November, 1997 Vol II, No.2

Marcia S. Wagner, Esq. & Associates, P.C. is pleased to announce that it has been instrumental in developing a revolutionary product for Trust Company of the West ("TCW"), whereby investment advice will be rendered to 401(k) plan participants for purposes of determining in which commingled trusts (comprised of TCW's Galileo mutual funds) plan participants should invest. TCW will receive fees from its management of the Galileo funds, but avoids the ERISA rules prohibiting self-dealing, which could result from recommending its own funds and receiving fees from managing those funds, by hiring independent financial experts to render the investment advice. The Department of Labor has issued an exemption from the prohibited transaction rules in favor of TCW.

Marcia S. Wagner is quoted in the following article from the Sunday, November 2, 1997, New York Times.

TWC Wins Approval to Advise 401(k) Clients

By Bloomberg News

TCW Group has become the first money manager allowed by the United States Department of Labor to advise investors on their 401(k) plans - a move that could help it expand in the fastest-growing part of the pension business.
TCW, whose $50 billion in assets is primarily from traditional pension funds, can now advise participants in 401(k) plans on how much to invest, where to invest it and how much risk to take. The firm can also provide information about specific TCW, funds.
No other fund companies are allowed to provide such specific advice, giving TCW, a Los Angeles-based money manager, an advantage in distinguishing itself from better-known 401(k) providers like Fidelity Investments or Putnam Investments.
"It is a cataclysmic change in the pension world," said Marcia Wagner, a pension lawyer in Boston, noting that investors would now be able to get specific investment advice about self-directed retirement accounts that was not available before.

It should also be good for TCW.

"We would be disappointed if we didn't have $10 billion of new assets under management within five years," said Brian Tarbox, senior vice-president for defined contributions of the employee-owned firm. TCW will charge no fees for providing advice, so its income from the service will come from money management fees.
Until now, the Labor Department, which regulates corporate pension funds, has not let fund companies provide specific advice on investment choices for fear that money managers would steer investors toward funds with the highest fees.
TCW began discussions with the Labor Department about an exemption in July 1996. The firm agreed automate some of the counsel process to limit the risk of such steering.
Mr. Tarbox said he knows of no other companies that have applied for an exemption, although he expects other fund companies will soon.
Assets invested in 401(k) retirement plans were about $810 billion at the end of last year, according Access Research Inc., and have grown at an annual rate of 18 percent since 1986.
Assets in traditional plans, in which companies guarantee a fixed pension upon retirement, total $1.685 trillion as of the end of last year, but the annual growth rate was only 8.4 percent, according to Access Research.