Maryland Investor November - December

InvestorInvestor November/December 2009 $9.95

Fixing the 401(k):Smashing the myths of the current system

MarylandMaryland

Where is the Market Going in 2010?

Lifestyle ReviewSingle Malt Scotch

Women’s WealthThe Retirement Mystique

Don’t Let Short-Term Uncertainty

Change Your Long-Term Plans.

Member FINRA, SIPC

We want you to know that we’ll never lose sight of what’s important… YOU. At 1st Mariner Financial Services, we will put your uncertainty to rest by

providing you with a realistic approach to your investments. We don’t

focus on short-term quotas; we focus on your long-term financial success.

Call Bethany Hendrix today!410-558-4193 or visit www.1stMarinerBank.com

UVEST and 1st Mariner Bank are non-affiliated entities. Securities and insurance products offered through UVEST Financial Services and its affiliates. Member FINRA/SIPC

Not FDIC Insured May lose value No Bank guaranteeNot a Deposit Not guaranteed by any Government Agency

Don’t Let Short-Term Uncertainty

Change Your Long-Term Plans.

Member FINRA, SIPC

We want you to know that we’ll never lose sight of what’s important… YOU. At 1st Mariner Financial Services, we will put your uncertainty to rest by

providing you with a realistic approach to your investments. We don’t

focus on short-term quotas; we focus on your long-term financial success.

Call Bethany Hendrix today!410-558-4193 or visit www.1stMarinerBank.com

UVEST and 1st Mariner Bank are non-affiliated entities. Securities and insurance products offered through UVEST Financial Services and its affiliates. Member FINRA/SIPC

Not FDIC Insured May lose value No Bank guaranteeNot a Deposit Not guaranteed by any Government Agency

InvestorSocial Security 6When to Start Receiving Retirement Benefits

Women’s Wealth 8The Retirement Mystique

Feature ArticleSmashing the 401(k) Myth 12Interview with Josh Itzoe: Author of Fixing the 401(k)

Shows & Events 19

Maryland Investor Lifestyle Review 20Single Malt Scotch Whiskey

Who’s Making News /Investment Centric Services Directory 23

InvestorMaryland

November/December 2009

maryland investor / 3

MarylandInvestor

PublisherWilliam Slaughter

Managing EditorStephanie Pietry

ColumnistsWilliam SlaughterStephanie Pietry

Henry T.K. Stormer

Art DirectorJerri Anne Hopkins

Contributing WritersJosh Itzoe

Sara Jacoby

PhotographerBrendan Cavanaugh

Maryland Investor Magazine is distributed throughout the Baltimore/Annapolis vicinity. It is mailed to 10,000 high net income households in Baltimore County, Howard County, Harford County and Baltimore City. Also available free in doctors offices, professional associations, senior communities, hotels, coffee shops, real estate offices, county libraries, hospitals, spas, supermarkets and at all of our advertisers.

Also available by subscription via mail or internet, for information please visit http//:Maryland.Investorpubs.com or call 410-650-4092.

Maryland Investor Magazine is published monthly by Marketing Resources, LLC. No part of this magazine may be reproduced in any form without express written consent of the publisher. Information contained in Maryland Investor Magazine is protected by the First Amendment of the United States Constitution and is intended for reader interest only. Do not substitute it for the advice of registered legal or financial advisors. Reader discretion is advised. Marketing Resources, LLC does not verify the accuracy of any claims made in connection with advertisements and accepts no responsibility for errors and omissions. All rights reserved. Submissions should be sent to [email protected] by the first of the month preceding the publishing date. For advertising inquiries contact [email protected] or [email protected]

4 / maryland investor

Dear Readers:

Welcome to the November/December edition of Mary-

land Investor, a magazine designed to inform and educate Maryland’s investing public.

I think 2009 was a year of reexamination. Everything in 2008 seemed to be smashed into pieces. For certain, most of us had lost 30 to 40% of our wealth. How were we going to rebuild? What were we going to build with? Who could we turn to for trust and confidence in our efforts to get back what was lost? We all had so many questions that no single answer could alleviate the uncertainty we all faced. This would not just be a rebuilding of our portfolios but would require rebuilding our entire perspectives as they related to all of our financial matters.

The passing of 2009 will bring us a New Year and with it there is a new beginning, new opportunities, new challenges and endless possibilities. I recently took a trip to the great battlefields of Gettysburg and read a quote by Colonel Joshua Lawrence Chamberlain which touched home for me. The quote may seem a bit deep for an outlook on the passing of 2009 and the coming of a New Year. Certainly the triviality of financial matters does not compare to the depth of the American Civil War, but his words express the need for individuals to work and live their lives with great purpose and cause. I hope you find the strength to accomplish great deeds in 2010 that may have an impact for years to come.

“In great deeds something abides. On great fields something stays. Forms change and pass; bodies disappear, but spirits linger, to consecrate ground for the visionplace of souls. And reverent men and women from afar, and generations that know us not and that we know not of, heartdrawn to see where and by whom great things were suffered and done for them, shall come to this deathless field to ponder and dream; And lo! the shadow of a mighty presence shall wrap them in its bosom, and the power of the vision pass into their souls.”

I wish all of our readers will come to a place in time during the coming year where they, too, will be moved by a presence that will inspire them to do great deeds.

Best Regards,

Bill [email protected]

Pu b l i s h e r’s le t t e r

IndIfference

M o v e i n n o w . u n p r e c e d e n t e d p r i c e s f o r a l i M i t e d t i M e .

Condominium Sales by: CSM Partners, Seller’s Agent MHBR #5575 Obtain the Property Report required by Federal

law and read it before signing anything. No Federal agency has judged the merits or value, if any, of this property.

once a 1920’s grain elevator. now 24 stories of glass, concrete, steel and soul. in

celebration of our July Grand opening, a very limited number of tower residences

are available at unprecedented prices with premium services and amenities included.

tower residences from $600,000 to over $4 million. silo residences from $264,900.

