While on vacation at Canyon Ranch in Tucson, I had an opportunity to take a workshop about joy. It’s a little word for such a big concept. Without that je ne sais quoi that puts a smile on one’s face and pep in each step, life can become a series of “must do” items instead of “let’s go” moments. That’s not an ideal outcome for individuals or their friends and families. Companies have a stake in the happiness game as well.

Motivated and satisfied employees can add to the bottom line through productivity gains. Employees on the other end of the spectrum can add to health care costs and reduced output due to excessive absences. According to the Global Wellness Institute website, “The world’s 3.2 billion workers are increasingly unwell.” This explains why companies around the globe spend upwards of $40 billion on wellness programs.

A few years ago, the Rand Institute carried out a large-scale survey of nearly 600,000 individuals who participated in wellness programs offered by seven companies. What they found may surprise some. While the lion’s share of wellness budgets was spent on improving lifestyle skills such as smoking cessation or losing weight, return on investment (“ROI”) was significantly higher for disease management efforts. The take away is that employers are not allocating monies wisely and need to modify accordingly.

If true that organizations should budget mostly on addressing existing illnesses or preventing new realizations, there could be a heightened demand for psychological or behavioral specialists. Those individuals who can afford to seek outside help will clamor to understand their malaise and emotional deficit, even when their bosses look askance.

In his Forbes opinion piece, Dan Pontefract discusses the importance of sharing a vision that excites and empowers. He cites surveys that demonstrate a C-suite awareness of the purpose-profit connection even when these same executives do little to activate their team around a shared vision. Instead of rewarding people for short-term bottom line advances, this author and researcher urges companies to ratchet up their efforts to do well by doing good. Whether the metric is excellent client service or operating with better ethics than a peer, his take is that managers should address more than the quarterly bottom line.

Illustration depicting a green roadsign with a optimistic concept. White background.

Most of us are disciplined enough to put together a financial plan or seek the help of an advisor. While true that retirement planning is important, the future should not give way to living life in the present. If you agree that every day is a gift, check out a new movie called The Hero.

Starring Sam Elliott, the recipe is straightforward. Take one aging actor who learns he has a serious illness. Add a younger love interest, a friend with a questionable work ethic, a caring ex-wife and a disappointed daughter. The result is a tale of redemption and a story about hope. The audience sees a man who is sympathetic because he wants a second chance to make a difference in the lives of those around him.

The Hero is a quiet film and likely too slow-paced for some. However, for those who crave solid character development and a ride towards grace, grab some popcorn and head to the theater without delay. Your reward is a chance to watch someone grow by recognizing his limitations and then being willing to ask for help. Lucky for him, he gets it aplenty.

There are flashbacks to the hero’s glory days as a celluloid cowboy, motivating viewers to distinguish good deeds from bad ones and understand that reality and make-believe can collide.  The scenes of this lanky “everyman” eating, sleeping and appreciating the nearby ocean are far from mundane. They reflect the “extraordinary ordinary” moments, something I describe in my book The Big Squeeze.

Sam Elliott refers to this gem of a movie by Brett Haley as a career brass ring in his June 2017 interview with Variety. I concur. The film is an enjoyable wake-up call for anyone in the doldrums. We root for the main character to live a rich and fulfilling life among friends, family and business associates for whatever time he has left. May we all be so lucky to renew and refresh, even when it seems like life hands us more lemons than we can squeeze into sweet lemonade.

 

new edition, 3D rendering, triple flags

During the last several months, I’ve been working with the terrific team at Lex Blog to consolidate my two business blogs – Pension Risk Matters® and Good Risk Governance Pays®. Now I’m back, raring to post commentaries and research updates about investment risk governance and fiduciary practices. I’ll plan to toss in a few essays about living the good life along the way.

Eleven years ago, I created Pension Risk Matters® with the objective of providing insights and information about investment governance and fiduciary best practices as relates to the management of retirement plans. A few years later, I created Good Risk Governance Pays® to address investment risk governance issues for the broader industry. Traffic to both websites has been robust and always much appreciated. However, in the interest of time and because of continued content overlap, I decided to consolidate the two websites.

Join me as Pension Risk Matters® rebrands as Investment Best Practices® and Good Risk Governance Pays® is phased out. Suggestions and guest posts are welcome. Simply email contact@fiduciaryleadership.com. For a complimentary subscription, visit www.investmentbestpractices.com and type your email address in the “Subscribe” box in the upper right hand corner of the home page. You can also add this blog to your RSS feed via www.investmentbestpractices.com/feed/.

