If you missed the Strafford continuing legal education webinar on September 12, click here to download the slides about ERISA investment committee governance. The ninety minutes flew by, with each speaker having lots to say. Attorney Emily Seymour Costin addressed ways for companies to minimize the risks of being party to an ERISA lawsuit or, if sued, how best to mount a defense. Insurance executive Rhonda Prussack talked about ERISA fiduciary liability coverage. I gave an economist’s perspective about conflicts of interest, delegating to a third party such as an investment consultant, facts and circumstances considered by a testifying expert and fiduciary training.

I also broached the topic of benchmarking fiduciary actions as vital to good governance, something that deserves significant attention. Certainly policies, procedures and protocols can vary across ERISA plans. However, the importance of assessing whether committee members are doing a good job is universal, regardless of plan design.

One way to grade job performance is to create a matrix of relevant attributes and compare actual deeds to expectations of what a prudent investment fiduciary would do in similar circumstances. Although overly simplistic, the image above illustrates the general notion of ranking decisions from great to bad or somewhere in between. For a specific engagement, a scorecard would be much larger because there are dozens of categories to examine.

My recommendation to anyone with ERISA fiduciary responsibilities is to engage outside counsel for a fiduciary assessment and then have the law firm bring an investment expert on board to address economics, risk management and industry norms. By self-assessing, with the help of knowledgeable and experienced third parties, investment committee members have a golden opportunity to improve weaknesses and recognize areas of strength. When there are multiple solutions to a given problem, something that is more the norm than not, brainstorming with meaningful metrics can be invaluable.

Economist Dr. Susan Mangiero is pleased to announce that she will be speaking during an upcoming Strafford Live webinar on September 12, 2017 from 1:00 pm to 2:30 pm EST. The Continuing Legal Education (“CLE”) webinar is entitled “ERISA Plan Investment Committee Governance: Avoiding Breach of Fiduciary Duty Claims.”

She will be joined by a prominent ERISA attorney and a senior-level ERISA fiduciary liability insurance executive to discuss risk mitigation approaches that have the potential to help lower the likelihood of breach of fiduciary duty allegations. This program will also address effective litigation strategies, the importance of fiduciary liability insurance and the role of the economic expert in the event of litigation, arbitration, mediation and/or regulatory enforcement actions. Court cases including the recently adjudicated Tibble v. Edison matter will be discussed as part of the program.

Please join the distinguished faculty for what should be a relevant, timely and important conversation about suggested protocols and bad practices to avoid. For more information or to register, visit the Strafford website or call 1-800-926-7926, extension 10. Mention code ZDFCT to qualify for a fifty (50) percent discount. If you have questions you would like answered, please let Strafford know in advance or on the day of the live event.

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.

+ + + + + +

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.

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.

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!

Hot off the press, The Big Squeeze (Happy Day Press, 2017) by Dr. Susan Mangiero is the result of many months of research about positivity. Inspired by the enduring appeal of teddy bears for grown-ups of all ages, The Big Squeeze is a sweet and uplifting gift book focused on the undeniable truth that kindness to ourselves, and others, matters. Combining enchanting photos with motivational messages, The Big Squeeze invites readers 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. Every page is designed to generate smiles and to offer a relaxing break from everyday stress. The Big Squeeze is a great gift for anniversaries, baby showers, birthdays, engagements, holidays, promotions, weddings and any time a hug is welcome.

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 February 23, 2017 learning event. Distinguished attorney Meaghan VerGow will talk about ERISA litigation and fiduciary risk management as part of "Establishing Risk Management Protocols for Defined Benefit Plans and Defined Contribution Plans." Click here to read Meaghan VerGow’s impressive bio as law firm partner and ERISA expert with O’Melveny & Myers LLP.

Session One 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 debut 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:

  • Procedural prudence and the costs of ignoring fiduciary risk;
  • Risk management differences by type of retirement plan;
  • Industry norms and pitfalls to avoid;
  • Role of Chief Risk Officer, investment committee members and in-house staff; and
  • Suggested elements of a Risk Management Policy Statement.

Visit the PRMIA website to register for Session One and read about course content for Sessions Two through Four. Our exciting roster of co-speakers for these future events will be posted shortly on this blog at www.pensionriskmatters.com