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Any thoughts on the proposed changes to retirement plans by the Dept of Labor??
Posted on 3/8/17 at 4:39 pm
Posted on 3/8/17 at 4:39 pm
LINK
I'm very simplistic but what I got out of a conversation I was involved in today was that the government wants to set how balanced (aggressiveness wise) ones portfolio is. I also got that it's to protect the consumer from fraudulent practices but at a likely higher cost.
Is that the crux of the idea? Please don't crucify me if I've got it all wrong ... rather explain and help one to learn.
Supposed to take effect in April but looks like Trump is trying to delay it.
I'm very simplistic but what I got out of a conversation I was involved in today was that the government wants to set how balanced (aggressiveness wise) ones portfolio is. I also got that it's to protect the consumer from fraudulent practices but at a likely higher cost.
Is that the crux of the idea? Please don't crucify me if I've got it all wrong ... rather explain and help one to learn.
Supposed to take effect in April but looks like Trump is trying to delay it.
4
Posted on 3/8/17 at 5:02 pm to tiger91
It's to set a fiduciary standard across the board for all retirement plans essentially. When you work with an advisor/broker he can either work with you as a fiduciary (typically a fee based account) or in a suitability standard (typically a commissioned based account.
There's a lot more to it than just that and it's certainly not meant to drive all retirement planning fee based but that's pretty much what is fixing to happen, since it holds the clients best interest to a higher standard and eliminates the most conflicts of interest.
Having said that, it's probably going to get delayed by the Trump administration. The heart of the ruling is good yet the details of it have a lot of the industry skeptical. It opens the doors for class action lawsuits and will create "the plaintiff attorney full employement act" as someone once put it.
There's a lot more to it than just that and it's certainly not meant to drive all retirement planning fee based but that's pretty much what is fixing to happen, since it holds the clients best interest to a higher standard and eliminates the most conflicts of interest.
Having said that, it's probably going to get delayed by the Trump administration. The heart of the ruling is good yet the details of it have a lot of the industry skeptical. It opens the doors for class action lawsuits and will create "the plaintiff attorney full employement act" as someone once put it.
This post was edited on 3/8/17 at 5:04 pm
Posted on 3/8/17 at 5:02 pm to tiger91
From what I understand the changes effect who is a fiduciary. In the past only RIA's were considered but under the new rule any broker giving advice\education comes under the rule. They are trying to prevent brokers from steering clients to expensive commission based retirement vehicles. If people would educate themselves just a little bit this wouldn't be an issue but it's the world we live in today.
This post was edited on 3/8/17 at 5:04 pm
Posted on 3/8/17 at 5:06 pm to tiger91
You got it wrong. The fiduciary rule requires advisors to simply act in the best interests of the client. That may require the advisor suggest an ETF with an expense ratio of 0.15% as opposed to a similarly weighted mutual fund run by the advisors employer that charges 1.50%.
So nothing about how a portfolio is weighted for aggression is on the table based on my reading of Dodd-Frank.
So nothing about how a portfolio is weighted for aggression is on the table based on my reading of Dodd-Frank.
Posted on 3/8/17 at 5:07 pm to lsufan1971
It is going to screw people with small IRAs because no commission based advisor is going to want to deal with them.
ETA: Chongo is correct. I believe it is more of a cost thing.
ETA: Chongo is correct. I believe it is more of a cost thing.
This post was edited on 3/8/17 at 5:09 pm
Posted on 3/8/17 at 5:08 pm to chongo
quote:
That may require the advisor suggest an ETF with an expense ratio of 0.15% as opposed to a similarly weighted mutual fund run by the advisors employer that charges 1.50%.
That part was changed by the DOL in their final ruling. An advisor does not have to recommend an investment over the other simply bc one has a lower expense.
Posted on 3/8/17 at 5:10 pm to Shepherd88
Yes, but doesn't it make it harder for the advisor to justify? I am 99% fee based so I never paid much attention.
Posted on 3/8/17 at 5:17 pm to Janky
The point I mean is I don't have to recommend a Schwab ETF over Vanguard solely bc it's .05% lower.
In the example that the poster said earlier it was a bit more extreme and would be harder to justify, yes. I just meant that's not the only criteria to look at.
In the example that the poster said earlier it was a bit more extreme and would be harder to justify, yes. I just meant that's not the only criteria to look at.
Posted on 3/8/17 at 5:23 pm to Shepherd88
Gotcha
Posted on 3/8/17 at 6:00 pm to Janky
It may take out the middle man or independent advisers who are charging small plans a good chunk of change and would allow others like Fidelity or Vanguard to serve as the fiduciary or co-fiduciary (they can't right now, so many small plans under $50 million get a 3rd party adviser).
It puts the participants first and makes the advisers or fiduciaries act in the best interest of the participants and not themselves or the plans.
It puts the participants first and makes the advisers or fiduciaries act in the best interest of the participants and not themselves or the plans.
Posted on 3/8/17 at 6:13 pm to tiger91
If the conversation you had was with your advisor, you may want to look elsewhere.
The rule does limit the options for smaller accounts, mainly because the risk/reward for an advisor is simply not there. However, the rule would effectively get insurance salesmen only out of the retirement business, for all practical purposes. Annuities have their place in retirement planning, but if that's all you can sell, how can you conceivably act in your client's best interests?
The rule does limit the options for smaller accounts, mainly because the risk/reward for an advisor is simply not there. However, the rule would effectively get insurance salesmen only out of the retirement business, for all practical purposes. Annuities have their place in retirement planning, but if that's all you can sell, how can you conceivably act in your client's best interests?
Posted on 3/8/17 at 7:47 pm to Shepherd88
quote:
That part was changed by the DOL in their final ruling. An advisor does not have to recommend an investment over the other simply bc one has a lower expense.
Exactly. It's why I qualified my statement by using the term "similarly weighted" indicating that the mutual fund and etf essentially hold the same securities. Of course a financial advisor doesn't simply have to recommend an investment based on expense ratio. That would be insane and the end of hedge funds lol.
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