Client Service March 15, 2017

Family Conversations Increase Confidence in Financial Future

Ameriprise Financial says a financial adviser can help families understand their full financial picture with a customized approach to fit their unique needs.
Reported by

More than half (52%) of Americans say they feel extremely or very confident about their family’s financial future, due to regular family conversations about money, according to research released by Ameriprise Financial.

The study found family members tend to discuss different topics with different relatives. Adult children are most likely to initiate conversations with their parents about managing current finances (74%), the cost of health care (73%) and long-term financial goals (70%). When parents take the lead in financial discussions with their adult children, they also bring up managing debt (73%). In general, survey respondents report they are less likely to talk to their family members about estate planning and inheritance but it’s still a popular topic (67% talked to their parents, and 69% talked to their adult children about this topic).

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

Though estate planning can be a tough topic to initiate, families who have talked about it say the discussion went much smoother than anticipated. The overwhelming majority said the conversations were straightforward, easy and relaxed as opposed to awkward or difficult.

“The hardest part is starting the conversation, which is where a financial adviser can make a difference,” says Marcy Keckler, vice president of financial advice strategy at Ameriprise Financial. “Working with a financial professional can help family members get on the same page and could mean the difference between leaving behind a loving legacy and leaving behind a headache and hurt feelings.”

NEXT: Inheritance may cause conflict

Most survey participants (83%) want to leave money or assets to a loved one; however, only 64% feel they are on track or prepared to leave an inheritance and even less (50%) have a formal plan in place. Only 21% of parents who are planning to leave something to their children have told them how much inheritance they will receive. As a result, expectations don’t always match reality. The majority of respondents (53%) expected to receive more than $100,000. In fact, the majority (52%) of those who have received an inheritance got less than $100,000; an amount that only matched the expectations of 28% of those surveyed.

Money transferred within families can often cause conflict. Nearly one-quarter (24%) of respondents think an inheritance will cause tension or disagreements with family members—a sentiment that rings true for one-quarter of individuals who have received money following the loss of a loved one.

Both parents and their adult children say the top trigger for conversations around estate planning is aging. But, age can also create a barrier between family members when it comes to who should initiate the conversation. The number one reason why adult children haven’t talked with their parents about the topic is that they “don’t believe it’s their place to raise the issue.” Parents, meanwhile, don’t bring up the subject because “they haven’t thought about it” (25%), or “don’t feel it’s appropriate” (19%).

Ameriprise says a financial adviser can help families understand their full financial picture with a customized approach to fit their unique needs.

Compliance March 15, 2017

Lawsuit Claims Chesapeake Energy Stock Was Imprudent 401(k) Investment

Among other things, the plaintiff alleges the plan committee ignored the numerous warning signs that Chesapeake was an imprudent investment for retirement assets, and allowed the plan to invest more than 44% of its assets in this one stock.
Reported by

A participant in the Seventy Seven Energy Inc. Retirement & Savings Plan has filed a lawsuit on behalf of the plan and a class of similarly situated participants in the plan against the 401(k) Fiduciary Committee, other plan fiduciaries, as well as Delaware Charter Guarantee & Trust Company d/b/a Principal Trust Company.

The lawsuit alleges that Committee Defendants and Principal Trust wrongfully and imprudently invested the plan’s assets in Chesapeake Energy Corporation stock in the plan’s employee stock ownership plan (ESOP) component. The complaint says, under the Employee Retirement Income Security Act (ERISA), ESOPs must invest in employer securities, and Chesapeake stock was not an employer security. The complaint says defendants should not have allowed the plan to make the investment.

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

The lawsuit also alleges the plan’s investment in Chesapeake stock violated ERISA’s prudence requirement “and was reckless under any common-sense investment strategy.” It noted that Chesapeake is in the oil and gas industry, a very volatile, high-risk sector of the economy subject to frequent boom-and-bust cycles. The plaintiff alleges the Committee Defendants ignored the numerous warning signs that existed before the class period showing that Chesapeake was an imprudent investment for retirement assets, and instead allowed the plan to invest more than 44% of its assets in this one stock. The complaint also says Committee Defendants did not take any action as the price of Chesapeake stock declined more than 70%, from $29 per share to $7 per share during the class period, causing the plan to lose tens of millions of dollars in assets that should have been used for participants’ retirement.

According to the complaint, the Committee Defendants violated their duty under ERISA to diversify the plan’s investments. Despite recognizing that investing in a single company’s securities was “not diversified and exposes investors to a higher risk of loss,” the Committee Defendants allowed the plan to have a high percentage of its assets concentrated in Chesapeake stock and let the plan buy millions of dollars of additional shares of Chesapeake during the class period.

In addition, the complaint says, the Committee Defendants violated their duty under ERISA to accurately convey the plan’s terms to participants. The Committee Defendants told participants the ESOP’s purpose was to invest in the stock of Seventy Seven Energy, Inc., rather than truthfully telling them that the ESOP was primarily, and heavily, invested in Chesapeake stock throughout the class period.

Among other things, the lawsuit seeks an order compelling the Committee Defendants and Principal Trust to make good to the plan all losses resulting from their breaches of their fiduciary duties, including loss of vested benefits to the plan resulting from imprudent investment of the plan’s assets; to restore to the plan all profits defendants made through use of the plan’s assets; and to restore to the plan all profits which the plan and participants would have made if defendants had fulfilled their fiduciary obligations.

The complaint in Myers v. The 401(k) Fiduciary Committee for Seventy Seven Energy, Inc. is here.

«