S i lopoint .com 2009 Winner National Community of the Year

TURSP10611-Silo Point Tower Ad_MD Investor_7/09.indd 1 07/10/09 05:19:17 PM

IndIfference

M o v e i n n o w . u n p r e c e d e n t e d p r i c e s f o r a l i M i t e d t i M e .

Condominium Sales by: CSM Partners, Seller’s Agent MHBR #5575 Obtain the Property Report required by Federal

law and read it before signing anything. No Federal agency has judged the merits or value, if any, of this property.

once a 1920’s grain elevator. now 24 stories of glass, concrete, steel and soul. in

celebration of our July Grand opening, a very limited number of tower residences

are available at unprecedented prices with premium services and amenities included.

tower residences from $600,000 to over $4 million. silo residences from $264,900.

S i lopoint .com 2009 Winner National Community of the Year

TURSP10611-Silo Point Tower Ad_MD Investor_7/09.indd 1 07/10/09 05:19:17 PM


Retirement… We all dream of it in some way, shape or form. Some may envision a simpler lifestyle when children are grown, Mom’s taxi service is a thing of the past, and the home is filled with serenity. Others may look forward to throwing out the alarm clock and living a life without the daily hassle of office politics. Then there are those who simply aspire to some distant point in the future when they will have the time to… travel …play golf …make a difference in their community... Whatever your retirement dream might be, there are steps that you can take—starting today—to make it become a reality.

First the bad newsRetirement planning is more of a challenge for women for many reasons, such as:

l A woman retiring at age 65 can expect to live another 19 years on average, which is 3 years longer than a man retiring at the same age.2 This increased longevity creates a greater risk that a woman will outlive her money.

l Women are more likely to interrupt their careers to care for young children or elderly parents. This results not only in decreased income, but also lower retirement savings and the possibility of reduced employer and Social Security retirement benefits down the road.

l Women are also more likely to work parttime jobs in which they may not qualify for an employer sponsored retirement plan.

l Then there is the gender gap: according to the Women’s Institute for a Secure Retirement (WISER), women’s earnings average $.77 for every $1.00 earned by a man.3

The Retirement MystiqueBy Sara T. Jacoby, CFP®, ChFC®

mys·tique (miu-ste-k’)

n. An aura of heightened value, interest, or meaning surrounding something, arising from attitudes

and beliefs that impute special power or mystery to it.1

Wo m e n’s We a lt h

r 2009 $9.95


So what’s a girl to do?With all of these factors working against them, some women may feel that retirement planning is a losing battle. Not so! Financial security in retirement starts with planning—and women are great planners!

Before we explore the steps to create a secure financial future, let’s demystify the term “financial planning”. According to the Certified Financial Planner Board of Standards, “Financial planning is the process of meeting your life goals through the proper management of your finances.”4

When you embark on the process of comprehensive financial planning, you take a holistic approach to your finances carefully fitting each part of your financial life together as if it were a puzzle. One of the primary benefits of this process is that you gain an understanding of how each financial decision will impact the other areas of your financial life, and are therefore better able to evaluate the short and longterm effects of your decisions. We all have a limited resource (money) and an unlimited number of ways that we can use that resource. At its heart,

financial planning is simply the process of determining how to best allocate our limited resource among the unlimited options in an effort to create the most satisfactory outcome.

Successful retirement planning for women must address the above challenges as well as additional issues that arise for anyone preparing for retirement, so let’s start by looking at some of these issues.

Longevity A woman’s longer life expectancy threatens her ability to make her savings last throughout retirement. To address this concern, women should consider protection strategies such as the opportunity to create a guaranteed lifetime income through a pension or annuity. While many recognize the importance of having a source of guaranteed lifetime income, most retirees choose a lumpsum believing that they will be able to manage distributions to last throughout their lifetime. This may be more difficult than you think. It is widely accepted that 4% is a “sustainable withdrawal rate” which results in a high probability

that the portfolio will last throughout retirement. This means that retirees should only withdrawal 4% in the first year of retirement, increasing for inflation each subsequent year. It is important to evaluate all of your options to determine if you would benefit by using some portion of your funds to create a source of guaranteed lifetime income.

Health CareLonger life expectancy for women also poses a question about future healthcare needs. The rising costs of healthcare and the potential need for longterm care are

of particular concern to women. On average, women outlive men by 7 years. It is an alltoofamiliar scene: a woman spends part of her golden years caring for her ailing husband, only to be left with no one to care for her after his death. The lack of a spousal caregiver may result in significantly higher healthcare costs for women. According to the Genworth 2009 Cost of Care Survey, the average annual cost in Maryland for a private room in a Nursing Home is $74,825 and the cost for a MedicareCertified and Licensed Home Health Aide is $52,624.5 Few people are prepared to cover these costs out of pocket. One way to address this threat is to consider Long Term Care Insurance, which can provide for home health care as well as facility care.

InflationMost people recognize that the items we buy routinely may increase in cost from one year to the next, but many never consider the impact of this inflation over a longer period of time – such as a 25 year retirement.


r 2009 $9.95inflation over a longer period of time – such as a 25 year retirement.

Let’s look at just a few examples:

Attempting to live on a fixed income when the cost of living is continually increasing creates an entirely new challenge. While bonds and other fixed income products should be an increasing portion of a portfolio as retirement nears, it is important to keep in mind that these types of investments may do little to protect against the longterm impact of inflation. Advisors usually recommend some exposure to stocks, which have historically improved the potential of the portfolio to keep pace with inflation.

Retirement Savings ShortfallThe remaining challenges all boil down to one thing: less retirement savings through employer sponsored retirement plans. To make up for the shortfall in retirement savings that women experience due to working parttime or being out of the workforce altogether, women should personally save 5%10% more than their male counterparts. If you are employed and eligible to participate in your employer’s retirement plan, maximize your contributions to the plan. For those who are selfemployed, speak with a financial planner or accountant to determine the best retirement plan option for you and your business. If you are not currently employed, you may still be able to contribute to an Individual Retirement Account if you are married or have other sources of earned income.

