As the Baby Boomer generation retires, advisors will need help managing the transition of billions of dollars from retirement plans into rollover IRAs, according to a new Pershing white paper.
As the Baby Boomer generation retires, advisors will need
help managing the transition of billions of dollars from retirement plans into
rollover IRAs, Pershing, a BNY Mellon company, says in a new white paper.
The white paper, Pursuing
Rollovers in an Evolving Regulatory Landscape, looks at the anticipated
regulatory changes that will affect the definition of a fiduciary. Specifically,
it outlines that IRA rollovers are a “critical client need,” as well as an
important part of advisory businesses.
Retirement plan distributions and IRA rollovers are
regulated by the Department of Labor, which is currently working on expanding the definition of what constitutes “fiduciary advice.” The potential
upshot is that more advisors could be subject to regulation by the Employee
Retirement Income Security Act.
“Being knowledgeable of the current and pending regulations
that will affect the definition of a fiduciary is essential for advisors,” said
Robert Cirrotti, director of retirement solutions at Pershing. “These new
definitions require advisors to understand when they are considered a fiduciary
and when they are not.”
Advisors who are not currently fiduciaries can already help
participants with distributions and rollovers. However, for those who are fiduciaries - or would become fiduciaries under
an expanded definition – now is the time to sharpen their focus on what assisting clients with rollovers entails.
Pershing recommends the latter segment works on:
- Clearly defining the fiduciary services provided to a plan;
- Ensuring that the decision to take a distribution and to
rollover an IRA is the participant’s decision;
- Offering clients educational materials regarding
distribution alternatives and rollover services;
- Providing written disclosure of fees and expenses for the
IRA and its investments, as well as the advisor’s compensation.
“If regulations change to expand the fiduciary definition,
it will focus more attention on an advisor’s fiduciary status with regard to a
plan or participant,” Pershing said. “Because it is not possible to predict what the rules will
be once they are finalized, advisors should always consider their current
practices based on the current regulatory environment until pending changes are