Conflicts of Interest and Rollovers Front and Center for Feds

Call it a conspiracy or coincidence, but it seems that the SEC, FINRA, the DOL and the White House are all singing from the same hymnal: eliminate potential conflicts of interests by brokers when advising on IRA rollovers. 



Citing a massive change in the way people save since relevant DOL regs were last updated, a memo written by White House staffers lays out a plan to push the DOL’s so-called conflict of interest rule. 



The SEC focused on rollovers in their 2015 priority list. As Baby Boomers shift massive amounts of wealth from DC plans, the spotlight is focusing on actions taken by brokers that may pose greater risks and higher fees for clients while benefitting the advisor. Specifically, the SEC mentioned dually registered reps using wrap fee accounts and doing little. The SEC also cited concerns about alternative investments attractive to investors in a low interest rate environment. 



Meanwhile, FINRA said that brokers should put their clients’ interests first irrespective of the suitability standard, moving closer to a fiduciary standard. In particular, FINRA cited wealth events like inheritances, sales of businesses and rollovers. 



So while the debate about whether plan advisors are or need to be fiduciaries when representing a DC plan is over, the new frontier is firmly focused on IRAs, which are just another form of participant-directed retirement plan without the protection of their employer, ERISA or a fiduciary standard — for now.