Tapping experts in their fields, AdvisorOne reviewed the issues most likely to affect advisors and their clients in 2013. These issues include:
1. The new fiduciary rule expected from the DOL by July. The industry is concerned about greater fiduciary scrutiny for small plans, with some experts warning that it could kill the commissioned-based business.
2. Annuities, which seem like a good solution for people concerned about outliving their money in retirement. But these products are so complex with limited disclosure that people don’t understand them and have trouble determining which are right for their situation.
3. Overhaul of the retirement system. This issue comes in various sizes and flavors, from concerns about limiting the tax incentives to state run MEPs, to Sen. Tom Harkin’s USA Retirement Funds idea, to imposing fiduciary liability on IRAs.
4. Social Security. With more people having to rely on it, there are growing concerns about funding, which may cause raising retirement age and/or increased taxation.
5. The so-called 4% withdrawal rule in retirement, which probably does not make sense in an era of low returns. Rather than bonds, which promise to have lower returns with greater demand for them, perhaps we should be relying on annuities using equities. Except that no one understands annuities.
While some advisors complain that the government is making it too hard to do business or that the issues are too big to overcome, remember that most if not all of the retirement business, especially 401(k) is owned by the government. They can do what they want, and the fact that they are paying more attention only speaks to the growing importance of the participant-directed retirement system and the vital role for independent and qualified retirement plan advisors. In addition, if the issues were easy to solve, there would be less need for experienced advisors and fee compression would only happen faster.
