An Obama win could hurt retirement plan advisers, some say

Aug 26, 2012 @ 12:01 am

By Darla Mercado

The Labor Department's effort to broaden the definition of fiduciary will be pushed hard if President Barack Obama wins a second term, according to attorneys with expertise in the Employee Retirement Income Security Act of 1974.

“If Obama wins, we will see a re-proposal [of the fiduciary rule],” said Bradford Campbell, counsel at Drinker Biddle Reath LLP. “I think we'll also see an actual proposal on dealing with rollovers that will make conversations with participants on distributions fiduciary advice.”

Mr. Campbell, a former assistant Labor secretary who headed the Employee Benefits Security Administration, held a teleconference Aug. 16 with Fred Reish, a partner at Drinker Biddle, to discuss upcoming regulatory developments for retirement plans.

When the Labor Department initially proposed a regulation to impose a fiduciary duty on all retirement plan advisers, including brokers, the agency asked whether its rules protected participants enough.

If the fiduciary re-proposal resurfaces, Mr. Campbell thinks that the Labor Department will answer that question with a new pitch for restrictions on profiting from any type of advice given to plan participants as they prepare to roll their assets out of 401(k)s into individual retirement accounts.

HARD TO GET ADVICE

“To say that all discussions are fiduciary in nature, it's going to make it hard for someone affiliated with the plan to have that conversation about distribution,” he said in an interview. “If the DOL takes the view that this is fiduciary advice, it will make it hard to get advice at retirement.”

Mr. Campbell said he expects the guidance to “disappear” if Mitt Romney wins the White House.

“There is no reason to believe his administration would place a high priority on changing the definition of fiduciary,” Mr. Campbell said.

A tougher stance on distributions into IRAs — a $4.5 trillion business — would dent the bottom lines of broker-dealers and other service providers. Harvesting lucrative rollovers from the highest-earning employees as they retire has long been the payoff for brokers and others in the business.

Mr. Reish said that he expected the fiduciary re-proposal to include some softening for broker-dealers, possibly through a prohibited-transaction exemption that would allow principal trading.

The agency may also have a lighter touch when it comes to how the IRA is invested.

Rather, it is the recommendation that workers roll their assets out of the plan that will come under scrutiny.

“We'll get a regulation that's modified enough to reduce the criticism,” Mr. Reish said. “It's not putting out a fire, but making it a smaller fire.”

Labor Department spokesman Michael Trupo declined to comment.

dmercado@investmentnews.com Twitter: @darla_mercado

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

Events

Dave O'Brien: Choosing the right tech for a growing practice

When your practice reaches a certain inflection point, technology becomes even more critical. What do you need to take you and your practice to the next level?

Latest news & opinion

10 fastest-growing IBDs

These independent broker-dealers saw the biggest percentage gains in their revenue in 2017.

The unique nature of working with celebrity clients

Athletes and entertainers are just like everyone else — aside from complex tax issues, a lack of financial savvy and a need for prenups

Top 10 IBDs ranked by revenue

These independent broker dealers generated the most revenues in 2017.

8 podcasts advisers listen to when they aren't working

Listening to podcasts for the fun of it.

UBS continues to cut loans to recruits, while increasing compensation to brokers

The wirehouse reduced recruitment loans 20% and increased bonus loans 68% in the first quarter.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print