The new Pension Protection Act of 2006 opens the door for ERISA fiduciaries – a registered investment advisor, bank, insurance company or broker/dealer – to be compensated for giving investment advice to retirement plan participants. The Act creates a prohibited transaction exemption to these fiduciaries subject to certain safeguards to protect participants from abuse. More on the details at a later date.

With January 1, 2007, the effective date of the prohibited transaction exemption, the marketing process has already started. The investment advice provider will hopefully take the plan’s demographics into account. And those demographics, suggests a 2006 study conducted by The Pension Research Council at the Wharton School, are not socio-economic factors but rather “money attitudes” which include:

  • Successful Planners  who have a strong, goal-oriented vision of a successful retirement
  • Up and Coming Planners who are similar to Successful Planners but don’t have as much confidence about their plans
  • Secure Doers who have a strong interest in savings, particularly out of a sense of responsibility or duty towards themselves or others
  • Stressed Avoiders who find financial matters to be a source of stress, anxiety and confusion
  • Live-for-Today Avoiders who are uninterested in the future

The study, “Money Attitudes” and Retirement Plan Design: One Size Does Not Fit All, conducted by Donna M. MacFarland, Carolyn D. Marconi, and Stephen P. Utkus can be downloaded here (PDF).