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Rollover Advisor

Financial Advisor Tim Hayes CRPS®, AIF®, AWMA®, CFS™, CTS™, CES™, APMA®, CAS® 

Your 401k is one of the most significant assets you own. Deciding what to do with it when you leave your employer is a critical financial decision.

To help with this decision, the U.S. government has been on a ten-year quest to develop a regulatory scheme that protects retirement plan participants. While many of the rules involve advice, when someone is in the plan, a primary focus is the direction a financial advisor provides on whether you should roll your 401k to an IRA.

Read More: Financial Planning for Retirement

The Fiduciary Rule

The first such attempt happened in 2010 when the Department of Labor (DOL) proposed sweeping changes to the retirement landscape with their so-called Fiduciary Rule.

The proposal required financial advisors to act in the retirement plan participants’ best interests, including advising someone on whether they should roll their 401k into an IRA.

It barely got off the ground before the 5th Circuit Court of Appeals canceled it on March 15, 2018, when it ruled that the Department of Labor overstepped its bounds.

Dodd/Frank

In addition to sweeping bank reforms, the 2010 Dodd/Frank bill tasked the SEC with reviewing the two regulatory silos that financial advisors come under to merge the two into one possibly.

You might be surprised that there are two silos. The first is for broker-dealers who worked under a suitability standard. The second is for investment advisors who, in addition to suitability, are fiduciaries who owe their clients a higher loyalty.

The New Rule from the SEC

Beginning June 30, 2021, broker-dealers will operate 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 (brokers) will be called financial professionals. Any advisors who are fiduciaries can continue calling themselves financial advisors.

The DOL Resurfaces

The financial industry had just adapted to the new SEC rules when on July 7, 2020, the Department of Labor issued a final rule to close the circle, begun by the 2010 Fiduciary Rule and the new SEC best interest rule.

The DOL rule brings back the five-point test to determine if an advisor is a fiduciary.

  1. The financial advisor must render advice as to the value of securities or other property;
  2. The advisor must do so regularly;
  3. The advisor must do so under an agreement with the client;
  4. That advice will serve as a primary basis for the client’s investment decisions; and
  5. The recommendation is to be based on the particular needs of the investment or retirement plan.

It also withdrew guidance from the so-called Deseret Letter. The DOL had opined that rollover recommendations were not fiduciary investment advice in that guidance.

The DOL sent the final rule to the Office of Management and Budget in December. Because of the administration change, the rule will be put on hold and eventually modified or canceled. The DOL decided the rule will go into effect on February 16, 2021, and will publish related guidance soon.

Previous Timeline

  • March 15, 2018, the 5th Circuit Court of Appeals ruled that the Department of Labor overstepped its bounds in creating the so-called fiduciary rule, parts of which went into effect last year. In general, the rule required that advisors and brokers charge clients the same fee no matter what product they offer them — the so-called conflict of interest provision.
  • On February 3, 2017, President Trump ordered a review of the Fiduciary Rule, putting its implementation in doubt. Some financial services companies may decide to go forward with some of the changes required by it anyway.
  • In April 2016, U.S. Labor Secretary Thomas Perez announced the final version. The early assessment indicates a phased implementation. Some changes were taking effect in April 2017. Others on January 1, 2018.
  • August 10-132015 public hearings were held.
  • On April 14, 2015, the DOL announced a re-proposal of the rule.
  • In February 2015, President Obama announced that the DOL should move forward.
  • Following an uproar by numerous groups and Members of both parties of Congress, the DOL withdrew its first proposal.
  • In 2010, the U.S. Department of Labor (DOL) proposed a change to the definition of who is a fiduciary.

Read More: DOL Fiduciary Rule Timeline & Updates

FAQ

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.

I've held an industry securities registration for 30+ years and am subject to SEC and FINRA oversight.

Most clients pay fee-only or an hourly rate. The size and complexity of the client's wealth management and financial and retirement planning determine that fee.

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 thee meeting types.

Book an appointment phone or in-person

Book a Phone, Zoom, or In-Person Rollover Appointment

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When “Life” Happens, What Should Happen to Your Financial Strategy?

Tim Hayes is a financial advisor who knows how to adjust your financial strategy to adapt to life’s changes. Whether you’re an individual, small business, or company executive, he’ll help you stay on track to your financial goals despite the shifts in the landscape.

So Back to the Question: Should You Roll Over Your 401(k)?

As you can see, the government is concerned that people that roll a 401k to an IRA end up paying higher fees. And if you have a plan with institutional share classes, work with a financial advisor, and move your plan to an IRA, your costs will likely go up.

But many 401k plan participants work for employers that do not offer institutional pricing nor a great fund lineup. For them, they can roll over without incurring higher expenses and maybe end up with better choices.

There are other reasons to do a rollover besides costs: convenience, not having to deal with the plan for withdrawals, beneficiary changes, or other housekeeping changes.

Also, the skill set involved in growing your accounts is different from providing income. Maybe you will find a financial advisor well-schooled in bonds, annuities, dividend stock funds, the tools needed to generate retirement income.

The advisor could also provide additional services such as estate planning. They can keep you abreast of vital rule or law changes, such as the recent change that made having a trust as a beneficiary in a retirement account less appealing.

Read More: Do You Have After-Tax Money In Your 401k?

Rollover Advisor

Consider me for your financial advisor when switching from growing your retirement accounts to distributing them.

This transition usually means moving some money from stocks to bonds, and I am well-schooled in the economy, inflation, markets, interest rates, and the bond market.

Before coming to Cambridge Investment Research Advisors in 2010, I spent 20 years with MetLife, so I am also well-versed in guaranteed retirement products such as variable and fixed annuities.

Rollover Checklist
  • Review the fees in your 401k plan or 403b
  • Review the fund lineup in your 401k plan or 403b
  • Check if there are enough choices to provide retirement income security
  • Calculate your retirement risk-tolerance score
  • Compare your retirement risk score with your current 401k or 403b allocation
  • Recommend whether you should leave your 401k or 403b in your plan or roll it to an IRA
  • Design your retirement portfolio in your 401k, 403b, or IRA using your retirement risk tolerance and income goals
Disclosure

Please be sure to speak to your advisor to carefully consider the differences between a company retirement account and IRA investment. These factors include changes to the availability of funds, withdrawals, fund expenses, fees, and IRA-required minimum distributions.

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