Wednesday, July 18, 2012

Fiduciary Still Looming

While it may have taken a back seat to the election, the Department of Labor and stakeholders continue to engage in a behind the scenes debate about the DOL's fiduciary rule.

In the latest salvo, FSI sent a letter to Congress clarifying the industry's cooperation in the process.

When the rule comes, the key test will be does it preserve access to financial advice for small savers?  Americans are not saving enough for retirement.  With the need for the rule already in doubt, it is important we do not take one step forward and two steps back.

According to this article, the rule might not come until post-November.

Kent Mason, a lawyer at Davis & Harman, LLP, recently spoke to some of the practical concerns with the rule:
Under the original Labor fiduciary-rule proposal, a broker who has a client with $25,000 to invest in an IRA and $30,000 to invest in an investment account would only be able to advise the client on the investment-account portion, according to Mr. Mason. The broker couldn’t help with the IRA because he or she couldn’t give advice that affects compensation – either commissions or revenue sharing – under the Labor proposal.
“That kind of strange disconnect would have to unfold in that very odd way,” Mr. Mason said. “That’s the product of this bifurcated rule.”
Stay tuned...

How Important is a Financial Advisor?

A recent LIMRA study attempted to answer that question.  What they found is that access to an advisor can make the difference between saving and not.

Key point:
LIMRA's study found that 61% of consumers who work with an advisor contribute to a retirement plan or an IRA, while only 38% of consumers who don’t work with an advisor contribute to their retirement savings. Controlling for income, consumers who work with a financial professional are also more likely to contribute to a defined contribution plan or IRA.
Numbers like these are why CFS fights to ensure all communities have access to sound, ethical financial advice.