swung to a $63 billion surplus in 2007 after five years in the red, according to a May 19 report by Standard & Poor’s,” says Miles Weiss in “Pension Plans Say Thank You Subprime for Return to Overfunded. ”

By the way, this news article suggests a technique you can apply to your investment commentary. Write about an unexpected implication of a widely discussed phenomenon.

OECD Economic Outlook as a resource for your investment commentary

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If you haven’t finished writing your second quarter investment commentary, check out the website of the Organisation for Economic Co-operation and Development for some useful statistics. The OECD publishes its economic outlook twice a year.

Its June 2008 outlook predicts weak growth and high inflation. Real GDP growth for the total OECD (see page 2) is estimated to run 1.8% in 2008 and 1.7% in 2009. Estimates are broken out for the U.S., Japan, and the Euro area.

The June outlook also discusses:

  • How deep is the impact of the recent oil and credit shocks on the productive potential of OECD economies? To what extent can structrual reforms help to soften it?
  • How should economic policies respond to the uncertainty created by these shocks?

Take the rancor out of divvying up an estate

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You’ve probably seen family members fight or sulk over the disposition of personal possessions after a loved one passes away. Estate planning and elder law attorney Susan J. Shipley‘s article below describes a website that may reduce the pain.

Have you used eDivvyup.com? Please comment on your experience.
Web Site Aims to Take the Rancor Out of Dividing Up an Estate

Dividing up family heirlooms after the death of a loved one can be a difficult business. Wills often deal only with financial assets, not personal possessions. The resulting infighting between family members over who gets which personal item can damage relationships for years to come.

Now there is a web site that may help families avoid acrimony and make the process of dividing up possessions in an estate easier. The site, eDivvyup, allows family members (and friends of the deceased) to divide up a relative’s personal estate using an auction platform similar to eBay’s. The estate’s executor gives family members non-monetary points which they can use to bid on estate items that can be listed and pictured on the site. Bids reflect a family member’s desire to own an item. eDivvyup seems particularly well-suited for families that are geographically dispersed, as many are.

The cost of the service is $49 to list 50 items. Additional item listings can be purchased as needed. For more information, go to: www.eDivvyup.com.

Podcasts from CFA Institute Annual Conference

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The CFA Institute’s Annual Conference in Vancouver attracted record attendance. Now, you can listen to podcasts of some of the speakers, if you’ve paid for a Total Access membership in the CFA Institute.

As of May 29, you can listen to:

  • Building a Global Equity Portfolio by Lawrence S. Speidell
  • Prediction Markets: The Collective Knowledge of Market Participants by Justin Wolfers
  • From Beta to Exotic Beta to Alpha Behavioral Finance: What Good Is it? by Meir Statman, Arnold S. Wood, and Jason Zweig
  • Investment Opportunities in Energy by Henry Groppe
  • Investment Strategies to Exploit the Growth of China by Burton Malkiel
  • The Neuroeconomics of Surprise: How the Investing Brain Handles the Unexpected by Jason Zweig
  • Economic Prospects for the U.S. Economy from a Monetary Policymaker’s Perspective by Janet L. Yellen
  • Nurturing Innovation in an Asset Management Firm by Blake R. Grossman

How to get a portfolio manager’s attention, and other email tips from an investment marketing consultant

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It’s not easy getting portfolio managers to open your emails. That’s why investment marketing consultant Jen Dunning sometimes writes her email subject lines completely in capital letters.

“INVESTMENT COMMENTARY – PLEASE APPROVE BY JUNE 30” grabs the reader’s attention where a meeker “Please approve by June 30” would not. Note that she puts her key action verb, “approve,” and its object, “investment commentary,” in the subject line. That also boosts her emails’ effectiveness.

But limit your use of all-capitals subject lines to rare instances of pressing need with people who work for your own organization. You risk irritating your recipient if you use all-caps too often. It flouts the rules of email etiquette and is considered “shouting.”

Some additional email tips from Dunning:

  • Save your pleasantries for the end of your email because busy readers want to get to the point right away
  • Before you attach an Excel file, name it and insert page breaks and headers and footers, including page numbers and total number of pages