Invest n Retire 401(k) Conference 2006

Transcription

1 Invest n Retire 401(k) Conference 2006 The goal of our conference is educate each of you, as an advisor, of the advantages of using exchange-traded funds (ETFs) in 401(k) plans. During the conference, we will explore how Invest n Retire, and our service providers, are leading a revolution in the retirement industry. The next day and a half you will have the opportunity to hear from experts in the mutual fund industry; including, the companies who are leading the revolution in indexing and exchange-traded funds (ETFs). Vision without action is merely a dream. Action without vision just passes the time. Vision with action can change the world. 1 Our ultimate objective is to help you understand that, by working together, we can change the status quo of 401(k) plans. Invest n Retire works hard to help employees achieve their ultimate goal of accumulating enough savings in their retirement account so that they can maintain their desired standard of living throughout their lifetime. 1 Joel A. Baker, Ph.D., Futurist and Independent Scholar, author of The Paradigm Man Invest n Retire LLC

2 Massachusetts Investors Trust the first mutual fund was introduced in March Let s have a short history lesson on the mutual fund industry in America. The first mutual fund was created by Massachusetts Investors Trust in 1924 when American s were driving Model T Fords. Invest n Retire LLC

3 The Securities Act of 1933 After Ford introduced their first V8 engine in 1932, Congress passed the first legislation regulating securities. The Securities Act of Invest n Retire LLC

4 The Investment Company Act of 1940 (The Act) The Investment Company Act of 1940, known as The Act, created the legislation that is still the foundation for mutual funds today. In1940 there were 68 mutual funds. Invest n Retire LLC

5 In 1949 Bogle wrote a thesis entitled, The Economic Role of the Investment Company. In 1949, John Clifton Bogle, Founder and former Chairman of the Board of The Vanguard Group, was seeking a topic for his senior thesis. While attending Princeton University, Bogle read an article in Fortune magazine, Big Money in Boston. Bogle realized that he had stumbled on his topic. The article stated,... mutual funds may look like pretty small change, but constituted a rapidly expanding and somewhat contentious industry that could be of great potential significance... Already firm in his conviction that mutual fund shareholders were not receiving a fair shake, Bogle s groundbreaking and innovative thesis unalterably changed the future course of investing. Among the hypotheses resulting from Bogle s exhaustively researched thesis entitled, The Economic Role of the Investment Company, was his conclusion,... the industry s future growth could be maximized by a reduction of sales loads and management fees. Bogle s concept was an investment approach that seeks to reduce costs while maintaining performance by matching the investment returns of a specific stock market benchmark or index. Invest n Retire LLC

6 BGI created the first index strategy in In 1971Mac (John A.) McQuown created the first index collective trust based on the S&P 500 at BGI for Saminite Luggage. Invest n Retire LLC

7 Vanguard created the first index fund, Vanguard 500, in In 1974 Bogle witnessed the birth of the first index mutual fund, the Vanguard Index Trust. However, until the early 90s, Bogle s venture was referred to as Bogle s Folly by the experts and the media, who felt that his idea was doomed from the start. Today, Bogle s Folly is recognized as Bogle s Triumph with Vanguard managing about $1 trillion in assets. As a validation to Bogle, I am reminded of Stephen Vincent Benét s declaration, If the idea is good it will survive defeat. Invest n Retire LLC

8 The first ETF was issued in In the Dec 1976 issue of Financial Analysts Journal, Professor Nils Hakansson published a paper titled, The Purchasing Power Fund: A New Kind of Financial Intermediary, which described a new financial instrument. 1 The theoretical financial instrument Professor Hakansson envisioned was a fund he called, Purchasing Power Fund, which would be made up of Supershares with the underlying assets composed of index funds. In the late 80s, Leland, O Brien, Rubenstein Associates (LOR), a firm known for developing portfolio insurance products, believed there was a demand for a simplified version of the Purchasing Power Fund. In 1990, the SEC issued the Investment Company Act Release, the SuperTrust Order, which granted LOR specific exemptions from the Act of The Order essentially made exemptions to the rules governing the way securities are sold and exchanged which allowed for the creation of exchange-trade funds (ETFs). LOR introduced the SuperTrust in 1993; however, the fund ultimately failed and was terminated in After the SuperTrust s failure, the American Stock Exchange through its subsidiary, Standard & Poor s Depository Receipt (SPDR) Trust, used the exemption and introduced the Spider, which gained acceptance in the marketplace and became the first commercially successful ETF. 1 White paper, Exchange Traded Funds, by James L. Novakoff, Managing Principal of Levitt Novakoff, LLC Boca Raton, Florida February 24, 2000 Invest n Retire LLC

9 In 1996 Morgan Stanley joined forces with BGI and the AMEX to create WEBS. In 1996, Morgan Stanley joined forces with Barclays Global Investments and the American Stock Exchange to create the World Equity Benchmark Shares (WEBS) which were SEC registered. Morgan Stanley organized the WEBS as an investment company, rather than a unit investment trust. This innovation allowed Barclays, the investment manager for WEBS additional investment management discretion. 2 While the SuperFund and SPDR pioneered the concept of exchanging shares, WEBS made a specific advance in the method of exchanging shares which acts to reduce the tax liabilities generated by ETFs. The WEBS were the foundation for Barclays Global Investors (BGI) s ishares, which have been the most successful investment option in history. 2 Exchange Traded Funds, by James L. Novakoff, CFP, Managing Principal of Levitt Novakoff Invest n Retire LLC

10 Invest n Retire offered the first ETFs in a 401(k) plan in In 2005 Invest n Retire offered the first ETFs in a 401(k) plan. Invest n Retire LLC

11 Invest n Retire TandemModels SM Portal In 2006 Invest n Retire (INR) introduced its TandemModels SM software. INR s ASP solution allows advisors to access its TandemModels SM software in order to design and manage asset allocation model portfolios - with ETFs as the investment options. Invest n Retire LLC