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3 Facts all Plan Sponsors Need to Know and Rules to Follow.
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3 Facts All Plan Sponsors Need to Know and Rules
to Follow
People Like Us Invest Like This™
TruNorth Capital Management, LLC ·∙157 S. Kalamazoo Mall, Suite 240-‐3 ·∙ Kalamazoo, MI 49007 ·∙ TruNorthCapital.com ·∙ ©2013
Presented By: TruNorth Capital Management, LLC
Most investors fail to earn the returns the market provides, driven by high-‐fee financial advisors, poor scienFfic stock and fund selecFon, and bad behavior-‐driven market-‐Fming.
Now more than ever, Plan Sponsors need to partner with an independent, Fiduciary Investment Expert that takes liability to help manage the onerous responsibiliFes assigned under ERISA.
Plan Sponsors are Under Attack! Breach of fiduciary duty is the fastest-‐growing driver of ERISA lawsuits involving securiFes fraud and quesFons about investment-‐risk governance and prudence.
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Ø Sole responsibility and takes liability to select, monitor and replace a plan’s investment opFons.
Ø Ensures all fees paid for investment services are reasonable.
Ø Fiduciary Status under ERISA. Don’t be fooled -‐ nearly all other providers don’t really assume liability.
The Fiduciary with Discretion …
1 Fiduciary Investment Expert that takes liability
Fiduciary Status w/ Discre1on
Compare Broker / Dealers
Can’t YES
Insurance Companies
Mutual Fund Companies
Banks/Trust Companies
Other RIAs
Can But Won’t
Can’t Can But Won’t
Rarely
What Providers Really Take Liability and Protect Plan Sponsors?
A fiduciary relaFonship that truly aligns TruNorth Capital with the interests of the Plan, its parFcipants and their beneficiaries.
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Ø Walmart, Merrill Lynch Agree To Pay $13.5 Million To SeQle 401(k) Fiduciary Lawsuit.
Ø Fidelity Sued by Employees Over Its Own 401(k) Plan.
Ø Prudential, Cigna Agree To Pay $35 Million to SeQle Class-‐AcFon With Cigna Workers.
Ø Mass Mutual 401(k) LiFgaFon Into New Territory Over Annuity and Stable Value Funds.
Plan Sponsors are Under
Attack!
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The Plaintiff’s Bar Strikes…
#FEES
1.5% Fees 0.5% Fees Returns $138,000 $202,000 Investment $25,000 $25,000
$0
$50,000
$100,000
$150,000
$200,000
$250,000
Balance a:
er
25 Years
The Long Term Cost of Mutual Fund Expenses
7% Rate of Return Assumed
Big Issue for Plan Sponsors
$ $ $ $ $ $ $ $
1.00% 0.77% 0.68% 0.68% 0.63% 0.59% 0.44%
0.08%
Emerging Market Funds
US Small Cap Funds
Int’l Large Cap
US Mid Cap Funds
Avg. Paid by 401(k)
Participants
US Large Cap Funds
Interm. Term Bond
Avg. Stock
ETFs @ TruNorth
What You Pay …
Average annual fund management expenses as a % of assets.
$5,200 in annual internal fund expenses could be saved for par1cipants by using Index and Exchange Traded Funds (ETFs) per $1,000,000 in Plan assets.
Lagging
Lagging
Lagging
Lagging
Lagging
BeaFng
BeaFng
BeaFng
BeaFng
BeaFng
Investors are Better Off Owning the Market
77% 23% U.S. Large Cap Stock Funds
U.S. Mid Cap Stock Funds
75%
64%
57%
56%
25%
36%
43%
44%
Over the last 5 years,
Actively Managed
Funds have
trailed the
indexes they’re
supposed to beat! Foreign Large Cap Stock Funds
Emerging Market Stock Funds
U.S. Small Cap Stock Funds
Percentage of AcVve Mutual Funds Lagging or BeaVng their Index – 5 Years Ended 6/30/13
Most Investors
Fail 3
$18,840
$23,494 $24,214
$14,808
$20,002
$27,402 $24,774
$15,381
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
US Large Cap US Mid Cap US Small Cap Bonds
AcFvely Managed Funds Index Funds
Over 10 Years, Indexing Won! Here’s how $10,000 grew in the 10 years ended June 30, 2013, in 4 mutual fund categories. Returns shown are for the average fund in each category versus popular index funds designed to replicate returns for each sector as a whole.
$1,162 Indexing Benefit
$3,908 $560 $573 Indexing Benefit Indexing Benefit Indexing Benefit
Scientific Indexing is an Investment Multiplier
80th Percentile
90th Percentile
74%
76%
78%
80%
82%
84%
86%
88%
90%
92%
Simple Index Poreolio MulFple Index Poreolio Indexing Outperforms Active Management
AND Increases Over Time
Investors Holding Only Index Funds Have A Better Chance for Success
RICHARD A. FERRI, CFA and ALEX C. BENKE, CFP®
Odds of Top Performing Actively Managed Funds Repeating Success are Low
and Get Worse Over Time
7.0%
6.5%
6.2%
6.3%
6.4%
6.5%
6.6%
6.7%
6.8%
6.9%
7.0%
7.1%
2011-‐2013 2009-‐2013 Percent of Actively Managed Funds Ranked in Top Quartile of Returns
Rearview Mirror Fund
Investing Doesn’t Work
Perfecting Investment Performance
Blending Equity Indexes to Improve the Probability of Success
Strategies Designed to Meet Your ObjecFves
Growth
Growth & Moderate Income Growth & Income Income & Growth
Income & Moderate Growth Income
33%
8%
14%
14%
9%
6%
8%
4% 4%
US Equity Broad Market US Large Cap Value
US Large Cap / Mid Cap Equal Weight US Mid Cap / Small Cap US Small Cap Value
US Microcap
InternaFonal Broad Market InternaFonal Emerging Markets InternaFonal Small Cap
ParFcipant Investment OpFons
Self-‐Directed – Menu of Index Funds or ETFs*
Managed Poreolio
Self-‐Directed Brokerage
Qualified Default Investment AlternaFve*
*TruNorth takes liability for fund selecFon.
