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OT: Major changes coming Wed. for retirement accounts

RUich

RUich

Heisman Winner
Aug 2, 2001
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Just finished talking to my broker (Edward Jones) and he said that a major announcement is scheduled for Wednesday (4/6) towards all types of accounts. Approximately 700 pages of directions will be presented and both firms and individuals will have a 8 month window to make the necessary changes before penalties will be imposed. Have no idea what the government has in mind, but any time an organization with such a history of poor money management wants to tell us how to invest our own money, it scares me.
 
RUich said:
Just finished talking to my broker (Edward Jones) and he said that a major announcement is scheduled for Wednesday (4/6) towards all types of accounts. Approximately 700 pages of directions will be presented and both firms and individuals will have a 8 month window to make the necessary changes before penalties will be imposed. Have no idea what the government has in mind, but any time an organization with such a history of poor money management wants to tell us how to invest our own money, it scares me.
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nah...it will be all good. they are just looking our for the folks after all
 
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Knight Shift said:
You have login info for the link?
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from the first paragraph, you can tell this only affects retirement accounts, for which people receive investing advice. No impact for those who invest in Fidelity/Vanguard type funds, it seems.
 
No effect on the average self investor. Only matters if you pay an advisor to invest for you or for advice.
 
This is a good rule. It forces the financial advisors to look out for their clients more. If you work with an advisor at on of the big brokerage firms that charges you a 1% fee each year to advise your account, they will need to show why an investment (like an annuity that has high inside commissions) would be a better selection than a basic low fee mutual fund.
 
rutgersal said:
from the first paragraph, you can tell this only affects retirement accounts, for which people receive investing advice. No impact for those who invest in Fidelity/Vanguard type funds, it seems.
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Not so fast. This rule (from the Department of Labor) may even affect those that use Fidelity/Vanguard, etc. Any firm that educates or gives advice, even on their website, may have to change the way they charge customers for this education/advice. That could mean a percentage charge (i.e. A wrap fee) even from the discount firms.
 
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Ruthinking said:
Not so fast. This rule (from the Department of Labor) may even affect those that use Fidelity/Vanguard, etc. Any firm that educates or gives advice, even on their website, may have to change the way they charge customers for this education/advice. That could mean a percentage charge (i.e. A wrap fee) even from the discount firms.
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This.

The DOL will change the industry. Many, many firms out there not currently working under a Fiduciary standard will not have the compliance infrastructure in place to handle this. Gonna be a lot of individual folks in the industry who bow out.

As an FYI, actual Financial Planning fees, which often get misconstrued with Investment fees because people like to say they are fee only, will not be impacted. If anything, the smart financial planners who provide fee based advice will increase their advice fees and lower their investment management fees.
 
Ruthinking said:
Not so fast. This rule (from the Department of Labor) may even affect those that use Fidelity/Vanguard, etc. Any firm that educates or gives advice, even on their website, may have to change the way they charge customers for this education/advice. That could mean a percentage charge (i.e. A wrap fee) even from the discount firms.
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If you don't ask for advice, you still will be affected by this?
 
Yay, more regulation that no one understands. Another Oblunder special.
 
Caliknight said:
Yay, more regulation that no one understands. Another Oblunder special.
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Hopefully this carries over to every other industry to protect the consumer. Can't wait to have anyone who sells me something have to write a ten year disclosure of how much they will earn in doing so. Also can't wait to see all fees...and I mean all...being available by request to the general public. This should particularly be enlightening when visiting my physician, buying groceries, stopping at Home Depot and purchasing a car.
 
kjb32812 said:
Hopefully this carries over to every other industry to protect the consumer. Can't wait to have anyone who sells me something have to write a ten year disclosure of how much they will earn in doing so. Also can't wait to see all fees...and I mean all...being available by request to the general public. This should particularly be enlightening when visiting my physician, buying groceries, stopping at Home Depot and purchasing a car.
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Oh yeah, I also have a serious problem with engineers and architects being compensated. Let's not forget about the IB guys. Not only are they self-righteous and overpaid, they also screw everyone at every turn and try to bring down the whole financial system.
 
Ruthinking said:
Not so fast. This rule (from the Department of Labor) may even affect those that use Fidelity/Vanguard, etc. Any firm that educates or gives advice, even on their website, may have to change the way they charge customers for this education/advice. That could mean a percentage charge (i.e. A wrap fee) even from the discount firms.
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The intent is to carve out "Education" from "Advice" so you would not be paying for "Education." I'm generally not a fan of regulation but the intent here is to increase transparency and decrease cost to the consumer. Depending on the final rule, this will impact "brokerage" firms and those that use them more than Vanguard, Fidelity, T Rowe, other similar firms and those that use these lower cost companies. Lots of people have no clue what they pay in aggregate in fees, this is intended to increase awareness and ultimately decrease fees (or at least let people know what they are paying).
 