The first step to achieving your retirement dream is simply to analyze your cash flow. It

may be tedious, but this is an important part of the financial planning puzzle so don’t skip this step. Gather your

checkbook and credit card statements and make general categories (such as food, clothing, household expenses, utilities, transportation…). Go back at least six months and record your expenses for each category, then compute an average monthly amount for each. Total the category averages to determine your average monthly expenses, and subtract this number from your monthly income to determine your net cash flow. If the number is positive, you have a cash flow surplus. That’s great news, because you can put that extra money to work for you as additional retirement savings. If, however, the number is negative, you have a cash flow deficit and will need to work on a budget to turn that around. To achieve longterm financial security, it is imperative that you spend less than you earn. Budget is not a dirty word!

No matter what our financial situation is, we can all benefit from a budget by trimming expenses to reduce debt or increase savings. There are some great online tools and software packages if you need help with your budget.

Now we can have some fun! Start by trying to envision your retirement. Where do you want to live? What do you want to do? Set your goals and make them SMART—Specific, Measurable, Attainable, Relevant and Timely. It’s important to remember to include your needs (such as health care) as well as your wants. This will give you a starting point for determining the amount of income you will need in retirement. You can use that information and additional planning assumptions to generate a retirement savings goal through an online retirement calculator available at www.thelegacygroupinc.com.

THERE IS NO RETIREMENT MYSTIQUE! Retirement is simply a phase of life’s journey that we all aspire to achieve someday. It may mean different things

Item 1984Cost 2009Cost

Gallon of Milk $1.94 $3.87

Loaf of Bread $.71 $1.40

Average New Car $6,294 $24,125

Source: Spectrum Unlimited, LLC


r 2009 $9.95to different people, but we can all prepare for it the same way—with careful planning. The important thing is to start today! “A journey of a thousand miles begins with a single step.” Confucius

1Dictionary.com, The American Heritage® Dictionary of the English Language, Fourth Edition. Houghton Mifflin Company, 2004. http://dictionary.reference.com/mystique (10/2009).

2 “Women and Retirement Savings,” U.S. Department of Labor, http://www.dol.gov/ebsa/Publications/women.html, (10/2009).

3 “WISER’s Top Five Retirement Challenges for Women,” Women’s Institute For A Secure Retirement, http://www.wiserwomen.org/portal/index.php?option=com content&task=view&id=50&Itemid=0, (10/2009).

4 “Financial Planning Basics,” Certified Financial Planner Board of Standards, Inc., http”//www.cfp.net/learn/knowlegebase.asp?id=1.

5 “Genworth 2009 Cost of Care Survey,” Genworth Financial, http”//genworthrr.com/content/products/long term care/long term care/cost of care.html, (10/2009).

Sara T. Jacoby, CFP®, ChFC® is a Financial Consultant with The Legacy Group, Inc. in Towson, MD, where she conducts a client-centered, consultative practice with an emphasis on managing and protecting her clients’ assets. She

takes a holistic approach with her clients, helping them to create a comprehensive financial plan to address all of their financial needs.

Sara was honored as one of Maryland’s Top 100 Women in 2008 by The Daily Record. The award recognizes successful female professionals throughout the state of Maryland for outstanding achievement in professional accomplishment, who also give back to their professions and their communities by mentoring others, and who actively serve their communities in leadership roles.

Sara lives in Westminster with her husband Bob. She is very active in her community, serving on numerous charitable Boards and committees.

The Legacy Group, Inc.; 305 West Chesapeake Avenue, Suite #510; Towson, MD 21204; Tel: 410-828-4411 x230

Email: [email protected] Representative, Securities

Offered through Cambridge Investment Research Inc., A Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors Inc., a Registered Investment Advisor. Cambridge and The Legacy Group, Inc. are not affiliated.

r 2009 $9.95

Smashing the myths of the current system

Fixing the 401(k)by William Slaughter

photographs by Brendan Cavanaugh

Rarely does a topic or subject person cause such an immediate desire for me to want to know more

information in such an immediate manner as did the topic of how broken the 401(k) plans are in many Maryland companies and for that matter all over the country as I learned in a book

written by a local Wealth Manager and 401(k) expert of Josh Itzoe. Maryland Investor featured his book Fixing the 401(k) in the who’s Making News Section of our September issue and I immediately knew that I needed to read the book and find out more about the subject and the author. I have had


Josh Itzoe, Principal at Greenspring Wealth Management and author of Fixing the 401(k).

r 2009 $9.95

many conversations with people about 401(k) plans, their make up, performance and practicality as useful components of a retirement plans over the years. The pessimist inside of me always felt they were better for the planners than they were for the participants.

I never did any research about 401(k) plans to either support or dismiss my suspicions but through the years it was a sentiment that was shared by many fellow workers and conversationalists. I knew it wasn’t just me who had reservations about how well they did or didn’t work. No matter what you know, believe or suspect about 401(k) plans, Josh’s book is a must read for any investor, plan administrator, plan participant or anyone else interested in saving for retirement.

Depending on who you are, his book might help you save more money for your own retirement or it might help you save your own rear end from becoming the target of a law suit. If you read this book you will learn everything there is to know about 401(k) plans that you probably didn’t know and you will learn about the enormous responsibilities the Fiduciaries managing these 401(k) plans have to help employees retire successfully.

Make no mistake that this article is not an infomercial or paid placement for Josh and his company but rather a very accurate dissection and analysis of the 401(k) system as a whole. You will find that as investors we all need to be more informed about the structures of these plans, how they work, who profits, how the players are compensated, who is to be held accountable for their administration and what we can all do to make sure that we as Americans are able to plan

and save for a successful retirement.Before we decided to run this

article we researched the subject and found that there is a mountain of irrefutable information on 401(k) plans that mirrors what Josh has condensed into his book. It would take another twelve pages to give you the links and references to support this claim.

I have said this many times and firmly believe that, if we take one quarter the time and effort we expend on following our favorite professional sports team and devote that time and effort to the planning and execution of our financial lives, we would be ten times better off financially than we are today. Maryland Investor Magazine visited the offices of Greenspring Wealth Management in Towson, Maryland, and spoke to Josh Itzoe to get in depth answers about the book he wrote and what questions we should all be asking ourselves if we are in any way touched or a part of a 401(k) plan as part of our overall retirement plans.

