Outside voices and views for advisers

Jan 19, 2018, 1:14 PM EST

How advisers can manage IRA rollover risk under the DOL fiduciary rule


By Fred Reish

Advisers need to examine their practices for IRA rollovers in the new fiduciary environment created by the Department of Labor's conflict-of-interest rule. As background, there are three ways an adviser can help a participant with a rollover. Those are:• Unsolicited• Education• Recommendation The third point — a recommendation — is a fiduciary act. The first two are not; however, for those, advisers should document that the rollovers were unsolicited or were based on education and, therefore, did not result from a fiduciary recommendation. An unsolicited rollover is one where the participant has made the decision to roll over from a workplace retirement plan to an IRA, without input from the adviser, and then asks the adviser for help with investing the IRA. For risk management purposes, the adviser should have the participant sign a statement to that effect as a part of the account opening process. For the ... Read full post

Jan 18, 2018, 6:14 PM EST

Why raising fee awareness matters for 401(k) advisers

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By Blaine F. Aikin

A keystone behavior is one that positively influences other behaviors and generates collateral benefits. For retirement plan advisers who want to positively impact the success of their plan clients and participants, this means focusing on raising plan fee awareness. A recent study by The Pew Charitable Trusts suggests higher fee awareness correlates with certain worker attributes and some positive participant behaviors. The results show that familiarity with fees correlates with both greater confidence in their ability to make the right investment choices and higher rates of having prepared formal retirement plans. The report posits that fee awareness, confidence and active retirement planning are attributes that contribute to workers' ability and propensity to accumulate savings needed for retirement. These assumptions are intuitively reasonable and backed in the report by references to outside research.The report also shows that fee... Read full post

Jan 18, 2018, 11:19 AM EST

Why 401(k) advisers should be aware of contractual language limitations

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By Marcia S. Wagner

As counsel for investment managers and investment advisers, we endeavor to draft documents precisely, making clear the obligations of our clients and seeking to limit their exposures to the extent permissible by the Employee Retirement Income Security Act of 1974. However, a recent district court decision from the Northern District of California, in the case Terraza v. Safeway, indicates limitations in the extent to which contractual language can protect investment advisers with respect to claims for breach of fiduciary duty under ERISA. Aon, a co-defendant in the case, along with Safeway, argued that its master consulting agreement with Safeway established its robust process in providing ongoing consulting and performance evaluation, including detailed quarterly reports addressing fund structure, performance and other characteristics, quarterly meetings with the client and investment managers, and regular client communications. While... Read full post

Jan 17, 2018, 1:17 PM EST

New Year's resolutions for 401(k) advisers


By Fred Barstein

Opportunities for retirement plan advisers have never been greater. But so are the challenges. The stakes are high, given the lack of retirement plan coverage for half of America's workforce and the fact that most workers are woefully unprepared for retirement. Advisers have been thrust to the forefront, as most small and mid-size companies do not have the time or knowledge to help their employees prepare for retirement. Here are the three biggest hurdles 401(k) plan advisers must overcome, and the New Year's resolutions they should be making to have any hope of solving the retirement crisis.No. 1: Getting plan sponsors' senior management to really care about their 401(k) planAt a recent educational program for plan advisers, almost all advisers in the room said they either don't have access to senior managers at the companies sponsoring retirement plans, or, when they do, that they are not confident about making a far-reaching... Read full post

Jan 17, 2018, 2:01 PM EST

Investment committee 'best practices' that help to add discipline to portfolio management

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By Scott Welch

In my capacity as the Chief Investment Officer at Dynasty Financial Partners, which serves a network of more than 45 independent RIAs, I actively participate on both the Investment Committee of Dynasty and as an outside member on the Investment Committees of more than 15 of our network firms. Why are ICs important? Externally, ICs illustrate professionalism and institutional-quality portfolio management to both clients and prospects. Internally, the discipline, consistency, and "institutional memory" ingrained in a formal IC is helpful in responding to regulatory audits. Given the importance of ICs, here is a summary of what I have learned about IC "best practices."1. Make the IC part of the fabric of your firm. ICs are not ad hoc or sporadic — they define your firm's investment approach and, therefore, your firm's investment value proposition. 2. Develop an IC policy manual or charter that states the purpose of the committee, a ... Read full post