Let’s keep the conversation going! There is a lot to discuss.

I am pleased to announce that I will be speaking as part of an upcoming Strafford live webinar, “Alternative Investments in ERISA Retirement Plans: Mitigating Liability Risks for Hedge and Private Equity Funds and Pension Plan Fiduciaries” scheduled for Wednesday, May 24, 1:00pm-2:30pm EDT. I am given ten (10) guest passes. If you are interested, please let me know.

Once the ten guest passes are gone, you can still attend the webinar. By referencing my name, you can receive a fifty percent discount. As long as you use the link shown below, the offer will be reflected automatically in your cart.

Our panel will provide ERISA and asset management counsel with a review of effective due diligence practices for institutional investors from both a legal and economic perspective. The panel will offer risk mitigation best practices at a time of increased government scrutiny and lawsuits by plan participants.

After our presentations, we will engage in a live question and answer session with participants so we can answer your questions about these important issues directly.

I hope you’ll join us.

For more information or to register >

Or call 1-800-926-7926 ext. 10
Ask for Alternative Investments in ERISA Retirement Plans on 5/24/2017
Mention code: ZDFCT

Sincerely,

Dr. Susan Mangiero, Managing Director
Fiduciary Leadership, LLC
Trumbull, Connecticut

 

This article entitled “Investment Fraud and the Role of Trust” by Dr. Susan Mangiero was originally published on April 19, 2017 in The Fraud Examiner, a publication of the Association of Certified Fraud Examiners that is distributed to some 65,000 fraud professionals.

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Investment fraud can happen to anyone, and unfortunately, there is no shortage of investment fraud possibilities. Affinity fraud, pyramid schemes, pump-and-dump security trading, high-return or risk-free investments, and pre-IPO scams are only a few of a long-list of schemes that could separate investors from their hard-earned money. 

Investors can find themselves the victims of fraud when they don’t do enough due diligence or put too much faith in the people selling or managing a fund. Investors around the world would be wise to grasp fundamentals of the financial services industry, especially since results from a 2016 survey conducted by the National Association of Retirement Plan Participants show that only one in 10 persons express confidence in financial institutions. Financial advisers are similarly viewed with doubt. This is problematic.

Due in part to these concerns, very few people are adequately saving for retirement and those with money frequently invest in riskier assets in hopes of high returns. Following the 2008 credit crisis, people are changing the kinds of assets allocated in their pension plans and foundation portfolios. Taking more risks isn’t necessarily bad as long as investors sufficiently understand what is being offered to them and have assurances that sufficient safeguards are in place. Moreover, savers urgently need reliable help. Fragile confidence in the intentions of financial service providers creates a friction that can discourage investors from getting the input they need.

But investment fraud isn’t just a problem for individuals. When it occurs, it taints the financial services industry and the professionals who operate with high integrity and put customers first. Low trust of an entire industry can invite additional regulation. The net effect can be unfair penalties that diligent investment stewards must pay for the trespasses of fraudsters.

Increasing Investor Confidence

Although there is no such thing as a risk-free investment, investors can take action to detect red flags and hopefully avoid problems. With the Madoff Ponzi scheme, there were some who seriously questioned whether the touted strategy was legitimate, let alone viable, and did not invest. Regarding Enron, some investors looked askance at the energy company’s reliance on a complex web of special purpose vehicles. One lesson learned from the Bayou hedge fund scandal is to verify whether auditors are independent and well respected.

In its guide for seniors, the U.S. Securities and Exchange Commission urges the use of publicly available databases to check the disciplinary history of brokers and advisors, warning that investors should “never judge a person’s integrity by how he or she sounds.” The guide also says to avoid those who use fear tactics and to thoroughly review documents. The Financial Industry Regulatory Authority cautions investors not to be pressured or to believe that a “once in a lifetime” opportunity will be lost without immediate action.

To help combat investment fraud, the North American Securities Administrators Association teamed up with the Canadian Securities Administrators to create an online quiz that anyone can take to enhance awareness of what to avoid.

Although there are organizations that formally grade companies on their trustworthiness, investors should not rely on a single metric alone. Instead they should study whether a financial service provider has a good reputation in the marketplace and what the company is doing to manage its economic and operational risks.