Mi: In the preface to your book, you state that “fear and greed play a large role in the world of financial

services…” In light of the market crash last year and the attention brought to the financial markets/industry. Do you feel that sentiment is changing or staying the same?

JI: Fear and greed have always been a part of investor psychology and I believe always will be. I also believe the financial services industry knows how to play off these powerful emotions from a marketing standpoint and there’s nothing that has happened since the book was published that has changed my opinion. At the end of the day, the financial services industry often operates as one big sales and marketing machine, usually placing its own interests ahead of the interest of clients. Most investors would be surprised to learn that their brokers, advisors, agents, consultants, etc. are not held to a fiduciary standard which legally requires them to disclose conflicts of interest or do what’s in the clients’ best interest. I think this is the primary reason why our industry often isn’t viewed by the public as a “profession” and, in most cases, I’d agree with that sentiment. To be considered a professional you need


r 2009 $9.95to work in such a manner. I strongly believe that every financial professional should be held to a fiduciary standard when advising clients because there is so much trust involved. It’s also a big reason why I am so passionate about what I do and why I wrote the book—as a way to “fix” many of the problems and issues I think plague the retirement plan industry and negatively affect workers ability to retire successfully. Unfortunately, my ideas don’t always make me the most popular personal at industry cocktail parties!

Mi: The title of your book is Fixing the 401(k), which you chose because you believe the industry is broken in many ways. What percentage of Maryland based 401(k) plans overall do you feel are broken?

JI: Of the plans I review within Maryland, as well as across the country, I can confidently say that at least 95% are broken according to how we believe the ideal 401(k) should be designed and implemented. Sounds pretty staggering but you have to remember that we are looking at the whole plan from the inside out and making sure that everyone who is responsible for implementing the plan, everyone participating in the plan, the plan strategy, the inner workings of the plan and the plan monitoring are all in accordance with our methodology for complete compliance, efficiency and effectiveness. We believe the Fixing the 401(k) approach is the best way to implement a high quality, low risk, cost effective, transparent, compliant and easytouse retirement plan that

does what it should, namely, help its participants accumulate as much money as possible at the lowest reasonable cost.

Mi: Is there any plan size that is more broken than others or would you state they are equally broken no matter what the plan size?

JI: Smaller plans are generally in much worse shape than larger plans. The Small Business Administration defines a small business as an independent business having fewer than 500 employees and small firms represent 99.7 percent of all employer firms and employ just over half of all private sector workers. Sadly, since most small plans are sponsored by small business, this means that most of America’s


r 2009 $9.95workers are part of a plan that may not be working the way it could be or should be. Most small plans are strapped for resources and because of this you may have one or two key people wearing many different hats and the attention they give to their 401(k) plans can easily get lost in the other seemingly more important duties that they are faced with while running a company during difficult times such as we see today. To illustrate my point, I was recently interviewed by a major financial publication about this very topic and the article included a quote from a business owner who said, “The 401(k)? That’s the least of my problems.” While most people responsible for their company’s 401(k) plan won’t be so direct, I’ve found this is often the prevailing sentiment. Larger companies typically have a better understanding of their legal duties and responsibilities and will take a more comprehensive and formalized approach to oversight and decisionmaking. Larger companies also have the resources to employ more specialized experts which usually lead to a better performing plan. However, this doesn’t mean that we don’t come across a lot of large plans that are just as broken, if not more, than some smaller plans. We do.

Mi: You state that the two biggest problems in the industry are conflicts of interest and fee disclosure. Which of these two do you feel is the bigger problem and why?

JI: Actually, fee disclosure and conflicts of interest are closely connected on many levels and go handinhand. There is no question that fee disclosure is the hot topic of the day from a regulatory and legal standpoint and a lack of disclosure often leads to higher than necessary costs. And make no mistake, costs matter in a big way and often have an inverse relationship

with returns and, ultimately, account balances. Many plan participants and administrators have no idea of the fees they are paying for when they set up a plan. Many of the fees are hidden, buried or just plain unable to be truly quantified such as the transactions costs incurred by some mutual funds that excessively trade securities during a year and thus incur more fees that diminish the overall return of the fund. Greater transparency leads to greater accountability. It amazes me that many companies have no idea how much money their service providers are actually making but it happens all the time.

Mi: In your book you wrote extensively about fiduciary responsibility. How much do you believe that plan sponsors, employers and employees understand about this responsibility? What do you feel will be the motivating factor for companies to fix their plans and adhere to the fiduciary responsibility they have with respect to their 401(k) plans.

JI: Unfortunately, from my experience, very little is understood. One of the first questions I ask in meetings with prospective clients is whether they feel like they are doing a good job fulfilling their fiduciary obligations related to the retirement plan. Most all say “yes”. Next, I ask whether they can tell me their four specific fiduciary duties as required by law. So far, I’ve never had anyone be able to answer my question. Finally, I submit to them that if they think they are doing a good job, but don’t even know what’s required of them, whether they think there is a high likelihood that they

aren’t doing as good a job as they think they are or could be doing. Most agree and it can be a sobering moment when reality hits.

Mi: What percentage of Maryland 401(k) plans do you believe could be or are in violation of the Employee Retirement Income Security Act of 1974 (ERISA) which is the law that governs retirement plans and are therefore open to possibly being the target of a law suit?

JI: ERISA is extremely complex and it would be safe to say that every plan could be in violation in some way or another. Some infractions are relatively minor and can be easily remedied.

Other issues can range from serious to extremely serious and involve significant penalties and, in some

cases, criminal proceedings against the plan fiduciaries.

Mi: Are there any one or two factors that commonly occur triggering law suits against companies and their 401(k) plans?

JI: The main factor in most current litigation relates to excessive fees being paid out of the plan and by participants. So far, very large companies have been targeted by lawsuits from plan participants because there is more money to go after. However, there was a recent lawsuit regarding excessive fees that was announced involving a $2 million plan with only 30 participants and I fully expect litigation to continue to move down market into the smaller plan space.

