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COLLECTED WISDOM™ on Participant and Investment Advice

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SEC and DOL Working Together on Retirement Advice Rules

The SEC Package provides guidance broadly on the standards of care owed by registered investment advisers and broker-dealers. The SEC Package also imposes new disclosure requirements. In light of recent regulatory focus (including the DOL's) vacated 2016 fiduciary rule on individual retirement accounts and rollovers from ERISA covered plans to IRAs, in particular, this article discusses how the SEC Package may impact recommendations and investment advice in the retirement savings space.

Source: Groom.com, September 2019

Survey Highlight the Power of Financial Advice

Voya has released new research that examines Americans' retirement preparation efforts. The results also identify ways that working with a financial advisor can help Americans make wiser, more-informed decisions. The transition into retirement involves various financial, emotional and social choices, and a financial advisor can act as a sounding board, helping his or her clients make pivotal decisions and setting them on the right path toward success.

Source: Voya.com, November 2018

New Evidence on the Demand for Advice Within Retirement Plans

Using participant-level data from TIAA, this study sheds new light on demand for advice within retirement plans. In addition to examining how demand varies based on participant demographics, the authors explore how demand is affected by default investment options and the means by which advice is offered.

Source: Tiaainstitute.org, December 2017

Recordkeepers Gear Up for Advice Role

Several large recordkeepers are expanding their fiduciary duties by providing more advice to defined contribution clients in response to the Department of Labor's conflict-of-interest rule that is slated to take effect in April.

Source: Pionline.com, January 2017

New Evidence on the Demand for Advice Within Retirement Plans

This 13-page paper uses participant-level data from TIAA to shed new light on the demand for advice within retirement plans. In addition to documenting how demand for advice varies over time and across different groups of participants, it take initial steps to determine how demand for advice interacts with reliance on default investment options.

Source: Tiaainstitute.org, December 2016

Robos Set Their Sights on Retirement Plan Providers

It is no surprise that the retirement industry -- with entrenched players and complex arrangements between multiple vendors for services like fund lineups, administration and record-keeping -- is proving difficult for the "robos" to disrupt. Recent announcements, however, hint that these alternative retirement plan providers may be gaining traction.

Source: Corporateinsight.com, December 2016

Robo Advisors: Looking Beyond the Low-Cost Service

Results of a new study from Loring Ward comparing the portfolios from the top five robo-advisors to a benchmark portfolio with several decades of measurable performance reveal that while the robo-advisor portfolios are very well diversified, they also contain construction gaps that should not be present in well-constructed portfolios.

Source: Advisorinsightsblog.com, December 2016

DC Plans Shifting From One-Size-Fits-All to One-On-One Retirement Advice

Up until now, one-size-fits-all 401k retirement plans have been the main strategy. However, it appears that 401k plan sponsors are starting to reconsider this approach. This year, Cogent has found evidence of increasing interest among plan sponsors in adding new forms of advice.

Source: Marketstrategies.com, July 2016

DOL Encourages 401k Participant Education

The widely anticipated final fiduciary rule from the DOL is here. As expected, the rule broadly expands the definition of fiduciary investment advice, but also provides welcome flexibility for providing general education materials to participants without triggering fiduciary liability. That flexibility is welcome news given employers' interest in and demand for holistic financial wellness

Source: Manning-Napier.com, May 2016

Perspective on the DOL's Final Rule on Fiduciary Advice

While details of the long and complex rule are still under review, Vanguard believes the DOL took significant steps to simplify, clarify, and streamline earlier proposed provisions.

Source: Vanguard.com, April 2016

Department of Labor Finalizes Rule to Address Conflicts of Interest in Retirement Advice

This is a Department of Labor piece reviewing the final version of the 'Conflict of Interest' rule. Topics include, what is covered investment advice under the rule, what is not covered investment advice under the rule, Best Interest Contract, and applicability date.

Source: Dol.gov, April 2016

Delivering Investment Advice: Key Differences between 403(b) vs. 401k Plans

Asset allocation models raise a whole different set of issues for the 403(b) investment adviser. This is because investments in 403(b) plans do not enjoy the same exemptions from securities laws, as do 401k plan investments.

