Offices in Boston and S Dartmouth, Massachusetts
401k Advisor • Boston Retirement Plan Fiduciary Advisor
I am an Investment Adviser Representative at Cambridge Investment Research Advisors, Inc., a $44B RIA based in Fairfield, IA. I am also registered with Cambridge Investment Research, Inc., an independent broker-dealer with over 3,000 registered representatives nationwide.
Some clients pay a commission, mainly those with smaller accounts, i.e., Roth IRAs, some public-school teachers with 403b retirement accounts, or parents or grandparents who set up a 529 college savings plan.
The first introductory and fact-finding appointment can be in-person or by phone. The next meeting where I provide my recommendations should be in-person. (For the time being, telephone, Zoom, and email are replacing in-person meetings.)
Subsequent meetings during which we monitor your progress and investments can be done in-person or by phone, email, Zoom, or Skype – or, more likely, a combination of these meeting types.
Fee-Only or Commission?
Many financial advisors are registered as both representatives of a broker-dealer and as investment-advisor representatives of an investment advisor.
Investment advisors are fiduciaries who owe the client a higher oath of loyalty. They must act in their clients’ best interest and disclose any conflicts of interest.
Registered representatives are not fiduciaries. The advice they offer the client must suit the client’s particular situation. However, they do not have to disclose any conflicts of interest.
Which Registration is Right for You?
If the client has a smaller retirement account, such as a Roth IRA or a 529 Plan, or is a teacher saving in a 403(b) plan, I opt to receive commissions as a registered representative. Most of these clients end up paying less with a commission-based product. Moreover, maybe they do not need as much time as those who pay an annual fee.
If that is not confusing enough, there is a third standard, a fiduciary advisor who falls under ERISA, the law governing retirement and pension plans. Unlike investment advisors who can have conflicts of interest as long as these are disclosed, an ERISA fiduciary advisor must eliminate all conflicts.
A Uniform Standard of Care
Under the 2010 Dodd-Frank Act, Congress directed the Securities and Exchange Commission (SEC) to study the need for establishing a new, uniform federal fiduciary standard of care for brokers and investment advisors.
Having a uniform standard would make it easier for investors, as many are unaware that there are two standards and that the same financial advisor could wear both hats.
The New Rules from the SEC
Beginning June 30, 2020, broker-dealers will start operating under a new standard called Regulation Best Interest. This requires brokers to better align their interests with those of their clients by eliminating conflicts of interest, such as proprietary product requirements, sales quotas, or sales contests.
Registered representatives will now be called financial professionals. Any advisors who are fiduciaries can continue calling themselves financial advisors.
New Fiduciary Rule
Finally, however, to many people’s surprise, President Trump’s Department of Labor, run by Eugene Scalia, Supreme Court Justice Antonin Scalia’s son, implemented the Fiduciary Rule.
They removed some of the more demanding requirements and possible legal challenges provided to clients. Still, they kept the core tenant that financial advisors advising retirement plans and participants are fiduciaries. Most advisors, when recommending a client roll over their retirement account to an IRA, are also fiduciaries.
Remember, the Rule applies only to private-sector retirement plans, such as 401(k)s, SEPs, SIMPLEs, and 403(b) plans under ERISA. The 403(b) plans of public employees, such as teachers, are not covered by ERISA, so they are not subject to the new law. It only applies to them if they decide to roll over their 403(b) to an IRA. Roths, traditional, and rollover IRAs fall under the new rules.
The Obama administration believed the Rule was needed because conflicts of interest caused 401(k) participants and IRA owners to pay higher financial advisor fees, resulting in smaller account balances.
What do I mean by ‘conflicts of interest’? For example, some firms paid their advisors bonuses and benefits if the financial advisors sold that firm’s proprietary products. This is no surprise, but it is surprising that these conflicts go on with retirement plans—given that ERISA forbids conflicts of interest.
But ERISA stipulated that the prohibition against conflicts applied only on five conditions:
- The financial advisor must render advice as to the value of securities or other property;
- The advisor must do so regularly;
- The advisor must do so under an agreement with the client;
- That advice will serve as a primary basis for the client’s investment decisions; and
- The advice is to be based on the particular needs of the investment or retirement plan.
The advice must be given regularly and must be the primary basis for the client’s investment decisions. The DOL believes it allowed financial advisors with conflicts of interest to provide advice without violating ERISA’s prohibition.
Plus, the DOL felt that the 1974 exemptions were put in place when there was no such thing as an IRA or a 401(k), and companies invested the retirement money for their employees. However, now that individuals are responsible for their own investment decisions, new rules are needed.
For example, the DOL believes people are rolling over their 401(k)s into IRAs when it would cost them less if they remained in the 401(k). Moreover, under the old rules, rollover advice never fell under ERISA guidelines because the rollover happened once.
So, the new fiduciary rule reinterprets the five-part test so that now more financial professionals fall under the ERISA standard of who is a fiduciary. It also removed a previous ruling that rollover advice was not fiduciary advice. Instead, it requires that any advisor falling under these standards work in your best interest, including when they recommend a rollover.
Financial Advisor Tim Hayes Believes the DOL Got It Right
By striking a balance between new protections for consumers with additional burdens on the financial services industry, Financial Advisor Tim Hayes believes the Department of Labor (DOL) hit a home run with its new retirement advice rule.
Fixing the Law
By eliminating a 1975 rule, made when retirement plans were much different than they are today, the Department of Labor rectifies the contradiction that financial advisors with conflicts of interest are providing financial advice to retirement accounts even though ERISA, the law governing these accounts, prohibits this from happening.