Mi: You state that part of what makes the retirement plan industry so confusing is the number of different service providers who are involved in the process. I counted 12 “players” as you called them, in this field. How many players do you think should be involved to effectively give employees

Fear and greed have always

been a part of investor psychology

and I believe always will be.


r 2009 $9.95and employers the best plan options?

JI: The answer to this can differ according to the size and needs of the plan but a successful plan should have the following service providers that will most likely ensure success for all involved: A plan administrator and record keeper are necessary to provide things like administration and compliance support, employee communications, and enrollment services for the plan participants. Every plan with more than 100 participants must be audited annually by a qualified CPA firm and I also recommend that plans of every size should have a relationship with an ERISA attorney. Finally, I have an obvious conflict of interest, but I believe a truly independent advisory firm who specializes in this area and serves in a fiduciary capacity is critical to the success of a plan by providing objective investment and fiduciary advice.

Mi: Your chapter titled “Protecting Participants from Themselves” explains that you feel participants are better off investing in a qualified default investment alternative (QDIA). These types of investments include target retirement date mutual funds, lifestyle mutual funds or custommanaged portfolios which are designed and managed by a professional investment advisor. The plan participant should then choose one portfolio according to their risk tolerance and time horizon rather than trying to put a portfolio together by themselves with 30 different mutual funds. What percentage of companies in Maryland use your preferred method?

JI: Most plans we see typically include these options to some extent. For instance, target retirement date funds are very prevalent within the industry and most plans include them as options. Unfortunately, there are several issues

with how they are generally utilized. First, most participants fail to use these types of investments correctly which leads to poor or uneven performance. These options are preallocated and well diversified and meant to serve as a “onestop shop” from an investing standpoint—this means that participants should select the most appropriate option for their situation and then put all their money and future contributions into that fund. Instead, in the name of “diversification” we see most participants put half their money in a target date fund and the other half in a number of other mutual funds. This actually defeats the purpose of using this type of investment vehicle

by throwing the allocation out of balance and can expose the participant to either too much or too little risk. Second, target date and lifestyle funds are often from a single mutual fund company and usually have all proprietary mutual funds which lead to conflicts of interest, a loss of investment flexibility and potential fiduciary problems. Most importantly, the reality is that the vast majority of participants are illequipped to make their own investment decisions and there is a growing body of data that supports this idea. For instance, in my book I cite a study that evaluated the performance of nearly 15,000 participants over a 10year period, comparing the results of those who chose to make their own decisions versus those who selected a professionally managed option like a lifestyle fund. The results showed that the “doityourself” investors averaged

1.9% lower returns per year over that period and end up with 11% lower account balances. Think about the impact of 2% higher returns over the course of a working career. I provided an analysis in the book of the impact of saving 1% in fees and earning 2% higher returns over a 30year period and it equated to a difference of nearly $500,000. I describe the difference between using a professionally managed approach rather than a “doityourself” approach as the choice between buying a car or building your own. We’ve found that most participants want to buy a car—in fact, when we are hired by companies to “build” cars within their plan, we usually experience anywhere from 70100% of participants choosing this

option rather than trying to assemble their own.

Mi: You wrote a lot about how, when it comes to saving for retirement, many investors

have an unbalanced approach to investing that lacks diversification

and discipline. This is a well known fact among financial industry professionals. Why do you think this is the case and how do you think the industry can help change this attitude?

JI: The reasons for investors lacking diversification and discipline are many and varied. It could be debated for days as to all the reasons for this and I would guess the main underlying reason would be lack of knowledge and adding personal emotion to the equation when investing. As an industry, and for companies with 401(k) plans, we could improve this situation by forcing diversification through limiting options for plan choices to those that are welldiversified. Most companies think that more choice is better when providing investment options to participants. The reality is that giving participants too many investment choices has a negative impact, both on participation and performance. Most participants

The vast majority of active

managers fail to outperform

their comparable indexes,

usually anywhere from

50-80% in any given year.


r 2009 $9.95know nothing about the options they are given and even less about how to construct and stick to a welldiversified portfolio. From a fiduciary standpoint, we’re seeing the more progressive companies take steps to limiting the damage participants can do to themselves by poor investment selection and this involves rethinking the traditional way the menu of investment options are provided to participants. Few plan fiduciaries realize, that technically speaking, they probably are considered responsible for the individual investment decisions made by their participants.

Mi: You pointed out that clear and transparent fees are a major problem in the majority of current 401(k) plans. Because of this, employers may not be making good choices for their plan and employees may not be saving as much as they could be. Did the legislation you described from Congress and The Department of Labor that proposed regulations to better disclose fees go through?

JI: Unfortunately the legislation did not go through in the form presented due to the new Administration entering the White House but it opened up the door for the process to be reintroduced and there are currently several proposals that are being reintroduced. I believe we most likely will see some sort of fee disclosure mandated within the next twelve months.

Mi: You stated that the total internal cost for many 401(k) plans is completely out of control. Do you believe it will take legislation/regulation, education or competitive market pressures to bring these costs down given the amount of money involved and the companies involved that benefit from these plans?

JI: It’s going to take a combination of all three. The regulation will force service providers to disclose

their compensation and conflicts of interest in an easily understood and meaningful way. As more and more companies become educated on what fees are charged for the services they are receiving then I think you will see the different players in the market be forced by competitive pressure to lower their fees and improve their levels of service to earn business. In my opinion, transparency and disclosure is the critical first step but it is not enough. Plan fiduciaries need to take the information they receive and make meaningful decisions with it, including negotiating with their

service providers. No one is willing to pay sticker price for a car but most companies pay sticker price for their 401(k) plan simply because they are unwilling to take the time to educate themselves and negotiate in a wellinformed manner. If you don’t know how much you’re paying, how can you know if you’re getting a good deal?

