Compliance August 31, 2010

Ford Settles Company Stock Suit with Advice

Ford Motor Co. will provide free financial advice to retirees and employees as part of an agreement to settle a lawsuit claiming the company should not have offered company stock as an investment in its retirement plans.  
Reported by

The Detroit News reports that under the proposed settlement, which must be approved in the U.S. District Court for the Eastern District of Michigan, Ford will provide free financial advice for four years to hourly and salaried retirees and employees who invested in Ford stock since April 2000. The company also will warn some employees and retirees with large holdings of company stock that they should consider diversifying their portfolios.  

Ford will pay nothing to those who lost significant funds in retirement plans; however, it will pay up to $1.5 million in legal fees to the attorneys representing the employee and retiree shareholders, and will cover the costs of notifying individuals of the settlement. Ford did not admit to wrongdoing. 

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Ford also agreed that if it restores a company match to retirement plans during the next three years, the contribution will come in cash — not Ford stock, as it has done in the past, according to the news report.  

Last year, U.S. District Judge Stephen J. Murphy, III denied a motion to dismiss a case brought by participants of Ford Motor Co.’s employee stock ownership plans claiming the plans’ investment in Ford company stock was imprudent (see Federal Judge Allows Ford ESOP Suit to Move Forward).  

The Detroit News noted that Ford employees have benefitted from the recent run-up in the price of Ford stock. The value of company stock held in retirement plans rose from $722 million at the end of 2008 to $2.7 billion last year.  

Ford’s turnaround is one reason the case is being settled without collecting any money for retirees or shareholders, according to the news report.
Data & Research August 31, 2010

Many Advisers Hesitant to Use Social Media

Although there are financial advisers who have adopted LinkedIn and other sites as part of their business, the vast majority remain on the fence.  
Reported by

In the “Independent Advisor Outlook Study” conducted by Charles Schwab in July, advisers were first asked which social media sites they use and for what purpose.  LinkedIn, the site used by over 75 million professionals to “exchange information, ideas and opportunities,” was the clear winner, with 51% of respondents already using it for professional and/or personal use. Facebook came in second, with 45% having an account (however the majority uses it strictly for personal use). Thirty-five percent of advisers use YouTube; again, mostly for personal use.  Fourteen percent of respondents use some sort of personal blog and 10% have started using Twitter.   

Perhaps the debate over social media will be centered on what exactly is the use of it.  The vast majority of respondents replied that they were “Skeptics” or “Tentative Users” when asked the question, “How would you describe yourself in terms of using social media in general?” Thirteen percent described themselves as “Eager Learners,” 10% as “Early Adopters,” and 2% as “Evangelists.”   

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The numbers are rapidly fluctuating however.  For earlier reporting on the use of social media among financial advisers, see “Advisers Use Social Media to Drive Growth, Connect with Clients.”  

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