New Fiduciary Standard Rule 401k IRA Rollovers

(The new rule is also known as the Conflict of Interest rule).

American retirees better get used to a new word, fiduciary

It’s pronounced (fi-do-she-er-ee). In a nutshell, retirees need to better protect their retirement “nest eggs” from financial advisers potentially conflicted 401k plan rollover advice and when they do open an IRA Rollover account and invest, avoid high costs in certain mutual funds, investment products, insurance, annuities or investment advisory, retirement or rollover planning services.

4 steps for Retirees

Why is this important now?

The United States Department of Labor (DOL), Employee Benefits Security Administration released a new rule*, known as the NEW Fiduciary Standard Rule or Conflict of Interest Rule, requiring a new fiduciary standard (to act in the best interests of the customer) for investment advisors, insurance agents, stockbrokers and certain mutual funds 1940 Act companies that covers retirees’ distributions from ERISA plans like 401k plans into IRA Rollover accounts.  Generally, the new fiduciary standard (Conflict of Interest Rule) applies to advisors, insurance agents and broker dealers when, how and to whom they give advice to or about a plan participant electing a distribution, transfer or withdrawal from or to a covered account out of a 410k or into or from an IRA Rollover account.  The new rule requires the advisor, as a fiduciary (including the investment advisory firm, insurance company or broker dealer) to give advice that is in the best interest of the customer, subject to exemptions or carve – outs, when the Best Interest of the Customer (B.I.C.E.) does not apply.  The White House press release is here.

In summary, the NEW rule requiring a Fiduciary standard is in addition to and augments the Suitability standard, itself embedded within the decades-old “Know Your Customer” rule.

The new rule is lengthy, (and may be challenged by Congress, the securities or insurance industry or certain companies or individuals) however, customers are reminded that advisors, insurance agents and broker dealers’ registered representatives are paid to market (i.e. give investment, securities, retirement and rollover advice), reading is not at the top of the list; see additional issues below.

Independent, Fiduciary Standard Expert

A retirement or pension plan account rollover is usually a once in a lifetime decision.  When it comes to your retirement assets independent, fiduciary standard and conflict of interest analysis is important.  It’s advisable to ask the correct Fiduciary Standard questions first, before risking all the years of hard work and sacrifice with an inappropriate, illegal, non-compliant or ill-advised transfer, deposit or withdrawal into or out of IRA Rollover from a 401k plan or other type of ERISA pension benefit also known as an IRS qualified plan.

Five Risk Areas for American Retirees’ 410k and IRA Rollover Accounts

Five risk items include but are not limited to the NEW Fiduciary Standard covered accounts; 1) receiving conflicted advice or 2) paying high cost, unreasonable or over-priced investment advice.  Risky or speculative investments often go hand in hand with both risks, that being conflicts of interest and or over-priced investment products and services.

Third, failures or omissions to follow these new rules could result in costly, time consuming litigation.  For example, it’s foreseeable that your IRA Rollover beneficiary could file a lawsuit (against you and your investment providers) for not following the correct information about the new IRA Fiduciary Standard rule, asking the correct questions or engaging in a risky or non-compliant Rollover, if at all.  (In addition, to not following or receiving existing customer account advice and or protections on the books today.)

Fourth, perhaps the greatest risk, but getting the least amount of media attention at present, how is it possible for any investment advisor, insurance agent or stockbroker to act as a fiduciary when they often do not have the knowledge to act as a fiduciary?  In general they, 1) lack training, 2) are not tested, 3) not licensed 4) not receiving continuing fiduciary education to act as fiduciary and or 5) not supervised by supervisors who themselves are knowledgeable, trained, tested and licensed.

Fifth – the effective date for compliance by investment advice providers is next year, April 2017, about a year in the future.  Why wait to have your 401K plan rollover at undue risk today? Or your current IRA Rollover account left to th,e lower older standards?

2018 Update, below is an excerpt from a letter to the SEC from the Consumer Federation of America, dated February 21, 2018 and a previous statement from the SEC Chairman dated, June 1, 2017 here:

As the well-documented Massachusetts complaint makes clear, the reality behind the scenes was very different. The complaint describes a “firm-wide culture characterized by aggressive sales practices and incentive-based programs,” which only intensified in the period after the DOL rule’s impartial conduct standards went into effect.5 Far from abandoning sales contests, as its compliance manual indicated, Scottrade ramped up its use of such contests, according to the complaint, making no effort to exclude retirement accounts.6  It allegedly set performance metrics and quotas for referrals to its investment advisory program, for example, that agents had to meet to qualify for certain prizes. And its “internal-use” materials instructed agents to target a client’s ‘pain point’ and emotional vulnerability, while training sessions lauded the use of emotion over logic in getting a client to bring additional assets to the firm,” according to the complaint.7 [emphasis added]

As is clear in the excerpt in the above letter, retirees should exercise caution, be very careful and aware of certain “pressures” artfully phrased as “targeting [potential investors’] pain points and emotional vulnerabilities” when dealing with certain “advisers” in all discussions and meetings with any financial representatives and be especially wary when handed off to new individuals or teams since those persons or teams may not be fully aware of the context, content and understandings of previous discussions.

Is your 401K plan Rollover or IRA Rollover in harm’s way today?

Get more information about the NEW Independent Fiduciary Standard Expert account review for IRA Rollovers, 401k plan rollovers, ERISA plan distributions; Trust accounts, and other Fiduciary Accounts from an independent, objective, experienced and expert source.  American retirees and consumers deserve nothing less.

Since 2003, we are expert in Fiduciary Standards (including identifying Conflicts of Interest) and Securities Industry Compensation with over 30 years of combined Securities industry and litigation support experience.

* Note as new or revised interpretations become available we will endeavor but do not guarantee to update the site.  This site and or post is not intended nor should one use it as legal, financial, fiduciary, tax or investment advice.

For more information or (310) 943-6509

Copyright Chris McConnell & Associates 2016 to 2018 All rights reserved


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