Mi: You favor passive management investments over active management investments for 401(k) plans. Do you favor these for all retirement investment strategies?


r 2009 $9.95

JI: I prefer passively managed investments, such as index funds, for any portfolio of any size. They have lower cost structures, are generally more transparent and well diversified, and most importantly, have a strong tendency to outperform actively managed investments, especially as time progresses. If you take an honest look at the data you will find that the vast majority of active managers fail to outperform their comparable indexes, usually anywhere from 5080% in any given year, and these percentages go up over longer periods of time. It is also nearly impossible to accurately predict which managers or funds will outperform ahead of time. Most people assume that if a manager has outperformed in the past they’ll continue to do so in the future but there’s

a reason you always hear the disclaimer “past performance does not guarantee future results.” Past performance is actually one of the worst predictors of future performance. In fact, studies have shown that the most reliable predictor of future performance is fees—the lower the fees the higher the performance and viceversa.

Mi: What advice would you give to our readership who are employees participating in a 401(k) plan and think it may be, as you call it, “broken”?

JI: First, educate yourself and then be vocal to the people in your company who are responsible for the administration of your 401(k) plan. Ask them questions, give them

articles, do your own research. At the same time, be respectful about how you approach things and realize that the company usually has the best intentions in mind when they set up a retirement plan. It’s a very complex process and most “broken” plans we come across were not designed that way on purpose. But certainly you can ask questions about the plan and make sure you are as knowledgeable as you can be about the plan. My book is a helpful starting point and at the end of each chapter I include a number of questions plan fiduciaries should be asking themselves and their service providers in order to uncover problems and bring about clarity and accountability. The feedback I have received from readers is that this is the most valuable aspect of the book and

leads to some interesting discussions.

Mi: What is the one question our readers who are responsible for 401(k) plans should be asking themselves to ensure that they are providing the very best plan for their employees, while effectively protecting themselves?

JI: I’d encourage them to ask whether they have implemented the Fixing the 401(k) approach which focuses on what we call the four “pillars” or key areas of fiduciary decisionmaking. First, has the plan been designed effectively so that employees are participating and increasing their contribution levels over time? Second, have steps been taken to fully identify all the fees within the plan, including who is receiving compensation and how much they are being paid, and have these fees been structured and negotiated to benefit the participants? Third, has the investment strategy for the plan been designed in a way that encourages and leads to successful investment experiences for participants? Finally, have the plan fiduciaries done everything in their power to understand and fulfill their legal duties and protect the interests of plan participants? Protection from personal liability comes from knowing what’s required, implementing and following a prudent and consistent decisionmaking process, and relying on outside experts who really know what they are doing. The 401(k) is a major part of many American workers retirement plans and should be treated with the greatest care and respect. This responsibility lies solely with the people who are responsible for making the decisions about the plan, the fiduciaries.


-PR Photography and Solutions-Corporate and Private Parties-Weddings and Family Events

P3Imaging.com410-382-4478

P.O. Box 27Lutherville, MD 21094Imaging

Capt

urin

gLi

fe

Inc.

On Time, On Budget, On the Ball

-Print-On-Site Capabilities-Printing Services-Digital Retouch/Restoration

Maryland Investor trusts its photography to P3 Imaging Inc. You Should Too.

Bay Bridge Boat ShowDates: April 22-25, 2010Hours: Thurs. 10:00am- 6:00pm, Fri. & Sat. 10:00am-7:00pm, Sun. 10:00am-6:00pmLocation: 357 Pier 1 Road, Stevensville, MD 21666Website: www.usboat.comContact: 410-268-8828Event Description: Bay Bridge Boat Show is the Mid-Atlantic’s largest spring boat show for both new and premium brokerage boats. Offering the latest boats and equipment. Located just over the Bay Bridge on Kent Island. New this year, the “Take The Wheel Workshop”, which made its successful debut at the Annapolis fall shows. Additional seminars will be held to encourage and inform the novice and experienced boater.Ticket Cost: Adults-$12, Children (7-12) -$6 (6 & under) free. Two-day tickets- $19

Annapolis Nautical Flea MarketDates: May 29 & 30, 2010Hours: Sat. 9:00am-5:00pm & Sun. 9:00am-3:00pmLocation: Taylor Ave.& Rowe Blvd., Annapolis, MD 21401Website: www.usboat.comContact: 410-268-8828Event Description: Visit the newest addition to United States Yacht Shows – The 2nd Annual Annapolis Nautical Flea Market at the Navy Marine Corp Memorial Stadium. This is the newest addition from the United States Yacht Shows, a company recognized as the producers

of the most renowned boating showcases in the world, including the United States Sailboat and Powerboat Shows held in Annapolis. Find well-loved nautical items or previously owned boats looking for a new home. A great way to practice sustainable boating! Ticket Cost: $5Parking: $5, $10-vans or cars w/trailer

The Food & Wine Festival at National HarborDates: June 12 & 13, 2010Time: Sat. 12:00noon – 8:00pm & Sun. 12:00 noon – 6:00pmLocation: Awakening Plaza, National Harbor, MD 20745Website: www.foodandwinenh.comContact: 443-716-2800Event Description: The 3rd Annual Food & Wine Festival at National Harbor, a waterfront event, will feature the cuisine of renowned chefs with fine wines, beer and spirits. Guests will have the opportunity to learn about the latest food and beverage trends in a beautiful and unique setting on the Potomac River.Ticket Cost: Reg. Admission-$65, Child ticket available.

