Thursday, October 8, 2009

Firm owners take it in the wallet


INVESTMENT NEWS
September 13, 2009

By KEN TARBOUS


While few independent advisory firms were able to completely avoid salary cuts, the owners of many firms reduced the extent of those cuts by slashing their own paychecks in 2008.

The 2009 Moss Adams/InvestmentNews Adviser Compensation and Staffing Study found that the heads of nearly 70% of the 757 independent advisory firms surveyed cut their own salaries last year — in many instances to a greater degree than they asked their employees to absorb.

“The owners have tried to take most of the pain themselves, particularly the firms that are better-positioned in the long run,” said Matt McGinness, a principal at Best Practices Research, the research and consulting firm that analyzed the survey results. “They have done that [rather than] cutting staff.”

Enlarge This PhotoIn many cases, the owners' pay cuts helped forestall, or even avoid altogether, widespread salary reductions, Mr. McGinness said.

For employees, seeing a firm owner take a bigger pay cut than they had to is something of a morale booster, said Sean Cunniff, research director in the brokerage and wealth management practices at The Tower Group Inc.

“It is tough medicine in the short run, but it can pay for itself many times over in the long term,” he said.

Indeed, “these times will define the character of firms,” said Philip Palaveev, president of Fusion Advisor Network, which provides independent advisory firms with business management consulting, marketing support, advice on best practices and other tools. “There's a lot of research that culture is created [during time of] crisis.”

George Tamer, director of strategic relationships at TD Ameritrade Institutional, whose team has worked with more than 1,800 advisors this year, said that beyond cutting their own compensation, owners of advisory firms are trying to find ways to reduce expenses, such as renegotiating equipment leases and attacking operational inefficiencies, before cutting employee compensation.

Automatic enrollment quadruples over three-year period among retirement plans run by Vanguard



August 26, 2009


By KEN TARBOUS

About 20% of the defined contribution plans administered by The Vanguard Group Inc. had adopted automatic enrollment by the end of last year, up from just 5% three years earlier, according to a recent study by Vanguard.

“How America Saves 2009” also found that employees covered by automatic enrollment plans at the Malvern, Pa-based mutual fund company had an overall participation rate of 84%, compared with 60% for plans with voluntary enrollment.

At the end of 2008, about half of Vanguard’s 2,200 defined contribution plans had designated a qualified default investment alternative and, of those, 85% chose a target date mutual fund.

“This means that more people are being defaulted into [target date funds],” Vanguard spokeswoman Linda S. Wolohan said yesterday.

The survey also found that decreases in participant account balances were not as drastic as might have been expected.

Participants who had balances both at the start and end of the 2008 experienced a median decline of 14%.

The median decline for pre-retirees — those ages 55 to 64 — was 16%.

On average, participants contributed 7% of their salaries to their retirement accounts in 2008, compared with 7.3% in 2007, the survey found.

The drop is due to the 3% deferral rate set by many automatic enrollment plan sponsors, said Vanguard.

The survey, which was released Aug. 19, looked at the behavior of more than 3 million participants.