2011 – The Year of Fiduciary – UPDATE!
Our last blog was titled “2011 – The Year of Fiduciary,” little did we know that the Securities and Exchange Commission (SEC) would so quickly make a confirming declaration.
January 22nd, 2011 the SEC staff, under mandate from the Dodd-Frank financial reform law, recommended that the agency should adopt rules implementing a “uniform fiduciary standard for brokers and advisors that require broker-dealers to act in the best interest of their clients, without regard to the financial or other interest of the broker or advisor.” If you are a plan administrator, this is what you have been waiting for.
While we understand this is only a recommendation from the SEC, the lobbyists representing brokerage firms to insurance companies are out in full force. The fact is, if a broker comes under these fiduciary guidelines, they must disclose any and ALL conflicts of interest, as well as ALL the fees that will be paid by your plan. This includes fees paid to the broker, in addition to fees paid to all the parties involved (TPA’s, insurance companies, etc.), which never had to be disclosed in the past.
As a fiduciary (you are one if you are the plan administrator), it is your responsibility to know all the fees your plan and its participants are paying and that they are reasonable for the services your plan is receiving. For example, if your plan is with one of the many insurance providers (Hancock, MetLife, Principal, etc), you will need to document why you own XYZ fund when you can own the identical XYZ fund for 30% less in fees. Unfortunately, if you are working with a non-fiduciary (brokerage, banks, insurance agents, etc.) they are not obligated to disclose these fees. You can fully understand why the brokerage industry lobbyists are some of the busiest people in Washington today.
Jane Quinn, writer from CBS MoneyWatch.com suggests having your present “advisor” sign the following statement:
“I will act as a fiduciary. I will put your interest first. I will act with prudence. I will not mislead. I will disclose all your fees, not just the ones I am being paid. I will disclose all important facts. I will avoid conflicts of interest and disclose those I can’t avoid.”
If they will not sign this, it is time to find someone who will.
– LCM Capital Management, our Retirement Plan and Wealth Management Advisors.