What does the new rule mean for consumers? “If you have a 401(k) or 403b, the advisor fees might come down. If you roll over the 401(k) or 403b to an IRA, the fees in the IRA should be competitive to what they were in the 401(k).
What to Do Now
If you have an IRA and work with a financial advisor, now is an excellent time to review the financial planning arrangement, fee or commission, best interest, or fiduciary. Also, if you are thinking of rolling over a 401(k) or 403(b), ensure your decision is consistent with the new rule.
Suppose you happen to administer a retirement plan for an employer: Ensure that any advisor compensation is aligned with the new interpretation from the DOL and the new rule from the SEC.
401k Services Tim Hayes
Build a template for your company’s 401k or ERISA 403b plan that produces plan-specific investment recommendations and reports and fee and compliance reports, which the government now requires.
Provide investment advice to plan participants and encourage them to take a risk profile assessment we can then use to rebalance their account or allocate their contributions.
For companies without a retirement plan, I size up and help implement the one (401k, profit sharing plan, 403b, SIMPLE, SEP, and Solo 401k that works best for the company.
My Professional Designations
Individuals who hold the AIF® designation have:
- Completed the AIF® Designation Training;
- Passed the AIF® designation exam;
- Met the designation’s prerequisites and qualification and conduct standards;
- Accrued a minimum of six hours of continuing professional education, with at least four hours coming from fi360-produced sources;
- Attested to a code of ethics.
Individuals who hold the CRPS® designation have:
- Completed a course of study encompassing design, installation, maintenance and administration of retirement plans;
- Passed an end-of-course examination that tests their ability to synthesize complex concepts and to apply theoretical principles to life situations;
- Pledged adherence to the CRPS® Standards of Professional Conduct, and are subject to a disciplinary process in that regard.
CRPS® designees renew their designation every two years by completing 16 hours of continuing education, reaffirming adherence to the Standards of Professional Conduct, and complying with self-disclosure requirements.
Individuals who hold the AWMA® designation have:
- Completed a course of study encompassing wealth strategies, equity-based compensation plans, tax-reduction alternatives, and asset-protection alternatives;
- Passed an end-of-course examination that tests their ability to synthesize complex concepts and apply theoretical concepts to real-life situations;
- Agreed to adhere to the AWMA® Standards of Professional Conduct, and are subject to a disciplinary process in that regard.
AWMA® designees renew their designation every two years by completing 16 hours of continuing education, reaffirming adherence to the Standards of Professional Conduct, and complying with self-disclosure requirements.
CFS designation is awarded upon passing an examination on mutual funds, ETS, REIT’s, closed-end funds, and similar investments. Advanced studies on topics include:
- Fund analysis and selection;
- Asset allocation;
- Portfolio construction;
- Sophisticated investment strategies for risk management, taxes, and estate planning.
San Diego, CA, November 13, 2020 – The Institute of Business & Finance (IBF) recently awarded Tim Hayes with the only nationally recognized tax designation, CTS™ (Certified Tax Specialist™). This graduate-level designation is conferred upon candidates who complete an 135+ hour educational program focusing on personal income taxes and methods to reduce tax liability. The combined top state and federal bracket can easily exceed 40%.
San Diego, CA, September 1, 2020 – The Institute of Business & Finance (IBF) recently awarded Tim Hayes with the estate planning designation, CES™ (Certified Estate and Trust Specialist™).
This graduate-level designation is conferred upon candidates who complete a 135+ hour educational program focusing on trusts, wills, probate, retirement benefits, caring for children, and what should be done after the death of a loved one. Over $50 trillion is expected to pass from one generation to another during the next half-century.
The Accredited Portfolio Management AdvisorSM, or APMA® program, is a designation program for financial professionals. The program educates advisors on the finer points of portfolio creation, augmentation, and maintenance. Students will gain hands-on practice in analyzing investment policy statements, building portfolios, and making asset allocation decisions.
San Diego, CA, May 12, 2020 – The Institute of Business & Finance (IBF) recently awarded Timothy Hayes with the only nationally recognized annuity designation, CAS® (Certified Annuity Specialist®).
This graduate-level designation is conferred upon candidates who complete a 135+ hour educational program focusing on fixed-rate and variable annuities. Several trillion dollars are invested in annuities; it is estimated that at least one-third of all annuity contracts are not titled correctly.
2023 Retirement Plan Limits
The Internal Revenue Service increased the annual contribution deferrals on some popular qualified retirement plans. So you will be able to put more into your workplace retirement plan in 2023.
|Name of Retirement Plan||Basic Contribution Limit||Age 50 and up Catch-Up||Basic + Age Fifty|
|401(k) Retirement Plan||$22,500 per year deferral||$7,500 per year||$30,000|
|SIMPLE IRA Retirement Plan||$15,500 per year deferral||$3,500 per year||$19,000|
|SEP IRA Retirement Plan||Cannot exceed the lesser of: 25% of compensation, or $66,000 per year||N/A||N/A|
|403b Retirement Plan||$22,500 per year deferral||$7,500 per year||$30,000|
|457 Retirement Plan||$22,500 per year deferral||$7,500 per year||$30,000|
|Public School Employees Are Eligible for Both a 403b and 457||$45,000 per year deferral||$15,000 per year||$60,000|
These are the opinions of Financial Advisor Tim Hayes and not necessarily those of Cambridge Investment Research. They are for informational purposes only and should not be construed or acted upon as individualized investment advice.
Fee-Only Financial Planner, Hourly Rate, or Commission
Most clients pay fee-based or an hourly rate. The size and complexity of the client’s wealth management and financial and retirement planning determine that fee.
Advisor Financial Planning
Fee-Only Financial Planning
Financial Planning Services
Best Interest Regulation