One thing advisers get wrong on retirement plan rollovers
Managing editor Christina Nelson speaks with senior reporter Mark Schoeff Jr. about regulatory uncertainty around moving money from 401(k)s to IRAs, and how adviser overconfidence may slant the decision.
Transcript:
[CN] Hi, I’m Christina Nelson, Managing editor of Investment news. I’m here to talk about our cover story this week, which was written by our senior reporter Mark Schoeff, in Washington. When he and I were assigned to this week’s cover story, we decided to think about conferences we had been to recently and what were some of the big issues on his radar, regulation and legislation for advisors. And we realised that the topic of rollovers kept coming up. Specifically because there is not a lot of guidance out there actually from regulators right now about them, even though they are a big, big part of advisors businesses.
So Mark, in reporting this out, what did you find that you were pretty surprised about that advisors were getting wrong about rollovers?
[MS] When you talk about rollovers it’s usually brokers that get the bad rap. But this is also dangerous ground for investment advisors.
Investment advisors tend to be confident, it’s not an industry for the diffident. So when you ask them about rollovers, usually they’ll start out saying: “I am a fiduciary, and I always act in the best interest of my clients, therefore I don’t worry about rollovers” But they ought to worry about rollovers, because when they advise a client to take money from their 401(k) account and put it into a retirement account that the advisor manages, the advisor is putting a new cost, that is his fee, on that account that the client did not have in their 401(k). And he’s also adding to his assets under management which produces revenue for him.
Advisors should document all of their rollover decisions, going into some detail about why they recommended them. And in the quarterly file of those recommendation documents it might be a good idea to sprinkle in a couple of notes where the advisor told the client to keep their money right where it is, in the company 401(k) because that’s a better deal for them and will lead to a secure retirement.
[CN] Thank you Mark. Please read his full story at InvestmentNews.com and we’ll see you again here next week.
