1. Calif. closes 529 plan as more advisers go direct


    By Jessica ToonkelOct 18 (Reuters) - The California State Treasurer’s decision last week to shut down its adviser-sold 529 plan is the latest evidence that the once popular option is losing ground, experts say.For starters, these plans are already losing market share to their direct-sold counterparts — giving up 9 percent market share in the past five years. And experts predict that this trend will pick up pace as regulation of the brokerage industry expands.On Oct. 12, the ScholarShares Investment Board, which runs California’s 529 plan, announced it had decided to drop the plan because it was not able to find a manager that “could deliver a competitive plan for our account holders,” according to a statement by Joe DeAnda, a spokesman for California’s treasurer office.The change came as California switched providers from Fidelity Investments to TIAA-CREF. TIAA-CREF did not bid to run the plan.”We bid on the direct plan because that is where we feel we have the most expertise,” said Doug Chittenden, senior vice president of institutional product management at TIAA-CREF. California’s direct 529 plan has $3.9 billion in assets, compared to the adviser-sold plan, which has $283 million.Currently, 30 states have both an adviser-sold and direct option, according to FRC. When 529 plans came to the forefront in 1997, adviser-sold plans — which are sometimes available nationwide and are sold by brokers who receive a commission — largely drove the growth of the market.But that has changed. While adviser-sold plans accounted for 60 percent of 529 savings plan industry assets in 2006, they accounted for only 51 percent of assets as of the end of 2010, according to Financial Research Corporation.VICTIM OF SUCCESSTo some extent, adviser-sold 529 plans are a victim of their own success, industry officials said. As the industry has raised awareness about how these programs work, more investors feel comfortable investing in them directly.States also spend more of their marketing dollars promoting direct-sold plans, which may be another reason that market is growing, said Laura Lutton, a Morningstar Inc. analyst.What’s more, a growing number of advisers are telling clients to invest in their in-state direct-sold plans, forgoing any commission or fee.Twenty-three percent of advisers recently surveyed by Financial Research Corp said they always recommend their in-state direct 529 plans for clients, while 49 percent said they sometimes do.Direct-sold plans are less expensive than adviser-sold plans, said Paul Curley, a 529 analyst at FRC. The average fee for an adviser-sold plan is 1.14 percent. Direct plans, average 0.58 percent, according to FRC.Robert Oliver, an Ann Arbor, Michigan-based fee-only adviser, always directs his clients to the in-state plan, which costs 0.35 percent and offers a tax break to residents. But he still meets prospective clients who have been sold out-of-state plans by other brokers, he said.”A lot of clients are being sold plans because the adviser gets a commission off of them,” Oliver said.REGULATORY CHANGESGiven the regulatory landscape, that is likely to change, Hurley said.The securities industry expects the SEC to soon propose rules that would harmonize legal standards of care between brokers and registered investment advisers. That would mean that brokers could be required to act as fiduciaries, acting in the best interest of a client, a standard that RIAs already follow.One change that would bring: Advisers selling out-of-state plans, when their clients can get a tax deduction for the in-state option, would have to provide even more disclosures about why they are choosing an out-of-state plan for the client, Hurley said.But advisers won’t be shut out entirely, experts say.”When we talk to account holders, the top three ways that investors learn about 529 plans is word of mouth, advisers and the Internet,” said Joan Marshall, chair of the College Savings Plan Network and executive director of Maryland’s college savings plan. “A lot of people really want the assistance of advisers when making these decisions.”