404(c) Protection With Default Investment Option
Capture what the markets already provide in growth and returns at a lower cost.
• Independent, fee-only and zero commissions is what we do – always. • Our investment philosophy is based on academically validated
portfolio science to drive intelligent investment strategies. • Our process is focused on asset creaFon with customized cash flow modeling,
scienFfically driven by Monte Carlo probability analysis. • Get more from every dollar with a low investment advisory fee
at 0.25%. Lower fees is just beQer poreolio science. • Exchange Traded Funds (ETFs) used by TruNorth trade with no
transactions fees. • We have no hidden costs and our low fee is all you will ever pay us. • We provide a Quarterly Account Review, which is your scorecard on
how your assets are performing.
Prohibited TransacFons and ExempFons
Bonding
Investment Policy Statements
Compliance TesFng
Investment OpFons
Fee Disclosures
Plan Amendments
Summary Annual Reports
Form 5500 Enrollments
Avoid Pitfalls…
Blackout NoFces
Qualified Default Investment AlternaFve
The TruNorth team honed intelligent investment strategies over decades of experience at leading firms like Goldman
Sachs, Greenleaf Trust and PNC. Brian Mullally, Esq., CEO and Co-‐Founder Brian is a graduate of Georgetown University and the Notre Dame Law and MBA programs. He completed the Applied Investment Management Program at Notre Dame, and is a member of the State Bar of Michigan. Aqer his undergraduate educaFon, he successfully completed the two-‐year financial analyst program at Goldman Sachs working with equity traders, prior to graduate law and business school. Brian also was a Vice President, Trust RelaFonship Officer and Research Analyst at Greenleaf Trust, and graduated from the American Banker's AssociaFon NaFonal Graduate Trust School. He holds the Series 65 qualificaFon as an Investment Advisor RepresentaFve (IAR). Brian has been using mulF-‐factor, market-‐return focused investment strategies since 1995. He is passionate about helping investors save and more intelligently use unbiased science to invest assets at a fracFon of the cost.
[email protected] (269) 823-‐4939
John Schoolman, President and Co-‐Founder John is a graduate of the University of Illinois at Urbana/Champaign and graduated with honors from the American Banker's AssociaFon NaFonal Graduate Trust School. He earned the CerFfied Trust and Financial Advisor (CTFA) and CerFfied ReFrement Services Professional (CRSP) designaFons. John holds the Series 65 qualificaFon as an Investment Advisor RepresentaFve (IAR). He is an investment operaFons and reFrement plan innovator and has been part of the founding team of successful investment firms like Greenleaf Trust and TruNorth and is a highly regarded expert on reFrement plan maQers and ERISA. Has supported internal and external parFes on compliance and plan administraFon, prepared plan documents for clients, supervised team members and maintained record-‐keeping responsibiliFes for complex reFrement plans such as “new comparability” (cross-‐tested) plan designs and ESOPs. Has prepared and submiQed hundreds of DeterminaFon LeQers to the IRS, submiQed numerous applicaFons under government voluntary compliance programs and Form 5500s.
[email protected] (269) 823-‐4118
Disclosures TruNorth Capital Management, LLC (TruNorth) is an investment advisor registered in, and regulated by, the State of Michigan. All clients and potenFal clients have access to important informaFon about our business methods, fees, professional qualificaFons and all other perFnent business informaFon. TruNorth Form ADV Part 1 Form ADV Part 1 is a U.S. SecuriFes and Exchange Commission (SEC) filing that provides the basic business structure of TruNorth and explains how we are legally registered. To access Form ADV Part 1 from the SEC website go to: hQp://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_Search.aspx TruNorth Form ADV Parts 2A & 2B Form ADV Parts 2A & 2B provides details of the services we offer as well as the backgrounds of TruNorth's principals. It also includes informaFon about our fees, investment strategies and how we conduct our business. See below to download Form ADV Parts 2A & 2B. hQp://www.trunorthcapital.com/legal/ Disclaimer Past performance may not be indicaFve of future results. All investment strategies have the potenFal for profit or loss. Changes in investment strategies, contribuFons or withdrawals may materially alter the performance, strategy and results of your poreolio. Different types of investments involve varying degrees of risk, and there can be no assurance for a client’s investment poreolio. Economic factors, market condiFons, and investment strategies will affect the performance of any poreolio and there are no assurances that it will match or outperform any parFcular benchmark.
Perfecting Investment Performance™
TruNorth Capital Management, LLC ·∙157 S. Kalamazoo Mall, Suite 240-‐3 ·∙ Kalamazoo, MI 49007 ·∙ TruNorthCapital.com ·∙ ©2013
Website TruNorthCapital.com
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LinkedIn www.linkedin.com/company/trunorth-‐capital-‐management-‐llc
Twitter @TruNorthCapital
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Email [email protected]
Phone 877-‐469-‐0446
