The main article of our Investment Quarterly for the first quarter of 2010 looks at the controversy that has for many years raged in the financial services industry, and that with consideration of financial reform has spread to the halls of Congress, over whether stockbrokers should be required by law to adhere to the fiduciary standard of care for their clients that financial planners and investment advisors have long upheld. We explore what the fiduciary standard means for investors, and how a requirement to meet it would be problematic for stock brokers and insurance agents.

Kathleen Pender interviewed SCLC Principal Jon Chambers, head of the firm’s ERISA Consulting practice, for an article that appeared in the Sunday edition of April 11, 2010, on the recently launched BrightScope, a company that will provide independent ratings of 401(k) plans.

The main article of Investment Quarterly for the fourth quarter of 2009 should prove useful for several years. It addresses the change to eligibility for conversion of Traditional IRA accounts to Roth IRA accounts that took effect on the first day of 2010: all taxpayers are now eligible for such conversions. But is conversion a good idea? That’s the $64 question that the article explores. It provides a number of examples of situations investors might face, and examines the option from a number of angles. We hope you enjoy our latest IQ.

Topics include:

Examining the impact of Obama’s plans by Kathleen Pender, San Francisco Chronicle, Tuesday, January 26, 2010.

The White House on Monday previewed several middle-class tax cuts and spending programs that President Obama will propose in Wednesday’s State of the Union address.

Proposals include:

• Improve 401(k) plans by requiring better fee disclosure, encouraging employers to make unbiased investment advice available to workers, promoting annuities and other forms of guaranteed lifetime income and requiring better disclosure of target-date funds.

SCLC principal Jon Chambers appears in San Francisco’s KTVU Channel 2 May 18, 2009 special report on the state of 401(k) plans. The segment is reported by KTVU’s Consumer Editor, Tom Vacar.

While many mainstream media sources have been reporting on problems with 401(k)’s and the limited retirement savings opportunities available to American workers, SCLC doesn’t believe the news is all bad. Consequently, we were pleased to be involved to help communicate some of the good news.

Here is link to the full video report (you need to wait a few seconds for the video to load, and there is a brief commercial before the report plays).

This is no April fool’s joke.

On April 1st Patrick Collins addressed a meeting of the Estate Planning, Trust and Probate Law Section of Bar Association of San Francisco. The topic is “Changing Economic Conditions and Trust Investment Policy – Implications for Trustees and Beneficiaries.” Both SF Bar members and others are welcome.

The BASF announcement has all the details.

If you could not attend but would like a copy of the handout materials, please email Kelly Woodard

Given the magnitude of recent declines in the price of financial assets, commodities, and residential real estate, investors are coping with decisions about how to invest on a go forward basis. Our recent paper (appearing in our Investment Quarterly for Quarter 4, 2008] situates decision making within the context of investor ‘utility,’ where utility measures the investor’s aversion to declines in wealth as well as the investor’s satisfaction with gains in wealth.

For some investors, risk tolerance changes with increases or decreases in their level of wealth. However, many investment policies mandate a constant proportional weighting between stocks and bonds during both bull and bear markets. A fixed investment allocation is usually termed a “Constant Mix” asset management approach. Such an approach is defensible under a variety of commonly held assumptions; and, is often recommended as a reasonable alternative to the risks of market timing. Advisors advocating that investors “stay the course” during perilous market conditions implicitly assume that investors, in general, benefit from a Constant Mix approach.

Warning! Economic disaster is closer than you think.

Why have an investment reserve? The underlying mathematics of compound return indicate that the more volatile the investment, the lower a portfolio’s long-term growth rate, all else equal. An investment that losses 20% in period one needs 25% in period two in order to get back to even. Periods of negative returns not only decrease portfolio value but, if the portfolio is also funding retirement distributions, the distributions take dollars out of the portfolio at the worst possible time. In a nutshell, distributions multiply the bad consequences of negative returns and cap the benefits of positive returns. The Wall Street term for taking money out of portfolios during periods of economic distress is “feeding the bear.”

An article in the October 2008 edition of Trusts & Estates Magazine (“The Journal of Wealth Management for Estate Planning Professionals”) includes a ranking of the 100 largest U.S. Registered Investment Advisory firms by Assets under Management. SCLC ranked 47th.

Here’s the article: Asset-gathering Machines (subscription required)