If the guy who you pay to give you financial advice is telling you he is going to have a problem acting in your fiduciary interest you have hired the wrong advisor.
 
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phs73rc77gsm83 said:
The intent is to carve out "Education" from "Advice" so you would not be paying for "Education." I'm generally not a fan of regulation but the intent here is to increase transparency and decrease cost to the consumer. Depending on the final rule, this will impact "brokerage" firms and those that use them more than Vanguard, Fidelity, T Rowe, other similar firms and those that use these lower cost companies. Lots of people have no clue what they pay in aggregate in fees, this is intended to increase awareness and ultimately decrease fees (or at least let people know what they are paying).
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are we talking about funds bought through brokers?... if I bought direct from the fund?
 
srru86 said:
If the guy who you pay to give you financial advice is telling you he is going to have a problem acting in your fiduciary interest you have hired the wrong advisor.
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LOL. Tell me a financial professional who IS NOT going to tell you they are acting in your best interest? In addition, you tell me what is in your best interest. The Ed Jones guy who uses American Funds and gets you a breakpoint while meeting with you twice per year and returning all of your phone calls the same day or the fee based investment manager using ETFs charging you 1% per?

Even Vanguard released a white paper saying that financial advisors add up to 3% in returns per. Only up to .45% of that had to do with fees. Up to 1.5% had to do with behavioral finance.
 
I was with the SEC years ago, and even so, I believe that sometimes the government can go too far in regulating. Having said that, my wife, who formerly was an in house as a lawyer with a major brokerage firm, now represents folks who have been ripped off by brokers. Some of the cases she's handled show outrageous conduct by reps and advisors in pumping up fees without benefitting clients. This continues to be a problem in the industry.
 
Lets be clear here - what is being referenced is the "Fiduciary Rule" as it applies to ERISA Law. It is not a given that it will be released on Weds - as this is coming from the Office Management and Budget which reviews all regulations to determine if it will have an adverse effect on the economy.

No one is sure how different this will be from the proposed rule. However the thought is it will significantly impact broker advice stemming from rollovers from 401k/retirement to an IRA.

If you are a financial "do it yourselfer" then no issue.

The rule is a major political football - as the Obama administration wants it badly as part of his legacy. The financial industry has fought this vigorously as has both Dems and Reps.
 
RUich said:
Just finished talking to my broker (Edward Jones) and he said that a major announcement is scheduled for Wednesday (4/6) towards all types of accounts. Approximately 700 pages of directions will be presented and both firms and individuals will have a 8 month window to make the necessary changes before penalties will be imposed. Have no idea what the government has in mind, but any time an organization with such a history of poor money management wants to tell us how to invest our own money, it scares me.
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I would be concerned with additional fees for implementing those 700 pages of directions.Sounds ridiculous to me but I guess anything is possible.
 
RUJMM78 said:
I would be concerned with additional fees for implementing those 700 pages of directions.Sounds ridiculous to me but I guess anything is possible.
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Like with any other change, there will be those who figure it out and those who don't. Going to be interesting to see how firms accommodate for the additional expense at their level. Typical thought would be to trickle it down by cutting payout. Amazingly, packages to jump right now are extremely attractive to reps.
 
http://www.dol.gov/ebsa/pdf/1210-AB32-2-00682.pdf

This whole issue is complex and a lot depends on the details of the final rule--the devil is in the detail, so to speak. As mentioned, how Education and Advice are defined is key here so as to not introduce unintended consequences. I am all for transparency and while I think brokerage houses and their clients would likely be most impacted, it could also impact the low cost providers and do-it-yourself folks. Here is a link to the comment letter submitted by Vanguard last summer. I'm not sure to what extent their (or others) input has made it into any revisions but it's an interesting read.
 
Do it yourselfers will have no impact - at issue is that a broker assisting someone who is not financially astute will make the broker a fiduciary.
 
RUBigFrank said:
Do it yourselfers will have no impact - at issue is that a broker assisting someone who is not financially astute will make the broker a fiduciary.
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While I generally agree, if you read the Vanguard comment letter you'll see that they do have some concerns about possible unintended consequences depending on specifics of the final ruling. I'm a 100% DIY and use Vanguard extensively, for context to my comments.
 
phs73rc77gsm83 said:
While I generally agree, if you read the Vanguard comment letter you'll see that they do have some concerns about possible unintended consequences depending on specifics of the final ruling. I'm a 100% DIY and use Vanguard extensively, for context to my comments.
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being that the Federal Government is involved I can guarantee 100% there will be NO unintended consequences......never are.
 
kjb32812 said:
Hopefully this carries over to every other industry to protect the consumer. Can't wait to have anyone who sells me something have to write a ten year disclosure of how much they will earn in doing so. Also can't wait to see all fees...and I mean all...being available by request to the general public. This should particularly be enlightening when visiting my physician, buying groceries, stopping at Home Depot and purchasing a car.
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To be a little fair here - the industry used to bury management fees and operating expenses in a way that a common investor, i.e. your Aunt Sally, would not see or understand.
 
