Be Careful What You Wish for With Fiduciary Rule

'Whatever is going to come down the pipe is going to be more restrictive than what the DOL was trying to do'

401k, retirement, litigation, regulation, ERISAIt might only be getting started.

The “shelving” of the fiduciary rule and what happens now is still top-of-mind for most 401k advisors, according to Ary Rosenbaum.

“The industry loves for things to be straightforward; they don’t like anything to be in limbo,” Rosenbaum, an attorney and ERISA expert, said. “And now, trying to gauge what the SEC might or might not do, and what’s going on with politics and the administration—when all is said and done, we really don’t know what’s going to happen down the line.”

So, are advisors nervous or relieved over the Department of Labor’s abandonment of the rule?

“RIAs never really sweated it,” he replied in an interview Thursday. “They were already abiding by a fiduciary standard. Of course, I’ve come across brokers who are ecstatic about it, but I’m always of the belief that you should be careful what you wish for—you just might get it. Whatever is going to come down the pipe is going to be more restrictive than what the DOL was trying to do.”

Referencing the previously-made point that an RIA has a competitive advantage as a fiduciary, he argued that the SEC’s version is “just a watered down version of a ‘best interest’ doctrine for brokers.”

With all of the attention litigation and regulation have recently received, the ramifications for advisors should be obvious at this point, but far too often, it’s (still!) not the case, Rosenbaum claimed.

“If something goes wrong, the plan sponsor or participants can sue everybody because they want someone to be left holding the bag (other than them). That’s just the nature of litigation. Any big provider that you have come across has been sued; it’s increasingly just a cost of doing business.”

Conversely, an issue with which his plan sponsor clients are currently grappling is delayed deferrals.

“I’m not involved with payroll and I’ve never dealt with it, but I’m still surprised at how often the late deferral deposits happen,” he offered. “It happens frequently, and the Department of Labor is really ramping up on it. It’s an answer on the 5500 and the plan sponsor has to indicate whether or not they have late deferrals. I’ve had multiple clients in the last four or five months that have had to apply for the DOL’s Voluntary Fiduciary Correction Program (VFCP). I had one client where it’s the fourth year in a row that I’ve had to file for something like this.”

It’s an organizational issue, but also interaction with payroll as well.

“You have to have a regimented process and understand that once you take the money out of payroll on Friday, by Monday or Tuesday you should have that money in the 401k plan. It’s just surprising how many times I’ve seen that not done correctly. It’s something that simple but it is a glaring error that’s a problem.”

These and other critically important topics will be thoroughly discussed at “That 401(k) Conference,” which Rosenbaum will host Thursday, September 13, 2018, from 9:00 am to 2:00 pm at Wrigley Field in Chicago.

Timed to coincide with PCS and its free 401k advisor “Advisor Lab” event, the conference is the second recently presented by Rosenbaum (the first held at Citi Field earlier this year).

“If you’re a 401k financial advisor, you get four hours of content, lunch, a Wrigley Field Stadium Tour and a meet and greet with Hall of Fame member Andre Dawson,” Rosenbaum concluded. “In addition, there is a Cubs game outing the night of Wednesday, September 12th as the Cubs take on the Brewers. More information and tickets can be found at”

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