  2. UPDATE 4-Wells Fargo disappoints Wall Street; stock falls


    * Loan reserve release and lower bad loan costs give lift* Commercial loans grow 3 pct in last three months* Shares down 7.6 percent in early afternoon tradingBy Rick Rothacker and David HenryOct 17 (Reuters) - Wells Fargo & Co reported a weaker-than-expected profit as its lending margins shrank in a weak economy. The rare misstep for the fourth-biggest U.S. bank pushed its shares down 7 percent.The bank eked out higher income, but the results disappointed analysts on many fronts. Net interest income, a measure of lending profit, fell 5 percent, and fee income from making home loans and other services fell 7 percent, a steeper-than-expected drop. Revenue fell nearly 4 percent from this year’s second quarter.”The economic recovery has been more sluggish and uneven than anyone anticipated,” CEO John Stumpf said in a statement.Profit at Wells Fargo, the biggest U.S. home loan servicer, was 72 cents a share, a penny short of the average analyst estimate, according to Thomson Reuters I/B/E/S.Banks’ lending margins are under pressure as intervention from the Federal Reserve pulls down long-term rates. For Wells Fargo, net interest margin tumbled to 3.84 percent from 4.25 percent.”Right off the bat, net interest margin declined more than expected,” said RBC Capital Market analyst Joe Morford.Wells Fargo executives said some of the margin shrinkage is a result of customers bringing the bank more deposits than it could quickly invest in higher-paying loans. In time, the bank hopes to make more money from those funds, Morford said.Because the bank set aside less money to cover loan losses during the quarter compared with last year’s quarter — $1.81 billion down from $3.44 billion — Wells Fargo’s bottom line for common shareholders rose to $3.84 billion from $3.15 billion.Wells Fargo’s report comes as the industry struggles to hold onto recent profits after having lost tens of billions of dollars in the financial crisis. Financial company earnings in the third quarter are expected to be up only a fraction of a percent from a year earlier, and still less than half as much as they were five years ago, according to Thomson Reuters Proprietary Research.Bank stocks have been among the stock market’s worst performers this year on fears that their earnings will be flat to down for years on less demand for loans and the low interest rates of the weak economy.Wells Fargo’s loan portfolio was up 1.1 percent to $760 billion, with commercial loans up 3 percent in the quarter.The loan growth was partly from higher demand and partly a matter of taking business from competitors, Chief Financial Officer Tim Sloan said in an interview. He said the economy is growing, but “choppy.”EXPECTING MOREAnalysts and investors have tended to expect more from Wells Fargo recently than from its bigger competitors because its shares are less subject to the ups and downs of the financial markets.Shares of Bank of America , JPMorgan Chase & Co and Citigroup — which earn more of their income from underwriting stocks and bonds and providing corporate takeover advice — have fallen more this year than Wells Fargo’s 14 percent loss through Friday.”One reason we’re a big fan of Wells Fargo is there’s less volatility in the earnings,” said Channing Smith, co-manager of the Capital Advisors Growth Fund, which owns Wells Fargo.Wells Fargo said its earnings were boosted by releasing reserves of $800 million for bad loans, down from $1 billion in each of the first two quarters of this year.Such releases amount to dipping into money previously set aside to cover bad loans and have been a significant part of bank earnings over the past year as lenders decided they set aside too much.Wells executives told analysts in a conference call after the report to expect more release reserves as long as the economy does not turn down sharply.The bank said it began “streamlining” staff functions and consolidating consumer lending businesses and several technology groups during the quarter. Noninterest expenses fell 5 percent from a year ago to $11.7 billion on lower personnel, merger and litigation costs. Under a program announced earlier, the bank wants to lower quarterly noninterest expenses to $11 billion by the end of 2012.San Francisco-based Wells is looking to ramp up revenue by selling more products to East Coast customers following its 2008 purchase of Wachovia Corp. Over the weekend, the bank finished converting Wachovia branches to Wells Fargo signs and systems, the last major step in the acquisition.

  3. Destination: Remote Khinalug


    Your View contributor Abbas Atilay took us to the remote Khinulag village in Azerbaijan this week with his beautiful images of life in the isolated location. View this week’s Your View showcase here.

  4. US lawmaker expects trade deals approved Wednesday


    Camp also said he expected the Republican-controlled House to approve a worker retraining program known as Trade Adjustment Assistance (TAA), despite the opposition of many rank-and-file Republicans.”In order to have the president’s signature on the trade agreements, we need TAA to pass,” Camp said.The Senate also is expected on Wednesday to approve the three trade deals, which were all negotiated and signed during the administration of Republican President George W. Bush.

  5. Sharks make Aussie golf course lake a real hazard


    The Carbrook Gold Course was flooded in the late 1990s when the Logan River burst its banks and covered the fairways. When the flood waters drained away, it was noticed that the course lake — between holes 12 and 15 — had some new aquatic residents.Today, fins can sometimes be seen breaking above the surface of the otherwise ordinary-looking lake, which is posted with yellow signs warning people not to swim.If a ball ends up in the lake, it’s best to resist a quick dive in to get it.”No that’s taboo, that’s taboo. If you value your limbs you don’t go anywhere near the lake,” said Casemore.But the warning signs are sometimes not enough to deter more daring players.”I’ve had a member in recent months try to get a ball in a scoop and end up in waist deep water, trying to scamper out,” said one golfer, who did not give their name.Though wildlife is a common sight at many golf courses around the world, most aren’t man eaters. The club hosts a tournament called the “Shark Lake Challenge” every month.”I know there are a fair few golf courses around with deadly animals like crocodiles and alligators, but we are the only ones I know who have got sharks,” another golfer said.