According to a survey largely comprised of responses from RIAs/IARs, the Department of Labor’s fiduciary proposal wouldn’t be a bad thing — and should be extended to 401(k) rollovers.
However, the survey’s authors acknowledge what seems to be a significant shift in the composition of respondents from the prior year: A higher percentage of RIA/IARs participated in the latest survey (a whopping 85%, up from 53% in 2013). Additionally, there were fewer dually registered and dually registered-plus insurance respondents (11% vs. 29% in 2013), and registered reps (3% vs. 15%).
Perhaps not surprisingly then, 91% of the respondents to the 2015 fi360 Fiduciary Standard Survey, which was conducted by fi360 and FiduciaryPath, said that the fiduciary standard should apply to advice to investors on rollovers from 401(k) accounts to IRA accounts, up from 79% in 2013. The majority of respondents (81%) indicated they are compensated by fees alone; 18% are compensated by a combination of fees and commissions; and less than 1% are commission-only.
The potential implications of the expansion of the fiduciary rule and its impact on the ability of plan participants to continue to work with their retirement plan advisors on rollovers have been a matter of concern to NAPA, which has spoken out against the pending rule. While NAPA believes that individuals should be protected from unfair and deceptive practices, all indications are that this rule will block Americans from working with the financial advisors and investment providers they trust simply because they offer different financial products — like annuities and mutual funds — with different fees, particularly in the event of a 401(k) rollover. At last month’s NAPA 401(k) Summit, NAPA Executive Director Brian Graff explained that only about half of workplace retirement plans currently offer a systematic withdrawal provision (via which a participant could establish a series of periodic payments) and far fewer currently offer any kind of lifetime income option, which could hinder their ability to develop a post-retirement income stream directly from their 401(k).
The 609 respondents to the fi360 survey, conducted nearly a year ago, also said that:
- It does not cost more to work with a fiduciary advisor than with a broker (91%).
- A fiduciary standard would not price investors out of the market for advice (83%).
- Fiduciary duty for brokers who provide advice would not reduce investor access to products or services for investors (78%).
Concerns about those potential implications have been raised by others, including the chairmen of the Senate Finance Committee and the Senate Committee on Health, Education, Labor & Pensions (HELP).
