Data & Research August 21, 2008

Generation(s) Dissatisfied

The Baby Boomers are the only group who like their name.

Reported by

That was the discovery of a recent survey by Charles Schwab, which analyzed how the many different age groups view retirement (see Four Generations Agree: We Need More Advice). The survey also revealed the negative and positive opinions generations have of each other. The generation lineup is:

Generation Y (ages 13 to 31)
Generation X (ages 32 to 43)
Baby Boomers (ages 44 to 62)
The Silent Generation (ages 63 to 83)
The Greatest Generation (ages 84 or older)

Why is it that Baby Boomers get all the good stuff anyway? Some in Generation X could nix their one-letter name, and some in Generation Y wonder why they were stuck with such a generic name next in the alphabet. Among Gen Y, 33% would prefer their digital prowess be recognized as the “Internet Generation,’ and a quarter of Gen X would prefer to be “Generation Tech.’ (It sounds like the two will have to battle it out.) The Silent Generation spoke up on how much they dislike being called “Silent’ or “Invisible.’ Almost half (44%) would prefer the “Responsible Generation.’

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters. 

Better with Age?

The view that younger people have no respect for older people does not hold up in this survey, according to a release of the results. In fact, the Silent (33%) and the Greatest (30%) generations are the most admired by all age groups. The survey analysis notes that this makes sense, as these are our parents and grandparents. And—as of yet—they are often benefactors rather than burdens (the Silent Generation was deemed the most generous by 40% of respondents).

It should be noted that the survey results do not necessarily tell us whether we see people as getting better with age, or if we simply admire certain generations.

Generation Y is most renowned for being the most self-indulgent. A 53% majority (including those in Generation Y) responded this way. (What do you mean? Telling everything about oneself on a Facebook/MySpace/blog is self-indulgent?) Those slightly older than Generation Y still beat them out in the creativity department. A 41% plurality sees Generation X as the most innovative, followed by Baby Boomers (25%), and Generation Y (22%), according to the results.

Baby Boomers and Generation X—the two generations running our offices—are not only seen as creative, but also productive, with Baby Boomers seen as the most productive by almost half (45%) and Generation X by 32%.

The results showed no clear-cut taker for having the most positive effect on society, but Baby Boomers received the most votes (35%) followed by Generation X (25%). There is also no consensus as to which generation is most socially conscious, but Baby Boomers (34%) and Generation X (26%) top the list.

The survey, conducted by Harris Interactive, asked almost 4,000 Americans aged 21 to 83 what they thought of different generations.

More information about the study is available at www.harrisinteractive.com or here.

Compliance August 21, 2008

EBSA Clarifies Investment Advice Regulations

Two proposed regulations released Thursday from the Department of Labor (DoL) include a model for advisers to satisfy the fee disclosure requirement for independent retirement account (IRA) and 401(k) investment advice.

Reported by

Ellie Behling

The components of the proposals clarify the Pension Protection Act (PPA) exemption for investment advice, according to the DoL. The PPA had added an exemption that allowed participants of 401(k) plans and IRAs to receive investment advice by using an unbiased computer model or an adviser compensated on a “level-fee’ basis. After receiving comments since December 2006 about clarifying computer models and developing the model for the disclosure of adviser fees, the DoL released Thursday’s proposals.

In a telephone press conference Thursday, Bradford P. Campbell, assistant secretary of labor for Employee Benefits Security Administration (EBSA) at the DoL, said this is part of the continued efforts to protect participants from receiving investment advice from individuals with a vested interest in products.

For more stories like this, sign up for the PLANADVISERdash daily newsletter. 

Campbell said the proposal could this will open the window for more providers to offer investment advice—giving plans who can only afford a one-stop-shop service to be able to receive investment advice for their participants. The DoL expects advice available to participants to increase from 20% of participants to 60% of the participants.

“One of the most important elements of this proposal is we are facilitating one-on-one investment advice,’ Campbell said. “People find advice most valuable when it’s being delivered face to face with another person, and these regulations facilitate that.’

Proposal Components

The proposed regulation gives more guidance on the requirements of the PPA exemption. The DoL said the three components of the proposal are:

general guidance on the exemption requirements, including computer model certification
a non-mandatory model form that advisers can use to satisfy the fee disclosure requirement
a class exemption that permits advisers to provide individualized advice to a worker after giving advice generated by use of a computer model.

The proposal outlines advice requirements, requiring the adviser to obtain necessary information about the participant, such as age and financial situation. The participant must also receive full disclosure of the adviser’s fees, and whether the adviser has any financial interest in the advice or who the adviser is connected to. Also, the plan fiduciary must review the advice, and there will an annual audit by an independent auditor to ensure the plan is following the investment advice rules.

Separately, the department also released its determination relating to the feasibility of using computer models for providing investment advice to participants of IRAs, the agency said.

“These proposals would give workers greater access to investment advice so that they are better equipped to manage and monitor their 401(k) plans and Individual Retirement Accounts,’ said U.S. Secretary of Labor Elaine L. Chao, in a DoL release.

The proposed regulation would be effective 60 or 90 days after the publication is released, which Campbell expects to be sometime next year.

The DoL is now in a 45-day comment period accepting comments on the proposal. Written comments on the investment advice proposals should be addressed to the Office of Regulations and Interpretation, Employee Benefits Security Administration, Room N-5665, U. S. Department of Labor, 200 Constitution Ave., NW, Washington, D.C. 20210, Attn: Investment Advice Regulations, or by email to e-ori@dol.gov, or through the federal e-rulemaking portal at www.regulations.gov. Earlier comments on the topic can be viewed here.

Last month, EBSA released disclosure requirements for plan sponsors to participants (see EBSA Issues New Participant Disclosure Regulations), and in December EBSA issued disclosure requirements for providers to plan fiduciaries (see EBSA Releases Proposed Revisions to Provider Fee Disclosures).