The Department of Labor’s (DOL’s) long-anticipated fiduciary rule has finally been released, and it will become effective (for the most part) on April 10th, 2017. The new rule in its final form broadens the definition of “fiduciary” in order to cast a wider fiduciary net over more financial professionals in the retirement planning industry.
A multiple employer plan (MEP) is a single plan that is adopted by several employers who are not under the same corporate ownership umbrella. Historically, in order to establish a multiple employer plan, all of the employers joining the plan must share a “common nexus.” This means that they must be in some way related to each other, for example, by doing business in the same industry. Two unrelated businesses are not allowed to sponsor a multiple employer plan together.Continue reading
You should be more skeptical of the people that offer advice about your company’s retirement plan. Hopefully, you already knew that.
The Huffington Post has an article, Proposal to Protect Retiree’s Nest Eggs Becomes Lobbying Flashpoint, in their June 14th online edition that outlines the current problem and the Department of Labor’s efforts to correct it. Sadly, it accurately reflects the state of the financial services industry.
Few of the so-called financial advisers in the marketplace today have any intent of serving the client’s best interest. They are simply financial salespeople. Unsuspecting retirement plan participants may seek out their “adviser” only to be sold a product that just happens to be offering an extra commission to the salesperson for the next 30 days. Conflicts of interest? You betcha. Pretending to be one thing, but really being something else? Uh huh.
The Department of Labor is trying to help the deceptive practices by issuing proposed regulations that attempt to expand the definition of “fiduciary” in ERISA (see our response to their proposal). A fiduciary must act in the best interest of the other party or they become liable for the bad advice. The proposal, should it become final, would limit financial salespeople from taking advantage of unsuspecting retirement plan participants.
Regulations such as this can help consumers by forcing industry to change its ways. That’s a good thing. But with it comes not-so-good things. The burden that regulation adds to industry, and ultimately to consumers, is substantial costs. Which way the cost-scales ultimately tip is often unknowable and makes me leery in general. No doubt that retirement plan participants deserve to know if the person that is offering them help is a salesperson or a fiduciary adviser.
The financial services industry has been unable or unwilling to act in their client’s best interest en masse. Now the government is determined to fix it. I only wish that I had confidence in their ability to do it. How about you?
PCI’s archived blog entries are dated, the rules and statutes referenced may have changed. The analysis or guidance within these blog entries may have become stale, dated, or no longer accurate. PCI will not update or change these entries to reflect the latest analysis or development.