Compliance July 21, 2015

PBI Bank Settles with DOL over ESOP Transaction

PBI Bank will no longer serve as a trustee or service provider for any plan covered by ERISA, with a few exceptions.
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The Department of Labor (DOL) has reached a settlement with PBI Bank in a lawsuit regarding the bank’s role as trustee of the Miller’s Health Systems, Inc. employee stock ownership plan (ESOP).

In the suit, the DOL alleges that PBI Bank authorized the purchase of company stock by the plan for $40 million, an amount far in excess of the fair market value of the stock. It is also alleged that PBI Bank approved financing for the transaction at an excessive interest rate.

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The DOL charged PBI Bank with violating the Employee Retirement Income Security Act (ERISA) after it determined the stock purchase was not made for the primary benefit of participants and did not promote employee ownership in Miller’s Health. The suit sought to require PBI Bank to restore all losses suffered by the ESOP, plus interest.

A federal court in Indiana has entered an Agreed Order and Judgment requiring PBI Bank to pay $1,052,613 to the ESOP to restore alleged losses. The terms of the judgment also require PBI to pay $83,750 to Miller’s Health Systems and penalties of $113,636 to the department for violating ERISA.

Neither Miller’s Health Systems nor PBI Bank have acknowledged any wrongdoing in the matter. However, PBI Bank, a subsidiary of Porter Bancorp in Louisville, Kentucky, has agreed to refrain from serving as a trustee or service provider for any plan covered by ERISA, with a few exceptions.

Data & Research July 21, 2015

Advisers Make Investors More Confident About Retirement

However, only 26% of Americans surveyed report they work with an adviser.
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Americans are missing out on a great opportunity to work with advisers, Northwestern Mutual says in its survey report, “2015 Planning & Progress Media Study: The Value of Financial Advisers.”

Those who have partnered with an adviser are far more confident about their financial security in retirement—yet just one-quarter, 26%, of U.S. adults rely on an adviser when making financial decisions.

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It is not surprising, then that only 40% of U.S. adults have set financial goals, 30% regularly monitor their progress against their financial plan, 26% have identified strategies to meet their goals, 18% have sought advice from a financial adviser, 17% have established an ongoing relationship with an adviser, 12% have developed a written financial plan to address their goals on their own, and 8% have developed a written plan to address their goals with an adviser. Only 9% strongly agree that their plan could withstand market cycles.

Among the 40% who have set financial goals, the reasons appear to be reactive rather than proactive, with 59% saying they received a cash windfall, 38% saying they were challenged with an unexpected financial emergency, and 23% citing a change in either their or their spouse’s employment.

Americans are misinformed about how much they need to have saved in order to work with an adviser, with 30% saying one needs a certain level of assets, 27% saying they do not think they could afford one, and 19% saying it hinges on meeting an adviser they could trust.

NEXT: Working with an adviser

Among those who do have an adviser, the majority, 73% assessed the adviser’s experience and knowledge, 44% considered their reputation, and 34% looked into their client service.

Seventy-two percent of investors who use a financial adviser consider themselves disciplined or highly disciplined in their financial planning, compared to 46% of those without an adviser, and 89% say they feel financially secure or very financially secure, compared to 62% of those without an adviser. Seventy-nine percent of pre-retirees who have an adviser expect to be happy in retirement, compared to 65% of those without an adviser.

Investors with a financial adviser are also more focused on saving, with 76% describing themselves as savers, compared to 62% of people without an adviser. Sixty-four percent of those with an adviser say they have more savings than debt, compared to 39% of those without an adviser.

Another benefit of working with an adviser is accumulating a more diversified portfolio. Seventy-seven percent of those with an adviser have a savings account, compared to 61% of those without an adviser; 61% have an individual retirement account, versus 23% of those without an adviser; 49% are invested in stocks, versus 17% without; and 48% are invested in mutual funds, versus 11% without.

Americans definitely need the help of advisers to achieve their financial goals, says Steve Mannebach, vice president, field growth and development at Northwestern Mutual. “Financial planning is less about how much you have in assets and more about maximizing the assets you do have,” he says. People should not “let assumptions get in the way of the opportunity to reap the significant proven benefits of working with an adviser.”

Northwestern Mutual’s report is based on an online survey of 2,010 adults that Harris Poll conducted between January 12 and January 30, 2015. The report can be downloaded here.

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