IRA Advisors' Fiduciary Status Back In Focus As Study's Methodology Comes Into Question

Tuesday, September 04, 2012 08:23
IRA Advisors' Fiduciary Status Back In Focus As Study's Methodology Comes Into Question

Tags: fiduciaries | IRA | retirement plans

There’s new pushback on the proposal that IRA advisors be brought under the fiduciary standard. The study used to state that such a rule would raise fees significantly was conducted by the Oliver Wyman consulting firm in 2011.

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It reportedly found that the Department of Labor’s proposed definition of a fiduciary would raise the cost of advice for IRA accounts from 75% to 195%. The report says such increases in fees would prohibit access to qualified financial advice on IRA accounts by middle income and low income individuals.
Proponents of the fiduciary standard extension to IRA advisors say that the study’s methodology is flawed. That revelation is recent because the study originally did not reveal the data it used in coming to its conclusions.
More data is needed before an adequate debate of the rule’s merits can be conducted. Opposition to the study’s conclusions says that people save more if they receive advice but that the study’s tactics were misleading and dishonest.
Phyllis Borzi, assistant secretary for Employee Benefits Security at the Department of Labor says that the rule would do away with the regular basis and primary basis requirements so that retirement plan participants as well as the companies sponsoring the retirement plans would receive greater protection.

Comments (2)

And what was the cost of advice prior to this? How was this prior advice delivered? What was the the type and quality of this advice? Who was it actually delivered to?
And why such a variance in cost?

Seems that an article about a study that claims that the cost of advice would increase 75% to 195% needs a bit a vetting itself. As a fuduciary I see nothing but a singular benefit to employees and plan sponsors for qualified plans by having fiduciary standard as a hallmark of "advice" provided.
And since most of my clients are IRA investors, the benefit to them of fiduciary advice is peace of mind that I have their interests at the center of my practice and not my own or some other institution.
This sort of sour grapes is simply the last gasp of a out-moded and Jurrasic Era approach to financial service and client "care" -- a word that never passes the lips or enters the mind of a Registered Rep because it is regulated away under current regulations for suitability.
mitchellkeil , September 04, 2012
Mitch - I think this is why the Oliver Wyman study is being questioned, since it is the source of the claim that fees would increase to those amounts.

I agree with you that applying the fiduciary standard to IRA advisors would be a benefit to both employees and plan sponsors for the very reasons you state.

It's an interesting debate that's going on around this topic. And one that's once again been brought to the forefront with the revelation of the data used for the Oliver Wyman report.
lisagray , September 04, 2012

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