Jan 17, 2018, 1:37 PM EST

Tax reform creates opportunities for advisers


By Dominick L. Schirripa ​

Wealth planning professionals could come out winners in the tax reform game. The new tax law doubles the estate and gift tax exemption amount, meaning fewer families will need extensive planning to avoid the tax. But that increased exemption sunsets after 2025, so the long-term outlook for transfer tax planning appears unchanged. In addition, numerous changes to individual and business tax provisions are likely to create at least short-term demand for advice.The following provisions appear to be the ones that will most directly impact planners' clients (and therefore the planners themselves):• Doubling of the estate, gift & generation-skipping transfer tax exemption.• Reform of tax treatment of pass-through entity income.• Changes to technical partnership terminations.• Creation of Qualified Opportunity Zones.• Changes to compensation and savings provisions.Transfer tax exemptionsThe law doubles the exemption... Read full post

Jan 16, 2018, 5:29 PM EST

Fiduciary rule every bit as necessary for brokers, according to report

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By Bloomberg News

For those who think a fiduciary-type rule is unnecessary, think again.The Wall Street Journal reported last week that "advisers at some of the biggest discount brokerage firms make more money if they steer clients toward more-expensive products." That includes the big three discount brokers, Fidelity Investments, Charles Schwab Corp. and TD Ameritrade Holding Corp.According to the Journal, for example, "Fidelity representatives are paid 0.04 percent of the assets clients invest in most types of mutual funds and exchange-traded funds," but they earn 0.1 percent on investments that "generate higher annual fees for Fidelity, such as managed accounts, annuities and referrals to independent financial advisers."It's hardly necessary to point out why such a compensation scheme is problematic. It means that representatives of broker dealers 1) are conflicted when giving investment advice to investors, and 2) have an incentive to recommend... Read full post

Jan 12, 2018, 6:31 PM EST

Busting DOL fiduciary rule myths of industry opponents


By Brian Lakkides

According to the opponents of a new rule designed to ensure that retirement savers get the best advice possible, the entrepreneurial mindset and innovative spirit that has powered the U.S. economy for decades is a thing of the past. They think we can't adjust — and thrive — under the new fiduciary rule.I disagree. And my own Detroit-based business, around for 30 years, shows why.The Department of Labor's fiduciary rule is an attempt to level the playing field for consumers by requiring the financial services industry to provide retirement investment advice in the best interests of clients. In legal jargon, it's the end of the suitability standard. But it ought to be the beginning of something better.Since the fiduciary rule was proposed, the financial services industry has been running around like Chicken Little. Their oft-repeated message is that the rule from the Department of Labor will harm the "average Joe" investor... Read full post

Jan 12, 2018, 5:13 PM EST

Fintech learns to play nice with traditional institutions


By Whitfield Athey

Fintech is finally learning to play nice with the financial services industry. The last couple of years have seen fintech upstarts forge successful partnerships with incumbent financial institutions to better the industry from the inside out. But it wasn't always this way.Fintech has become the land of opportunity for entrepreneurs and investors alike since the financial crisis. At first, these aspiring moguls figured their innovative technology and financial backing were sufficient to steal customers away from the big bad banks, asset managers and insurance companies, and completely upend the industry. Surely they had intentions of following the playbook written by Uber and Lyft, which exposed the taxi industry for its lack of innovation and succeeded in transforming on-demand personal transportation. As they came to find out, financial services is a different animal. It is very well insulated from disruptive outside forces, for a... Read full post

Jan 11, 2018, 3:02 PM EST

Adviser moves to expect in 2018

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By Matt Sonnen

Citigroup recently announced that it will be following Morgan Stanley and UBS' lead in exiting the broker protocol. While it's not a big player in the recruiting wars among wirehouse firms, this move signifies a further trend toward the potential demise of the protocol, and has reignited speculation as to what effect it will have on adviser movement in 2018 and beyond.Without a doubt, these departures from the protocol will successfully curb the "check hoppers" who bounce from one wirehouse to the next every seven years when their retention packages expire. While a non-protocol transition is far from impossible, it is more difficult than a protocol transition. First, clients must search out their adviser once they learn they have left the former firm (advisers cannot contact former clients in a non-protocol transition). Second, clients must be willing to endure a more time-consuming paperwork process to move their accounts to the... Read full post

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