Prudent Investor Advisors' Scott Simon offers thoughts on the recent PBS' Frontline broadcast.
W. Scott Simon is a principal at Prudent Investor Advisors, a registered investment advisory firm. He also provides services as a consultant and expert witness on fiduciary issues in litigation and arbitrations. Simon is the recipient of the 2012 Tamar Frankel Fiduciary of the Year Award.
PBS' Frontline broadcast a 1-hour program entitled "The Retirement Gamble" on April 23. Everyone under the sun in the retirement plan industry has commented on it, so I thought that I'd add my two cents' worth. There has been a lot of criticism of the program but it has had its defenders as well. I'll try to keep the criticism and defenses to a minimum, and instead offer some observations.
One of the researchers for the program called to interview me. Usually in such cases, there's only one call and that's it; it can be safely ignored, and the caller is not miffed. But in this case, the researcher proved to be relentless. After she contacted Morningstar to try to track me down--perhaps thinking that my failure to return her calls was due to my being on some secret Special Fiduciary Assignment somewhere--I hastened to call her back.
I apologized for my discourtesy in not returning her calls but explained that ordinarily I don't like to be interviewed. After all, Morningstar has allowed me a great deal of latitude over the years in this monthly column on fiduciary investment issues. As a result, I know with certainty that my own opinions will be conveyed accurately--keeping in mind, of course, that many may disagree with them.
When being interviewed for print or visual media, there's always the risk that one will be either outright misquoted or be quoted accurately but out of context. That's sort of how Ohio State's venerable coach Woody Hayes viewed the forward pass: two of the three results--an incompletion or interception--will be bad. That's why Hayes usually opted for runs--three yards and a cloud of dust--to power his offense, and that's why I usually avoid interviews.
But what if I had been interviewed for "The Retirement Gamble"? Even then, that's no guarantee that I would have actually appeared on the program. Apparently, plenty of folks (including certain industry heavyweights) were interviewed for the program, but after hours of answering questions, only a relative few wound up with any face time on the tube.
In any event, here's what I would have said--or at least I'd like to think it's what I would have said.
The Amount of Contributions Made by a Plan Participant Is Paramount
While reductions in costs and risks--both of which are the mainstays of modern prudent fiduciary investing--associated with plan investment options are crucial, their relative importance is lessened if a plan participant cannot or will not save money for retirement. By far the most important factor in how comfortable retirement will be for participants is how much money they salt away in their plan accounts. Even a 70% annual return would be of little consequence if a participant is squirreling away only $3 a year.