Crazed_RU said:
To be a little fair here - the industry used to bury management fees and operating expenses in a way that a common investor, i.e. your Aunt Sally, would not see or understand.
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No, not really. In fact, anyone that has the ability to read would be annually given more disclosure than practically anything else they bought as a good or service.

I'm all for Full and Fair Disclosure and am not defending those who don't provide it but I find your statement to be 100% erroneous unless Aunt Sally is illiterate.
 
Speaking as someone who works in a regulated industry, I would bet that it's not 700 pages of regulations, but a 700-page document that contains both the regulations and an explanation of why they're being adopted. (That's so the rule will comply with the requirements of the Administrative Procedures Act.)

That aside, there is a serious problem in the investment business with brokers acting more in their interests than the interests of their clients, particularly by recommending proprietary, more expensive funds over cheaper, but independent funds because they get compensation for selling the proprietary funds. Most people who use brokers have no idea about this, and assume their brokers make recommendations based solely on potential returns to the customer.
 
BeKnighted said:
Speaking as someone who works in a regulated industry, I would bet that it's not 700 pages of regulations, but a 700-page document that contains both the regulations and an explanation of why they're being adopted. (That's so the rule will comply with the requirements of the Administrative Procedures Act.)

That aside, there is a serious problem in the investment business with brokers acting more in their interests than the interests of their clients, particularly by recommending proprietary, more expensive funds over cheaper, but independent funds because they get compensation for selling the proprietary funds. Most people who use brokers have no idea about this, and assume their brokers make recommendations based solely on potential returns to the customer.
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Is this true? I was under the impression that this went away over a decade ago.
 
RU_Planning said:
Explain?
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Do you reall think advisors, who get paid by assets under management, will want to spend their time with prospective clients who have average account balances of $250,000 or less?

The middle and lower level clients who this directive was supposed to help, will be left to their own devices. It won't be pretty.

This wasn't legislation, this was a directive. It is overkill.
 
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Southern Gentleman said:
Do you reall think advisors, who get paid by assets under management, will want to spend their time with prospective clients who have average account balances of $250,000 or less?

The middle and lower level clients who this directive was supposed to help, will be left to their own devices. It won't be pretty.

This wasn't legislation, this was a directive. It is overkill.
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Many smart ones will educate themselves with respect to financial literacy and many will seek out lower cost providers such as Vanguard, Fidelity, T Rowe. Others with perhaps more complex financial situations, although that's generally not someone with $250k in investable assets, can decide for themselves. I'm not saying I support the way this may come to fruition and it depends on the final rules but transparency is a good thing. If someone wants to pay 100+ basis points annually, 12b-1 fees, trailer fees, Class A shares, etc because they like/trust their advisor, fine, as long as they understand it.
 
phs73rc77gsm83 said:
Many smart ones will educate themselves with respect to financial literacy and many will seek out lower cost providers such as Vanguard, Fidelity, T Rowe. Others with perhaps more complex financial situations, although that's generally not someone with $250k in investable assets, can decide for themselves. I'm not saying I support the way this may come to fruition and it depends on the final rules but transparency is a good thing. If someone wants to pay 100+ basis points annually, 12b-1 fees, trailer fees, Class A shares, etc because they like/trust their advisor, fine, as long as they understand it.
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I don't think even if they want to, that they won't be allowed to.
 
Southern Gentleman said:
I don't think even if they want to, that they won't be allowed to.
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It's not a bad thing for companies,with their corresponding financial advisors with an ERISA responsibility, to provide a selection of investment alternatives that have transparent fees and a range of investment alternatives. If, and that's if, the final rule is crafted well, then it could be a good thing. Again, I'm amazed at how many otherwise intelligent people are so financially illiterate--this is not a subject matter to ignore. If you don't want to service your car, lawn, home improvements, etc fine, but personal financial literacy is not a subject matter to pass on. Anyway, I've exhausted my self imposed limit of posts on any one topic. Love your BBQ posts and recent success with BBQ!!!!
 
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I've been breathing this the last few months.

There are good parts and bad parts of the rule. Unfortunately, the smaller investor gets screwed once again via higher fees or less advice. The government really has no place to be jamming this down our throats.
 
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