41st Annual United States Sailboat ShowDates: October 7-11, 2010Hours: Thurs.(Press, Trade, VIP Day) 10:00am-6:00pm, Fri.-Sun. 10:00am-6:30pm, Mon. 10:00am-5:00pmLocation: 1 Dock St., Annapolis, MD 21401Website: www.usboat.comContact: 410-268-8828

Event Description: Come celebrate the nation’s oldest and largest in-water sailboat show featuring exclusively new sailboats. Bring the family to this world-famous sailboat show where you will find something for everyone; seminars, clothing & accessories, and boats of all sizes. Enjoy the many shops and restaurants in historic Annapolis, Maryland.Ticket Cost: Press VIP Day (Thurs.)-$35, Adult-$17, Child-$8, Two-day tickets- $29

39th Annual United States Powerboat ShowDates: October 14-17, 2010Hours: Thurs.(Press, Trade, VIP Day) 10:00am-6:00pm, Fri. & Sat. 10:00am-6:30pm, Sun. 10:00am-6:00pm.Location: 1 Dock St., Annapolis, MD 21401Website: www.usboat.comContact: 410-268-8828Event Description: Experience the exciting world of powerboats, from luxurious motoryachts to high performance boats and more. Visit the nation’s oldest in-water powerboat show to see the latest boat designs and marine technology. Back by popular demand, the “Take The Wheel Workshop”. Space is limited so sign up early. Seminars and personal tours answer questions and offer additional information. Bring the family; spend the day enjoying the many shops and restaurants in historic Annapolis, Maryland.Ticket Cost: Press VIP Day (Thurs.)-$35, Adult-$17, Child-$8, Two-day tickets- $29

sh o W s / ev e n t s


Scotch is quickly becoming a popular liquor choice. This is partly because the past few years have been a lot

better for scotch. More and more people are choosing to buy it and drink it as a result. There are two kinds of Scotch Whisky, “Malt” and “Grain”. Malt Whisky is made only from malted barley, while Grain Whisky is made from malted/unmalted barley and other cereals. A blended Scotch Whisky can be made up of as many as 50 individual Scotch Malt and Grain Whiskies. Blended Whiskies account for more than 95% of Scotch sold across the world. Single Malt indicates that the Whisky comes from one distillery, although it may contain Whisky from several production batches from different years.

Maryland Investor’s lifestyle spotlight shines bright on the many aspects of this unusual investment that should be considered before making any choices. All Whiskies can be bought as a form of speculative investment. Only a very small proportion of the Whisky distilled in Scotland is bought and sold for this purpose. There is currently no recognized “Whisky exchange,” nor is there any officially recognized list of buying and selling prices for the various Whiskies available. The Scotch Whisky Association considers investment to be a very speculative business and does not offer advice on the purchase of Whisky for this purpose. Attending a local scotch tasting will help you make the right decisions.

These events are quite popular. We recently attended one, hosted by the William Grant Distillery. Like most given by William Grant’s Glenfiddich of Scotland, this one was sold out. We arrived early at the lovely Severn Inn of Annapolis to meet with “Scotch Ambassador” Heather Greene. It was news to us that there was such a title in the Scotch business, but as we spoke with Heather we realized why such a

Scotch InvestingBy Stephanie Pietry

“The proper drinking of Scotch whisky is more than indulgence: it is a toast to civilization, a tribute to the continuity of culture, a manifesto of

man’s determination to use the resources of nature to refresh mind and body and enjoy to the full the senses with which he has been endowed.”

David Daiches, Scottish literary historian and literary critic.

li f e s t y l e re v i e W


The Glenfiddich Distillery set in the heart of the Scottish Highlands. Glenfiddich means “valley of the deer.”

r 2009 $9.95

position was created. At Glenfiddich, Scotch Ambassadors are not just sales reps sent around the world to put on their best smiles, but are chosen based on their wealth of knowledge from crafting, to tasting, to the detailed history of the product from Scotland’s oldest distillery.

What Heather taught us at this fine presentation of Scotches, matched carefully with hand picked culinary delights meant to enhance the subtleties of each Scotch according to its age, was that a good single malt Scotch can be a very solid investment indeed. Time spent in the barrel is what gives all whiskies, from Glenfiddich’s 12 Year Old right up to their famous 1937 Vintage, their own unique characteristics. The pioneer of the

prestigious single malt Scotch whisky category, Glenfiddich 12 Year Old, is today enjoyed by more people around the world than any other single malt whisky.

“Our original, signature single malt Scotch whisky has matured for at least 12 years in American and European oak casks. The quality of these casks is exceptional, as all are individually tended by our experienced team of coopers, ensuring our whisky develops complex, elegantly rounded flavors with notes of fresh pear and subtle oak. Making every year count is a great philosophy for making

the most of all the possibilities life has to offer us, and here at William Grant, the makers of Glenfiddich single malt Scotch whisky, it is the foundation which underpins everything we do. And the perfect reward for a life well lived,” touts the Scotch’s website. On Christmas Day 1887, spirit first flowed from the Glenfiddich stills and history was made. William Grant’s hard work bore fruit when the first single malt Scotch whisky created at the distillery proved to be of truly exceptional quality. The combination of crystal clear water from the spring, homegrown barley, pure Highland air and the unusually small size of stills, produced an unrivalled single malt Scotch whisky.*

It is within all these intricacies that the value of the Scotch is cultivated. With interest rates low and the stock exchange performance showing some high risks, many people are interested in safer medium to long term positions and are looking at asset backed alternative investment

aryland investor / 21

opportunities. One possibility is Single Malt Scotch Whisky.

Websites such as www.Scotch Whiskey.com can provide the curious investor with more valuable information. According to them, “There are 3 ways of investing directly in whisky—identifying limited edition bottles that will rise in price once sold out, buying casks at a good trade price that will be in demand in years to come, and looking at the new single malt distillery projects.

1. New Distillery Projects. The Scotch Whisky sector has not only the global drinks (companies that continue to develop their Single

Malt brands around the world) it also has enterprise at a smaller local scale providing a mix of innovation, traditional values and opportunities for the alternative investor.

2. Limited Edition & Discontinued Bottlings for collectors and investors. There is a growing ‘investment’ interest in rare whisky bottles and, in the best cases, some remarkable increases in value have been recorded.

3. Casks with particular appreciation potential for investors. The holding of casks of whisky, which

appreciate as they age, remains a viable investment category. The skill is identifying casks that are in strong demand AND likely to be, or are already in, short supply. Read more on this category.”

Finally, whether your investment increases in value or not, you will still have a product that will give you considerable pleasure and enjoyment!

About William Grant & SonsWilliam Grant & Sons, Ltd. is an independent family-owned distiller headquartered in the United Kingdom and founded by William Grant in 1886. Today, the super-premium spirits company is run by the fifth generation of his family. Among the most

recent accolades for the well-awarded company, William Grant & Sons was honored as the “Distiller of the Year” for the third time in four years by the prestigious International

Spirits Challenge.

