Who Can Advise At Company Retirement Plans

By Kristen McNamara

Independent financial advisers will benefit from the rule-making that is under way regarding which financial professionals can advise participants in company-sponsored retirement plans — and which ones can’t.

Phyllis Borzi, assistant secretary of Labor of the Employee Benefits Security Administration, said this week the department expects to strike a proposal that would have allowed advisers connected to investment companies to provide retirement advice.

Sean Cunniff, a research director in the securities and investments group at research firm TowerGroup, says, ”This is not good news for brokers who want to advise on retirement plans, as well as providers of 401(k) services who also provide investments.”

A House subcommittee approved a bill in June that would allow only independent financial advisers to provide investment advice to workers and require greater disclosure of fees charged to retirement plan participants. It’s uncertain whether the Labor Department or Congress will be first to release retirement-advice rules. The Labor rules also apply to individual retirement accounts.

Some independent advisers and broker-dealers have shied away from the retirement-advice market because of the complex and evolving legal issues. One tricky area for advisers is the 401(k) rollover market, says Marcia Wagner, of the Wagner Law Group. She says advisers who serve as retirement plan fiduciaries could violate labaor law by implementing a rollover of assets from a 401(k) plan to an IRA.

“I think those that know it’s an issue are really working hard to figure out where the bright lines should be,” she said.