Theus Wealth Advisors Maryland


If you haven’t been following the latest ‘discussion’ regarding the government’s move to enforce a fiduciary status on the brokerage/investment industry, let me bring you up to speed.  There are several things at play. I normally try to keep politics out of things, but at this point, it’s more important to share the reality of what this administration is doing, under the auspices of ‘making investors safer’.

The IRA Rollover Conundrum

The new U.S. Department of Labor Conflict of Interest Rules has just passed. The new rules will expand ERISA fiduciary standards to cover individual retirement accounts (IRA). Investment, distribution and rollover advice will soon be held to new standards of care.

We believe these new standards of care will dramatically change insurance, brokerage and investment advisory engagements.  The ruling will alter the way the spectrum of investment/retirement products: variable annuities, mutual funds and other financial service products are used today. This will completely alter the landscape of the financial services industry. For a recent example of cause and effect, MetLife just divested itself of it’s entire annuity and brokerage divisions, worth hundreds of millions.

Imagine a client having to consider rolling over a 401(k) or other employer sponsored retirement plan, and having to choose whether to leave it where it is or move to another (rollover) option, long term tax consequences notwithstanding.Does the brokerage firm representative or independent financial advisor have the capability, skill, training and background to adhere to the new FIDUCIARY standard? This isn’t an OMG moment for us. We’ve been acting as fiduciaries for 12+ years and what we do adheres to the fiduciary standard, ERISA standard and the Restated Prudent Investor Rule.

So, we are already in line with the fiduciary standard — which isn’t really a new environment to us!  However, this new ruling will have some potentially deleterious consequences for investors, especially small-to-middle income investors.  I’m attaching the Wall Street Journal article from Wednesday that discusses the larger consequences of government interference.

“The Department of Labor says its so-called fiduciary rule will make financial advisers act in the best interests of clients. What Labor doesn’t say is that the rule carries such enormous potential legal liability and demands such a high standard of care that many advisers will shun non-affluent accounts. Middle-income investors may be forced to look elsewhere for financial advice even as Team Obama is enabling a raft of new government-run competitors for retirement savings. This is no coincidence.”
Please take a few moments to read the whole article.

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