Financial service companies likewise have responsibilities to be trustworthy and ensure that adequate protections are put in place. Some of these critical action steps include:

  • Setting up controls to prevent rogue trading
  • Appropriately compensating salespersons to minimize conflicts
  • Providing existing and potential customers with clear and understandable investment documents
  • Regularly communicating what the organization does well to lower risks for its customers
  • Calling out questionable activities of its competitors and working with industry organizations to improve risk management and fraud prevention techniques.

Disclaimer: The information provided by this article should not be construed as financial or legal advice. The reader should consult with his or her own advisors.

I had a chance to watch My Cousin Vinny on television the other night and was reminded how humor is such a powerful storytelling tool. How many times do we remember important concepts because the speaker or writer makes us laugh? Tickling our funny bones is a great way to convey ideas and keep the audience coming back for more. In the case of this 1992 movie starring Joe Pesci and Marisa Tomei, we have screenwriter Dale Launer to thank for lines that never seem to go out of style. He inspires us with his tale of a hero and heroine who never give up in the pursuit of justice.

Grab the popcorn. The movie is worth seeing again for entertainment. However, it turns out that lawyers use the movie for training purposes. As Mental Floss executive editor points out in “29 Fun Facts About My Cousin Vinny,” educators and litigators employ this celluloid textbook to "discuss criminal procedures, courtroom decorum, professional responsibility, unethical behavior, the role of the judge in a trial, efficient cross-examination, the role of expert witnesses and effective trial advocacy." That’s a lot of value for two hours of viewing time.

Whether we appear in a courtroom, an office, a classroom or elsewhere, we are almost always trying to persuade others. Adding humor can’t hurt and many times can help.

Last year, I celebrated a decade of posting investment governance insights to Pension Risk Matters. This year, I have two reasons to say "hooray." March 23 marks the eleventh year of posting analyses, research updates and essays about managing money, retirement planning and mitigating uncertainty. In addition, it is the debut of National Fiduciary Day. Sponsored by Fi360, the goal is to encourage individuals to be good stewards of other people’s money. 

Given our shared commitment to investment fiduciary best practices and the fact that I am certified by Fi360 as an Accredited Investment Fiduciary Analyst, I asked the organization’s top officers for their thoughts on this special day. They were kind enough to oblige.

Executive Chairman Blaine Aikin says "Happy Anniversary, Susan! Congratulations on having achieved 11 highly productive years of blogging. It’s only fitting that this comes on Fi360’s National Fiduciary Day. Keep up the great work and thank you for your valuable contributions to the profession!" Fi360 Director J. Richard Lynch adds "We have appreciated our long standing relationship with Susan as an AIFA designee and in particular, her contributions to the fiduciary discussion through her blog and as a past speaker at our annual conference."

There are lots of us who long ago recognized the importance of perturbing the conversation about investment governance. This includes the roughly 1.2 million visitors to Pension Risk Matters, many of whom have not been shy about offering their views. I am grateful to them all and look forward to a continued exchange of ideas.

For anyone who is stressed out and needs a literary cupcake or other type of relaxing break, check out my new inspirational gift book. I hope you enjoy The Big Squeeze: Hugs & Inspirations For Every Grown-Up Who Loves Teddy Bears. You can click here to order a copy on Amazon or contact me if you are interested in buying in bulk for a client event, sales meeting or fundraiser.

Here are a few of the reviews rolling in:

  • “What a chaming book! I like that it is addressed to grown-ups (even though I’m sure kids will love it). We are living through times in which most of us feel the need for a “security blanket” like a teddy bear, and this book is heart-warming. The pictures are wonderful (!), and the text flow is quite nice and easy. This will make a great gift.”
  • “Essential Guide for a Professional Life (and a fun read, too!) Do yourself a favor and get this book to read and keep handy – especially at those moments when you are entirely stressed with a difficult client, a difficult colleague or staffer, or facing the challenges of having to deal with the day-to-day stress in a professional life. This terrific book’s basic premise is “to ACCEPT that everyone has ups and downs, CELEBRATE triumphs, HEAL the hurts, LOVE one another, SHARE the good times and bad and TRY new adventures when it feels right.” These messages are presented in a fun and interesting way that begs revisiting it as a “sourcebook” for carrying on! Of note is that, while this author is a nationally renown economics and finance professor, lecturer and author of significant literature on pension risk matters, I believe that The Big Squeeze : Hugs & Inspirations For Every Grown-Up Who Loves Teddy Bears, may be one her best contributions to the canon of literature. I have purchased two copies already – one for me and one for a friend. I’ll be ordering more for some of my clients and colleagues. Highly enjoyable read!”
  • “I loved the book, The Big Squeeze. As I read through it my heart actually began to warm. The words and bright pictures are very cheering. During a period of loss in my life, this book is a source of comfort and inspiration.”
  • “I greatly enjoyed this book, and will turn to it often to read again. It is a perfect gift for anyone who would appreciate cheerful words and colorful photos, especially after a difficult day. As a book about the importance of kindness, The Big Squeeze places things in proper perspective, and is beautiful in its simplicity.”

