Push to curb tainted rollover advice could hamstring IRA sales

Members of Congress and the Labor Department are separately discussing possible legislation or regulation that would crack down on potential conflicts of interest involving brokers who provide advice to 401(k) plans, then seek to roll over retiring participants’ assets into their firm’s individual retirement account plans.
The Labor Department late last month issued regulations under the Employee Retirement Income Security Act of 1974 that apply to advice given IRA plans. But the agency is also looking at how it can make sure that participants do not get conflicted advice when rolling over their assets to an IRA, said Michael L. Davis, assistant secretary of the Department of Labor. “We are spending a greater amount of time on this issue,” Mr. Davis said in an interview following his discussion at the American Society of Pension Professional & Actuaries’ 401(k) Summit on Sunday.
The Labor Department’s main concern: Even if the department addresses the tainted advice problem for 401(k) plans, advisers could promote their firms’ products after the assets leave the plan in an IRA rollover, said Brian Graff, executive director, CEO of ASPPA.
Additionally, Congress is discussing passing legislation that would address the issue of advisers and service providers pushing their own products for IRA rollovers, Mr. Graff told attendees during a panel discussion with Mr. Davis on Sunday. “There are some folks on the Hill who think you — the plan service provider — shouldn’t be able to capture rollover assets,” Mr. Graff said. “For a lot of you, this is going to be a very big issue.”
But a number of experts at the ASPPA conference said they are worried that regulators and legislators are so focused on removing the potential for conflicts of interest in providing advice to retirement plan participants, that they are missing the benefits of having one person providing comprehensive advice.
“I would rather see some clarification on this issue rather than new regulation or legislation,” said Jason C. Roberts, a partner at Reish & Reicher, which represents securities firms and investment advisers. “You want one financial adviser who can provide comprehensive advice .Any further controls of that make no sense because you are excluding two of most investors’ primary assets: their ERISA plans and their IRAs.”