Advisors and broker-dealers should re-evaluate their IRA rollover business models and brush up on the differences and benefits of traditional IRAs and Roth IRAs now that the Department of Labor is mulling including IRAs in its reworked fiduciary rule.
Matrix Financial Solutions, a Broadridge company, is giving this advice to advisors and BDs in a newly released practice guide, IRAs & the ERISA Fiduciary Rules: Updates and Best Practices for a Changing Regulatory Environment, which outlines current DOL rules, what's included in DOL's fiduciary proposal, and steps advisors can take before the revamped rule to amend the definition of fiduciary under the Employee Retirement Income Security Act is released.
Among some of the questions Matrix's guide tackles include:
• Will advising a participant to make a rollover from an employer plan result in ERISA fiduciary status?
• Will investment advice provided to IRA holders be considered "investment advice for a fee" under the same definition as employer plans such as 401(k) plans?
• Will the rules apply both to broker-dealers and registered investment advisors?
"The proposed regulations may result in more broker-dealers and RIAs being classified as an ERISA duciary when they provide services to IRAs," warns Cindy Dash, Matrix's COO. "It's important that advisors and brokers understand this evolving issue and take the necessary steps to re-evaluate their business models and compensation structures in anticipation of any regulatory changes."
While Matrix concedes that it doesn't know what ultimately will be included in DOL's revamped fiduciary rule, Phyllis Borzi, assistant secretary of labor for DOL's Employee Benefits Security Administration, confirmed in early September that the reproposed rule would include IRAs — a move that advisors have vigorously oppposed.
"We will cover them," Borzi said at a conference held by the Financial Services Institute. "What this multiyear process has shown us is that there's an even greater need to protect those in IRAs…We are going to move forward on that."
