Bloink: The standard for determining who is an investment advice professional should not be conditioned on whether advice is provided to one particular retirement investor on a “regular basis.” Some of the most important advice that retirement investors and small business retirement plan sponsors receive is on a one-off basis. The focus absolutely should be expanded to home in on whether the retirement investor should reasonably expect fiduciary protections to apply — regardless of how frequently the investor interacts with the advisor.
Byrnes: We have to admit that this proposal will have a significant and negative impact on advisors who have been relying on prohibited transaction exemptions for years. The proposed amendments would sharply limit the availability of these exemptions — making it much more difficult for advisors to be compensated fairly for their work without making significant modifications — and, yet again, remembering that this is the third fiduciary standard we’ve seen in less than a decade.
Bloink: Consider the situation where a small business owner is “sold” a retirement plan or an investor is given advice to roll the entire balance of a retirement plan into another account. These are critical pieces of advice, and investors should be able to expect that the advice is in their best interest and subject to fiduciary protections. These are very often some of the most important investment decisions that individuals and small business owners ever make, and they should reasonably expect that fiduciary protections will apply.
Byrnes: In the end, these proposed changes will result in a system where ordinary, middle-income Americans will lack access to quality investment advice because of the increased costs incurred by advisors. It just won’t be worth it for advisors to take on cases where an individual is looking for quality advice on whether to roll over retirement funds. Because these are the investors who need quality retirement investment advice the most, the new proposed changes will almost certainly have a chilling effect on the retirement savings market.
Bloink: Yes, advisors will likely have to make some modifications to qualify for exemptive relief. However, the bottom line is that the retirement savings industry has changed. The governing law must change along with it — and the most important factor to consider is whether retirement investors are protected from conflicted advice.
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