Be part of the conversation

SEP 07, 2014
The Labor Department recently requested in-formation from the 401(k) industry on brokerage windows, signaling that it may be ready to pursue rules that would clearly address the responsibilities of plan sponsors and advisers as to these retirement plan options. Brokerage windows, or self-directed brokerage accounts, allow participants in a 401(k) plan to go beyond the menu of mutual funds, target date funds and money market funds that most plans offer. Those who select these accounts can theoretically invest in any financial product in the marketplace, including stocks, bonds — even options — although most employers limit choices. Inherent in the idea of a self-directed brokerage account is that the plan participant is now taking on much more responsibility for his or her investment decisions. Some welcome that but others are not so sure.

FIDUCIARY ROLE

Among the questions the DOL is asking the public to comment on are whether fiduciary or disclosure rules should apply to these accounts, whether they are being monitored by plan fiduciaries and whether the fiduciaries even have access to information on the investments workers are choosing. Clearly, the DOL is concerned that these accounts might backfire on the investors who use them. Instead of helping employees gain the maximum performance out of their retirement dollars, workers could end up with large losses if they choose the wrong investments. That is precisely why many advisers in the retirement space don't recommend brokerage windows. They are concerned that most employees simply do not have the expertise to choose their own investments, especially in an account as important to their future as a 401(k). If the DOL ends up issuing rules regarding brokerage windows, plan sponsors are rightly worried that they could be held accountable for the decisions of workers, even though they had little control over their investment options. Plan advisers need to make sure they and the plan sponsors with whom they are working take advantage of the opportunity to have their voices heard on this matter. Once rules are promulgated, it will be too late to complain.

Latest News

Turning Wealth into Retirement Income: Insights from Leading Financial Advisers
Turning Wealth into Retirement Income: Insights from Leading Financial Advisers

In this InvestmentNews TV panel, leading advisors discuss longevity risk, retirement income planning, withdrawal strategies, healthcare costs, and the mindset shifts retirees need to enjoy the wealth they've worked so hard to accumulate.

Advisor moves: Raymond James lands $700M Truist duo in Florida
Advisor moves: Raymond James lands $700M Truist duo in Florida

&Partners has also added a $357 million Texas family practice, while Janney recruits a $250 million Edward Jones advisor in Miami

Wirehouse moves: JPMorgan taps Merrill veteran for Southeast role as BofA beefs up OCIO team
Wirehouse moves: JPMorgan taps Merrill veteran for Southeast role as BofA beefs up OCIO team

Linda Patel will lead J.P. Morgan Advisors in Florida and Georgia as Bank of America adds nonprofit specialists in New York

Colorado advisor loaded up elderly clients with risky Interval funds: regulator
Colorado advisor loaded up elderly clients with risky Interval funds: regulator

Interval funds and other semi-liquid or illiquid products are typically two to three times more expensive than plain vanilla stock or bond mutual funds or exchange-traded funds.

Investor alleges alkaline water startup hid sales data in white text
Investor alleges alkaline water startup hid sales data in white text

The royalty statements looked normal - until someone checked the electronic files.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor