Data & Research June 23, 2014

Americans More Confident About Their Finances

More than eight in 10 Americans (83%) are optimistic about their financial future, says a new survey from Lincoln Financial Group.
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This 2014 figure is up from 78% in 2013 and 68% three years ago, according to Lincoln’s Measuring Optimism, Outlook and Direction (MOOD) of America Survey. In addition, three in five respondents (60%) believe their financial situation will get better during the next year, which is nearly twice as many compared to 2011, when just 33% anticipated financial improvements in in the next year. 

The MOOD survey also finds that the majority of respondents (87%) are optimistic about their overall future. That finding is up 7% from a year ago and 15% from 2011, the first year the survey was conducted.

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Feeling More in Control

Almost three-quarters (71%) of respondents in 2014 believe they are in control of their finances, their health and their overall lives, compared with 68% in 2013 and 66% in 2011.

The survey finds that those who believe they are in control when it comes to their financial future are more likely to prioritize saving for retirement (69% in 2014 compared with 62% in 2013) and actively protect their wealth, assets and savings (68% in 2014 compared with 62% in 2013).

Other financial priorities identified by “in control” Americans include:

  • Being debt free (73% in 2014, compared with 75% in 2013);
  • Paying credit card bills in full each month (71% in 2014, compared with 68% in 2013);
  • Paying for their child’s education (48% in 2014, compared with 61% in 2013); and
  • Meeting regularly with a financial professional (20% in 2014, compared with 19% in 2013).

Retirement Preparedness

While the survey finds that Americans are optimistic about the future, there is also a disconnect when it comes to savings preparedness, particularly for retirement. For instance, although 58% of respondent say protecting their wealth is more important today than five years ago, fewer than two in 10 (15%) feel they are very prepared to protect their wealth. And while more Americans overall feel more prepared for retirement (58% in 2014 versus 55% in 2013), just 18% say they are very prepared for retirement, about the same from a year ago.

Retirement preparedness is a different story for in-control respondents. Almost seven in 10 of them (68%) say they are prepared for retirement, with 23% saying they are very prepared. In-control respondents are found to be more likely to rely on financial professionals for expertise and advice, with 42% saying they use advisers for support, compared with 31% of those “not in control.”

Dennis R. Glass, president and CEO of Lincoln Financial Group, based in Radnor, Pennsylvania, believes that through education and by raising awareness of the issues that are at the heart of financial preparedness, employees can bridge the gap between inertia and activity when it comes to their financial futures.

The MOOD survey is the third in a series where the company has polled Americans on various topics, including financial attitudes and behaviors. The first survey was conducted in late 2011, and released early in 2012.

The 2014 survey is based on online research conducted by Whitman Insight Strategies, on behalf of Lincoln Financial Group. The research was conducted in late March, among 2,352 adults 18 years of age and older across the United States. An executive summary about the survey can be found here.

Lincoln Financial Group is a provider of retirement, insurance and wealth protection expertise.

Compliance June 23, 2014

Firm Settles with SEC for Pay-to-Play Violations

TL Ventures Inc. has settled with the Securities and Exchange Commission (SEC) in a case involving pay-to-play rules for investment advisers.
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The SEC had alleged that the Philadelphia-area private equity firm had violated pay-to-play rules by continuing to receive advisory fees from city and state pension funds following campaign contributions made by an associate in 2011 to the governor of Pennsylvania and a candidate for mayor of Philadelphia. The firm agreed to settle the charges, paying nearly $300,000.

Pay-to-play rules adopted in 2010 prohibit investment advisers from providing compensatory advisory services—either directly to a government client or through a pooled investment vehicle—for two years following a campaign contribution by the firm or certain associates to political candidates or officials in a position to influence the selection or retention of advisers to manage public pension funds or other government client assets.

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An SEC investigation found that TL Ventures violated pay-to-play rules by continuing to receive compensation from two public pension funds—Pennsylvania’s state retirement system and Philadelphia’s pension plan—within two years after an associate made a $2,500 campaign contribution to a Philadelphia mayoral candidate and a $2,000 campaign contribution to the governor of Pennsylvania.

The mayoral position appoints three of the nine members of the Philadelphia Board of Pensions and Retirement, says the SEC, and a mayor can therefore influence the hiring of investment advisers for the public pension fund. The 11-member board of Pennsylvania’s state retirement system includes six gubernatorial appointees. Therefore, says the SEC, a governor can influence the hiring of investment advisers for the public pension fund. After the contributions, TL Ventures improperly continued to receive compensation from the pension funds for those advisory services.

“We will use all available enforcement tools to ensure that public pension funds are protected from any potential corrupting influences,” says Andrew Ceresney, director of the SEC Enforcement Division, based in Washington, D.C. “As we have done with broker/dealers, we will hold investment advisers strictly liable for pay-to-play violations.”

LeeAnn Ghazil Gaunt, chief of the SEC Enforcement Division’s Municipal Securities and Public Pensions Unit, adds, “Public pension funds are increasingly investing in alternative investment vehicles such as hedge funds and private equity funds. When dealing with public pension fund clients, advisers to those kinds of investment vehicles should be mindful of the restrictions that can arise from political contributions.”

The SEC’s orders instituting settled administrative proceedings also charged TL Ventures and an affiliated adviser, Penn Mezzanine Partners Management L.P., with improperly acting as unregistered investment advisers. According to the orders, TL Ventures and Penn Mezzanine separately claimed to be exempt from SEC registration in March 2012. However their operations were closely integrated and significantly overlapped. Because they were not operationally independent of each other, TL Ventures and Penn Mezzanine should have been integrated as a single investment adviser for purposes of registration requirements or determining the applicability of any exemption, according to the SEC.

The SEC’s order finds that TL Ventures violated Sections 203(a), 206(4) and 208(d) of the Investment Advisers Act of 1940 as well as Rule 206(4)-5. TL Ventures is ordered to pay disgorgement of $256,697, prejudgment interest of $3,197 and penalty of $35,000.

TL Ventures agreed to be censured and to cease and desist from committing or causing any violations and any future violations of the provisions referenced in the order. TL Ventures neither admitted nor denied the findings in consenting to the SEC’s order.

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