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By Guest Bloggers, Robert L. Sichel and Amanda M. Katlowitz of K&L Gates According to the Investment Company Institute, at the end of the first quarter of 2017, assets in IRAs and defined contribution plans totalled $8.2 trillion and $7.3 trillion, respectively.1 Under the Department of Labor’s fiduciary rule, advice to rollover assets from these types of accounts to an account that you advise constitutes fiduciary investment advice. Below are three issues under the Department of Labor’s fiduciary rule that advisers should consider as they engage in rollover discussions with prospective clients. 1. Do I need to obtain information about the prospective client’s existing account? Yes. Advising someone to rollover assets,...

Daniel Satchkov

06 Sep 2017

Crazy Question of the Day: Will Bitcoin Ever Be a Fiduciary Asset?

The mysterious Satoshi Nakamoto created Bitcoin (BTC), the first digital currency as a result of the 2008 financial crisis. Bitcoin blockchain is the first example of monetary system operating in a totally decentralized manner bypassing the regular financial system. From the technological perspective BTC is a complicated endeavor that involves a lot of moving parts. We at RiXtrema always try to look at financial problems using quantitative methods and ask unexpected questions. The crazy question of the day is: Will Bitcoin Ever Be a Fiduciary Asset? It may seem crazy today, but I am sure your clients are investing in it and possibly asking you about it. I hear from...

Daniel Satchkov

24 Aug 2017

DOL Fiduciary Rule Best Interest Requirements: Creditor Protection in ERISA Plans

Is it important to factor in safety from creditors during a 401(k) rollover? How safe was the money in the 401(k) and how safe will it be in an IRA? How important is it to consider this as a financial advisor? What is protected in a 401(k)? To put this into perspective, a 401(k) account is generally very far out of reach from creditors. ERISA protects fund in a 401(k) through an anti-alienation provision. This means that most any creditor will be unable to touch money that’s in a 401(k) account. It has some of the highest level of protections against creditors. What is protected in an IRA? However, when...

Daniel Satchkov

11 Aug 2017

DOL Fiduciary Rule Groundhog Day: What Just Happened & What It Means For You

For those participating in the financial advice industry, it might seem like living out the movie Groundhog Day. Except instead of Bill Murray, the star of the movie is Alexander Acosta. Constant news of delays, new legislations that attempt to repeal the rule, repeated comment periods have become the norm in our Punxsutawney of financial advice that also goes by Washington, DC. On August 10th, the DOL has submitted to the Office of Management and Budget proposed amendments to extend until July 1, 2019 the transition period of the Best Interest Contract Exemption (BICE), Principal Transactions Exemption, and PTE 84-24 (regarding insurance contracts and annuities). This uncertainty and continued noise...

Daniel Satchkov

05 Jun 2017

Do I have to document best interest when doing rollovers?

How does the DOL Rule Affect Me? Do I have to document best interest when doing rollovers? Effective June 9, 2017, financial advisors who provide investment advice to retirement plan participants have to adhere to the Impartial Conduct Standard. The standard essentially stipulates the following: Best interest standard of care, which essentially combines ERISA’s prudent man rule and duty of loyalty Advisor cannot receive more than a reasonable compensation Advisor cannot make materially misleading statements After June 9th everyone dealing with rollovers is effectively an ERISA fiduciary. As we have written numerous times, under ERISA there is private right of action. Therefore, even if the DOL does not enforce the...