Source: Ntsa-net.org, October 2015

Robo-Advisors: A Closer Look

Robo-advisors have been touted by the DOL as a source of investment advice that can benefit retirement investors by minimizing costs and avoiding conflicts of interest. This paper examines whether robo-advisors in fact provide personal investment advice, minimize costs, and are free from conflicts of interest. Based on a detailed review of user agreements for three leading robo-advisors, this paper concludes that robo-advisors do not live up to the DOL's acclaim.

Source: Ssrn.com, October 2015

Department of Labor's Proposal to Define "Investment Advice"

The DOL intends to use the proposed definition of "investment advice," addition of a "best interest contract" exemption, and changes to current exemptions to more substantially extend its authority over IRAs. As a result, virtually all sales and marketing activities in connection with IRAs will be "investment advice" and subject to the prohibited transaction provisions. The purpose of this article is to explain how the DOL proposes to accomplish this.

Source: Groom.com, September 2015

Analysis: Impact of the DOL's Fiduciary Proposal on Participant Investment Advice

The proposal will have a significant impact on broker-dealers. It will be difficult for advisors to avoid fiduciary status when assisting participants with investment decisions. Where broker-dealers receive variable/indirect compensation on the basis of advisor recommendations, all of the available PT exemptions are highly nuanced and challenging to satisfy. Otherwise, broker-dealers will need to re-examine their advisors' practices carefully to ensure that they are providing only investment education, or develop other strategies to avoid PTs.

Source: Drinkerbiddle.com, July 2015

DC Managed Accounts: Shining a Spotlight on Investment Advice

Managed account and automated advice services have made significant inroads in DC plans. However, plan sponsors often have had limited or insufficient information to evaluate and monitor automated advice engines, despite having fiduciary responsibility over advice provided to participants. Article offers some simple investigative strategies to make more thorough evaluations, potentially improving participant outcomes and reducing fiduciary risk.

Source: Pimco.com, February 2015

Fewer Plans Offering Investment Advice

According to Plansponsor.com's 2014 Defined Contribution Survey, the percentage of plans offering investment advice slipped lower over the past year, with most of that decline coming at the expense of advisors.

Source: Napa-net.org, February 2015

Speakers Say Liability Can Be Minimized When Giving Participants Investment Advice

Pension plan trustees can offer participants much-needed individual investment advice in their participant-directed accounts without undue fear of liability, speakers said during a conference.

Source: Bna.com, March 2014

Investment Education or Investment Advice: Which Are You Providing?

How do you know if you are giving investment education or investment advice? In Interpretive Bulletin 96-1, The Department of Labor has given some of the best guidance on determining the difference between the two. Here is a summary of the most important points.

Source: 401khelpcenter.com, May 2010.

Advisory Opinion 2001-09A; SunAmerica

This is commonly called the SunAmerica opinion and deals with how financial services firms can provide asset allocation advice. It was issued before the Pension Protection Act of 2006 was passed by Congress.

Source: U.S. Department of Labor, December 2001.

Interpretive Bulletin 96-1; Participant Investment Education

This interpretive bulletin sets forth the views of the Department of Labor (the Department) concerning the circumstances under which the provision of investment-related information to participants and beneficiaries in participant-directed individual account pension plans will not constitute the rendering of "investment advice" under ERISA. This guidance is intended to assist plan sponsors, service providers, participants and beneficiaries in determining when activities designed to educate and assist participants and beneficiaries in making informed investment decisions will not cause persons engaged in such activities to become fiduciaries with respect to a plan by virtue of providing "investment advice" to plan participants and beneficiaries for a fee or other compensation.

Source: U.S. Department of Labor, September 2003.

Investment Advice and Fiduciary Liability

Fiduciary liability continues to be the primary reason most plan sponsors don't provide plan participants with investment advice, but are these concerns justified? Located on: 401khelpcenter.com, April 2004.

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