Founded in 1964, William Grant & Sons USA is a wholly-owned subsidiary of William Grant & Sons, Ltd. and features one of the fastest growing spirits portfolios in the USA with super-premium brands including Stolichnaya vodka, the world’s best-selling single malt Scotch whisky Glenfiddich, The Balvenie range of handcrafted single malts, Grant’s blended Scotch, Hendrick’s® Gin, Sailor Jerry® Spiced Navy Rum, the award-winning Milagro® Tequila, Frangelico Hazelnut Liqueur, Licor 43, BOLS Liqueurs, Galliano, Lillet and Solerno Blood Orange Liqueur.

William Grant & Sons USA has offices in New York City (sales and marketing) and Edison, NJ (bottling and warehouse facilities). For more information on the company and its brands, please visit www.grantusa.com.

* James Curich,William Grant & Sons USA; Julie Conover, Maloney&Fox


Above: 100-plus-year-old distillery equipment is still in use at Glenfiddich.

Right: Rows of barrels for aging whiskey.

r 2009 $9.95Financial Advisors

The Ford GroupMorgan Stanley Smith Barney650 South Exeter Street, Suite 1100Baltimore, Maaryland 21202410-837-8800www.fa.smithbarney.com/thefordgroup

Matthew F. KozackSynergy Financial Group401 Washington Ave., Suite 700Towson, Maryland 21204410-825-3200 ext. 117www.synergyfinancialgrp.com

Sean SomervilleRBC Wealth Management®

901 Dulaney Valley Road, Suite 900Towson, Maryland 21204410-427-3121www.rbcwm-usa.com

Andrew V. Tignanelli, CPA, CFP®

The Financial Consulate307 International Circle, Suite 250Hunt Valley, Maryland 21030410-823-7283www.financialconsulate.com

Attorneys

Robert G. BlueRoyston, Mueller, McLean & Reid, LLP102 West Pennsylvania Ave., Suite 600Towson, Maryland 21204410-823-1800www.mmr.com

Real Estate

Jim SpurrierBeazer Homes Quarry Lake at Greenspring7101 Traverfine Drive #403Baltimore, Maryland 21209410-415-5357www.beazer.com

Paul A. SudanoSilo Point - CSM Partners1200 Steyart StreetBaltimore, Maryland 21230410-539-7456www.silopoint.com

Money Management

Chip Carlson, CFACorbyn Investment Management(Manager of the Greenspring Fund)2330 West Joppa Road, Suite 108Lutherville, Maryland 21093410-832-5500www.greenspringfund.com

Yacht Dealerships

Garth HitchensAnnapolis Yacht Sales7350 Edgewood RoadAnnapolis, Maryland 21401410-267-8181www.annapolisyachtsales.com

Automobile Dealerships

Jack DavisMaserati of Baltimore1630 York RoadTimonium, Maryland 21093410-823-1800www.MBalt.com

Omid ShaffaatPrestige Motors Annapolis, LLC2039 INdustrial DriveAnnapolis, Maryland 21401410-990-1800www.prestigeannapolis.com

Brian TalbotValley Motors9800 York RoadCockeysville, Maryland 21030410-666-7777www.valleymotors.com

r 2009 $9.95


Benchmark Litigation 2010 Recognizes Tydings as a Top Litigation Firm in Maryland

Wh o’s ma k i n g ne W s

Tydings & Rosenberg LLP has been recommended as a top litigation firm in Maryland in the third annual edition

of Benchmark Litigation 2010, a publication of Euromoney/Legal Media Group. The guide focuses exclusively on leading U.S. litigation firms and attorneys.

In addition to naming the firm, Benchmark Litigation 2010 also recognizes four of its attorneys as “local litigation stars.”

William W. Carrier, III, the firm’s managing partner, was praised for his “healthy general commercial litigation practice centered on employment discrimination, trade secrets, and ERISA work.”

Alan M. Grochal was commended for his bankruptcy/creditors’ rights practice. His work representing a property management company of 43 shopping centers with

claims totaling more than $240 million was cited by the publication.

John B. Isbister was singled out for his complex litigation practice and “representation of public and private entities in matters of products liability, toxic torts and environmental litigation.”

William C. Sammons received recognition for his work in the areas of securities, real estate, employment, and antitrust.

Tydings & Rosenberg LLP is a Baltimorebased law firm serving clients throughout the midAtlantic region and the country. The firm practices in corporate and business law, employment, tax, real estate, litigation, intellectual property, bankruptcy/creditors’ rights, estates and trusts, and family law.

in v e s t m e n t Ce n t r i C se rv i C e s Di r e C t o ry

SKILLFULLY CRAFTED. ENJOY RESPONSIBLY.WWW.GLENFIDDICH.COM

PRIZED FOR ITS RICH TASTE.

When it comes to prizes, Glenfiddich Single Malt Scotches have

received more of the industry’s top awards than any other

distillery. However, its true distinction lies in its extraordinary

taste. Take our signature single malt, Glenfiddich 12 Year Old.

Matured in American and European oak casks carefully tended

by our coopers, it develops complex, elegantly rounded flavors

with notes of fresh pear and subtle oak. This might explain why

it’s the world’s favorite single malt whisky, which we happen to

consider to be the greatest honor of all.

GOLDEN COLOR

FRESH PEAR AND SUBTLE OAK FLAVORS

*Base

d o

n In

tern

atio

nal W

ines

& S

piri

ts C

ompet

ition

and

Inte

rnatio

nal S

piri

ts C

ompet

ition

Aw

ard

s si

nce

2000

G

lenfi

ddic

h® S

ingle

Malt

Scot

ch W

hisk

y, 4

0% A

lc./

Vol.

©20

09 Im

por

ted b

y W

illia

m G

rant

& S

ons,

Inc.

, New

Yor

k, N

Y.

Maryland Investor November - December

Documents

Transcript of Maryland Investor November - December