Opinions expressed by BIZ Experiences contributors are their own.
According to a recent national survey of investors done byresearch firm Roper Starch Worldwide, culture can influenceinvestment decisions. Conducted for Ariel Capital Management Inc.,a black-owned and operated mutual fund company in Chicago, thestudy found that blacks invest more conservatively and expectlarger returns in a shorter time period than do nonblacks. Thestudy also found that while stock and mutual fund investments areat an all-time high, most blacks do not invest in them.
The reasons behind blacks' investment decisions may have todo with perception of risk. Black investors tend to be comfortablewith a moderate amount of risk but typically don't want to tieup their money for a long time, says Stacy Bereck, senior projectdirector with Roper Starch. And that, in turn, may affect the typesof investments they make.
Educating employees about retirement plans could make adifference in where blacks invest, says Mellody Hobson, a seniorvice president with Ariel. "Mutual funds and stocks aredemonstrated wealth creators," says Hobson. "It'simportant to help employees understand that long-term investorshave the opportunity to withstand the volatility of the stockmarket."
Offering a black-owned mutual fund may also increase the comfortlevel of black investors, speculates Hobson. There are about 12black mutual funds, Hobson says, but Ariel is the only one listedin daily newspapers (to get listed, funds must manage at least $30million in assets or have at least 1,000 shareholders).
To obtain a copy of Ariel's free guide to mutual fundinvesting, call (800) 29-ARIEL.
Plan Ahead
Employers who offer a retirement plan could be held liable ifthe plan loses money. "The Employee Retirement Income SecurityAct [ERISA] says people who are the fiduciaries or in a position oftrust within a retirement plan [must] make sure the plan isadministered and invested for the benefit of participants,"says Mike Posey of ProFutures Capital Management Inc., an Austin,Texas., investment advisor.
Even if an outside money manager handles the fund, employers arestill responsible, says Posey, because employees select stocks fromemployer-chosen options. "Even if employers aren'ttrustees of a plan, they can be held liable because [they'retypically] responsible for directing trustees to pickfunds."
The only way to almost completely eliminate your fiduciaryresponsibility is to hire a bank trust department to manage thefund. However, by doing this, you lose control of investmentoptions.
To help mitigate your liability and still control the fund,educate your employees about their stock choices. "And if youappoint a registered investment advisor who accepts fiduciaryliability in writing, the majority of liability is removed from theemployer," says Posey.
But not all of it. For a 15-month period ending March 1997, theU.S. Labor Department collected more than $500 million due to ERISAviolations.
Great Expectations
Investment attitudes differ among cultures.
Returns Expected When Expected
Black investors 14.6 percent 6 years
Nonblack investors 11.2 percent 7.3 years
Source: Roper Starch Worldwide
By The Book
Not sure how the Taxpayer Relief Act of 1997 will affect yourbusiness? KPMG Peat Marwick LLP has compiled a book, accessible athttp://www.us.kpmg.com/taxact ,that outlines many of the changes. Topics range from capital gainsand estate taxes to the alternative minimum tax and healthinsurance deductibility.
What makes this book so helpful is that it goes beyond merelylisting the old and new provisions--it also offers examples of howthe changes could impact you. Under the section discussing changesin 401(k) matching contributions for self-employed individuals, forinstance, KPMG explains why the new change is expected to encouragepartnerships to adopt retirement plans.
But keep in mind, the book is just an overview of the basics,says Evan Liddiard, associate national director of legislativesupport services for KPMG in Washington, DC. After reviewing thesections that apply to you, consult your tax advisor for moredetailed information.
Contact Sources
Ariel Capital Management Inc., 307 N. Michigan Ave.,Chicago, IL 60601
KPMG Peat Marwick LLP, (201) 505-3400
ProFutures Capital Management Inc., 1310 Hwy. 620 S.,#200, Austin, TX 78734, (888) 890-7264
Roper Starch Worldwide, (212) 599-0700, http://www.roper.com
