Updated Thursday, October 23, 2014 as of 1:17 PM ET

Regulatory Scrutiny Mounts for Retirement Advisors

WASHINGTON -- With millions of Baby Boomers nearing retirement, federal and industry regulators are taking a hard look at the practices of advisors and brokers who are counseling retiring workers on how to plan for the transition, industry officials caution.

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Comments (6)
FINRA warned what? That a 401(k) remaining in the plan "could" be an option?
It is ludicrous to suggest that ANY 401(k) participant is "better-off" in a 401(k) plan than in an IRA, in almost any circumstance. I am an investment advisor representative, retail broker, insurance agent... And I sell 401(k) plans! There is NO 401(k) plan that can do for a retired investor what a properly managed investment strategy can do through OTHER investment accounts. The IRA ROLLOVER is a MUST when retiring, not an OPTION!
The investment options and the strategy to employ during retirement, especially in a "full withdrawal mode" situation, require annual (if not semi-annual) account review and significant management.
The tax strategy that the client's CPA must (coordinate with advisor)/use with our ever-changing tax code, coupled with the types of accounts and investments the client has OUTSIDE of their 401(k), such as TAXABLE ACCOUNTS, Roth IRAs, Annuities, bank accounts, real estate, etc. constitute so many variables... show me one 401(k) entity that provides the direction that takes ALL OF THIS INTO CONSIDERATION?
TIAA-CREF is cited in this article, and I just met a client of theirs through a college that was told by them to stay with them AT RETIREMENT... they scared the client to death to move the money... and the plan they have has the client burning $150,000 in 4 years to then have a guarantee of $650 a month to add to their Social Security... Tell me that was THE BEST ADVICE, TIAA-CREF?!
I had a plan to deplete her cash MUCH SLOWER, OVER 10 YEARS and with TAX EFFICIENCY... and then get her monthly guarantee over $1,000 a month in 5 years, and still have an option for future growth in that monthly amount... and SHE SAID SHE TALKED TO TIAA-CREF and they convinced her moving her money would be a "mistake."
- So thanks for the TIAA-CREF quote in the article... they are really "good at knowing products" in their retirement planning advice!
The position of regulators is based on what again? Oh yeah, the amount of money moving... not the individual behind the money movement. Where were they all with their concerns 15-20 years ago?
The fact the amount of money is what is drawing their attention and sparking comments like the FINRA 401(k) warning, is disturbing enough.
Posted by David C | Friday, July 04 2014 at 1:00PM ET
I think the comments David makes are exactly why regulators and fiduciary advisers are concerned about the quality of advice 401k participants receive as they head into retirement. If David thinks that a complete rollover of 401k assets is a must - that under no circumstances is a client better off leaving some or all of their retirement assets in the 401k, then under no circumstances is he acting as a fiduciary in the decision-making process, and that is unfortunate.
Posted by John W | Friday, July 04 2014 at 1:45PM ET
Roll the cleint's 401k into a Solo 401k. That way the client gets the best of all worlds. The account really doesn't matter as much as the advice the client gets. Some people see value in advice and are willing to pay for it. Others believe in taking advice only from themselves. Therefore, paying for advice makes no sense to them. For those that need help putting up barriers will not make it better.
Posted by Thomas W | Sunday, July 06 2014 at 11:37AM ET
The issue of compensation to agents who roll clients into IRAs for commissions is coming through loud and clear in David C's comments. There is no reason a client couldn't be charged an agreed fee for advice, even if the assets were ultimately left in the retirement plan rather than rolled out, but then, that may not be allowed by David's broker/dealer who oversees his IAR activity of their RIA. It certainly doesn't pay as much as rolling the participant's balance to loaded funds or a variable annuity which is exactly why FINRA is asking for full fee disclosure to the plan participant. If they still decide to rollover to a commissioned product, so be it, but you better have them sign an acknowledgement that they considered all factors including the higher costs proposed. And as for David's "selling" of 401ks plans, the days of a retirement plan as merely a product sale are over. It is all about a plan sponsor supporting the process they followed including the selection of their advisor. Unfortunately, plan sponsors and those responsible as fiduciaries within the company don't know what they don't know about ERISA standards or DoL audits so buying a product from a broker is still unregulated. Fiduciary standards should apply to all who have anything to do with retirement plans, not just those of us who sign on as co-fiduciaries to advise plan trustees and retirement committees.
Posted by Richard A | Monday, July 07 2014 at 12:19PM ET
As with anything, to perform or not to perform a rollover depends. Some 401k plans have very limited options so a rollover provides a greater range of options. Some 401k plans have fees, so again, a rollover might make sense. Sometimes, it is just the paperwork involved to get funds out - even for personal reasons. For example, you may have to go to the plan administrator every time you need to access your funds - not the case with an IRA. So, every case is different.
Posted by Doug W | Monday, July 07 2014 at 2:03PM ET
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