3(21) or 3(38). Whatever it Takes. Understanding Fiduciary Responsibility.


In the 1983 film Mr. Mom, Michael Keaton plays a downsized auto engineer named Jack who tends the homefront while his wife, Caroline, goes to work as the family breadwinner. When Caroline’s boss arrives to pick her up for a business trip, Mr. Mom, chainsaw in hand, leads him to the renovations ongoing in the house. He asks Jack if he’ll be wiring the house for 220 volts, and Jack replies with the movie’s signature line: “Yeah, 220, 221—whatever it takes.”

ERISA plan management is increasingly complex (and sometimes litigious). It’s no wonder a plan sponsor might say their investment adviser is serving as a fiduciary—yeah, a 3(21) or 3(38) fiduciary. Whatever it takes. The understanding of the two may be unclear, but it’s not unimportant.

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Highland Welcomes Barbara Myers, CFA

Barbara Myers

We are delighted to introduce you to Barb Myers, our newest consultant at Highland Consulting Associates.

While Barb may be new to Highland, she has over 30 years of experience. She is a pro in the world of investment management, especially in the areas of research, asset allocation and portfolio construction for institutional and individual investors.

In her longstanding role as head of investments and portfolio management of KeyBank’s nonprofit group, Barb managed the bank’s largest institutional accounts, select private clients, and a team of portfolio managers, overseeing more than $5 billion in assets under management. In recent years, Barb expanded her investment responsibilities further to include the bank’s wealth management clients nationwide. As Chief Portfolio Strategist she developed the portfolio construction process for the private bank and managed the team of multi-strategy research analysts.

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How’s your Relationship with your Money?

The Complicated Relationship between Women and Money

Research shows that when you ask a woman about her relationship to money and investments, she’ll likely say, “It’s complicated.” It sure is.

In the 1980s, a woman-empowered commercial for perfume said that women could “bring home the bacon, and fry it up in a pan…and never let you forget you’re a man” To that we say, you have come a long way, baby.

A few decades later, women are not only bringing home some bacon, almost 4 in 10 are the primary breadwinners for the family.

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Highland at 25

When Highland Consulting Associates opened its doors on December 1, 1993, there were associates, technically speaking. But only three of them. And instead of operating out of well-appointed offices overlooking a bustling, mixed-use lifestyle center, they worked in an office park looking out at a major interstate.

To further elaborate, they punched a hole through the wall between two of the offices. (Who had money for an intercom system? Texting? What’s that?) Highland’s office furniture was the best money could buy—from a used office equipment warehouse.

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Building a MODEL Investment Committee

The composition of the investment committee is as important as the development of a nonprofit’s investment policy and its portfolio design. Without thoughtful and intentional planning, the committee appointed to expand a nonprofit’s influence and reach can sometimes encumber the organization and limit its impact—an outcome to which no one aspires.

Using MODEL as an acronym helps us consider the essential elements for building an effective investment committee.


The size of the committee can either improve its agility or slow it considerably. Our experience suggests seven or fewer members tends to work best, keeping in mind that an odd number of formal voting members will ensure the committee’s never locked in the stalemate of a tied vote.

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Twists and Churns: Annuities No Sure Path to Retirement Readiness

On every path to retirement security, there should be a blinking sign that reads: “Annuities This Way: Proceed at Your Own Risk.” Which is an entirely appropriate retirement planning thought.

What’s your appetite for investment risk? If you’re risk averse, it would appear that annuities are an iron-clad, guaranteed, safe investment option. They may be. They may also rope the plan participant into needlessly long investment commitments for which investors pay excessive fees. But not always.

That’s the problem with annuity contracts: too few investors know exactly what they’re buying. And that makes the annuities route to retirement a difficult one to navigate.

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Who will inherit your wealth? Your heirs or the IRS.

Consider these three facts:

  1. Americans held $7.9 Trillion in IRAs by the end of 2016. (2017 Investment Company Institute Fact Book)
  2. With more than 10,000 baby boomers retiring every day, we are on the cusp of an historic intergenerational wealth transfer that could total as much as $3.2 trillion. (RBC Wealth Management Survey.)
  3. As much as 30-80% of an estate could be made up of IRAs or other retirement plan assets according to most estimates.

And, let’s add a fourth fact that is worth considering: Only 3 in 10 of families have a wealth transfer strategy in place.

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How the Ivies Grow

Over the last five years, when the average college endowment fund earned an annualized 5.9%, a typical investor choosing a low-cost 60-40 index fund realized an average return of 8.2 %, a difference of 2.3%. So why weren’t more endowment funds passively managed? Why not park those billions in an index fund?

That’s a question raised (and criticism implied) of the Ivy Leagues’ largest endowments from their own graduates and investment gurus like Warren Buffet in his 2016 investor letter.

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There’s No Time like the Present, and other lessons on…

Defined Benefit Funding Levels, Contribution Relief, and Unintended Consequences

At the close of 2012, pension funding levels for a broad set of defined benefit plans sat in the high-seventies. Sponsors had weathered the massive equity losses of the 2008 global financial crisis (GFC), and subsequent plummeting interest rates, and they seemed poised to recoup their losses. The markets would be kind to investors over the next half-decade with the S&P 500 nearly doubling in price, generating a cumulative total return in excess of 100%, and outpacing long duration fixed income (a proxy for pension liabilities) substantially.

Figure 1

So how did sponsors fare? Not as well as one might expect, given the data above.

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The Latest ERISA Lawsuit Target: Hidden Fees

The central complaint of lawsuits filed against ERISA plan sponsors since 2006 has shifted with the financial markets like a seesaw.

When the markets were anemic and participants’ savings suffered, lawsuits alleging failures in diversification and offerings of poor-performing funds soared. When participant accounts began to benefit from bull-market returns, complaints shifted to allegations of excessive fees.

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