Caughtin A Storm

BLACK ENTERPRISE offers 90 selections that might be a silver liningin the dark clouds of the recent mutual fund scandals

is weak,” explains Richard J. Peace, CFP, the Bakers’ financial planner. “In fact, these funds have performed well over the past decade.”

The Bakers also have some money in SunAmerica focused portfolios. “These are mutual funds that ask three different managers to name their 10 best ideas in terms of stocks,” says Peace. “They tend to be more aggressive than American Funds. Again, the company has a good reputation and performance has been strong.” Peace says he is satisfied with the ethical behavior of these families, as he is with Van Kampen funds, which are held by some of his other clients.

RESPONSIBILITY KNOCKS
Just as Baker is comfortable with the fund families he holds, so is Charles M. Adams, 42, president of Adams Communications & Engineering Technology, an IT consulting firm in Waldorf, Maryland. “All the bad news doesn’t scare me unless it affects my funds,” says Adams. “So far that hasn’t been the case. I do most of my investing through my company’s 401(k) plan, which has funds such as Fidelity Magellan (FMAGX) and Fidelity Dividend Growth (FDGFX). Fidelity hasn’t been named in these scandals.”

Ivory Johnson, Adams’ financial planner, concurs that Fidelity and its funds have not been implicated in the ongoing scandals. “Charles also holds some Vanguard funds, and Vanguard has an excellent reputation,” says Johnson. “I’d be surprised if it’s found out that those companies permitted improper trading.” Johnson does feel, however, that the mutual fund scandals have presented business owners, such as Adams, with other burdens to bear. “If you sponsor a retirement plan that includes employees,” says Johnson, “you have a fiduciary responsibility to them. Your employees might sue you in the future if their retirement accounts don’t do well, and having funds from families that have been named in scandals could hurt your defense.”

If that’s the case, what steps should business owners take to reduce this risk? “Bring in a reputable financial professional,” says Johnson. “This adviser can look at the funds in your plan and attest–on paper–that they appear to be well-managed and from respected fund families. If necessary, your adviser can recommend new funds to replace ones that should be removed from your plan. An advisor also can determine whether you’re participating in a good mix of funds and can help your employees put together well-balanced portfolios.”

LEARNING CURVE
Looking at this issue from the employee’s point of view is Carl E. Peoples, 38, a manager with Wachovia Wealth Management in Atlanta. “I do most of my investing through my employer’s 401(k) plan,” he says. “I expect [my employer] to review all the funds now in the plan and to replace any that are inappropriate for my investing.”

Within his 401(k) plan, says Peoples, most of his assets are in Dodge & Cox Stock Fund (DODGX). “This fund has done very well. That family hasn’t been charged with anything, as far as I know.”

Osmond Baptist, a certified financial planner in Decatur, Georgia, who advises Peoples, says, “I don’t like to see clients have too much of

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