Let me know how you like The Big Squeeze: Hugs & Inspirations For Every Grown-Up Who Loves Teddy Bears.

The issue of excess has been on my mind lately, mostly focused on my fragrance collection but now expanding to the topic of investment risk management. More specifically, as I continue to lead workshops about retirement plan risk management for the Professional Risk Managers’ International Association ("PRMIA"), I am pondering whether too much of a so-called "good thing" makes sense. 

By way of background, friends and family know I am a perfume aficionado. Yes, the ubiquitous "free" gift with purchase is a plus but I do truly enjoy trying new scents. I’m not alone. According to a February 23, 2016 article on the Beauty Stat website, 2015 sales of "prestige beauty" products grew more than seven percent to $16 billion and "mass beauty" product sales climbed two percent to nearly $22 billion in the United States.

Colleagues know that I have spent several decades in the risk management industry with positions that include trading, compliance and expert testimony, depending on the year. I am the author of an entire book and dozens of articles about investment risk governance. I strongly believe in the importance of establishing an appropriate risk management protocol, following said policies and procedures and regularly reviewing whether risk management actions are effective or need to be tweaked. I likewise believe there are lots of retirement plans that should be doing much more when it comes to identifying, measuring, managing and monitoring relevant risks.

Coming back to this issue of "too much" risk management, the critical question is whether investment fiduciaries can be too cautious. Most reasonable people would likely say "yes." Regardless of plan design, if an investment portfolio is overly skewed to seemingly safe assets or funds of "safe" assets, expected return could be insufficient to meet long-term needs. A discussion about what constitutes "safe" assets is left for another day except to say that every investment has some risk. Even putting one’s money under the bed could be risky if the house burns down. Another consideration is the cost of hedging. There is no free lunch. All fees and expenses associated with risk management, including the cost of putting a good technology system in place, should be part of any risk-adjusted performance assessment.

Retirement plan fiduciaries and their advisors are well served by identifying primary goals, major obstacles and both short-term and long-term nightmares that would generate serious pain for participants. Said differently, risk management, like perfume, is a good thing unless it prevents someone from achieving important milestones. As for me, I just bought a new bottle of perfume but resisted buying the other two I wanted. This should help me with my goals of decluttering and save more money.

As a follow-up to my January 12, 2017 announcement about retirement plan risk management education with the Professional Risk Managers’ International Association ("PRMIA"), I am delighted to announce a co-presenter for the March 2, 2017 learning event. Distinguished economist Dr. Lee Heavner will join me to talk about hedging techniques, the valuation of derivatives and structured products and the monitoring of investment-related risk as part of "Use of Derivatives in Pension Plans." Click here to read Lee Heavner’s impressive bio as a managing principal and financial expert with Analysis Group, Inc. Dr. Heavner and Dr. Mangiero have worked on multiple investment disputes and are the authors of "Economic Analysis in Fiduciary Monitoring Disputes Following the Supreme Court’s ‘Tibble’ Ruling" (Bloomberg BNA Pension & Benefits Daily, June 24, 2015).

Session Two will convene from 10:00 am EST to 11:15 am EST live this Thursday. If you cannot make it in real time, the event can be downloaded for later viewing. It is the second event of four CPE-qualified events. Speakers will examine risk management for retirement plans from both a governance and economics perspective. Topics to be discussed include the following:

  • Current usage of derivatives by retirement plans for hedging purposes;
  • Financially engineered investment products and governance implications;
  • Fiduciary duties relating to monitoring risks and values of derivatives and structured products; and
  • Suggested elements of a Risk Management Policy Statement.

Join us for this talk about an important issue – risk management for retirement plans!