How the new fiduciary rules will affect rollovers

The fiduciary fight isn’t over yet—but we’re getting close. Barring an unexpected upset, the U.S. Department of Labor soon will finalize regulations redefining the term “fiduciary” for purposes of the advice clients get from financial advisors.

These long-overdue reforms have been debated to death, and despite the short-term disruption, they’ll be good for the standards and professionalism of the advisory business in the long haul. A standard that requires advisors to act in the best interest of clients is especially critical in light of the retirement challenges facing so many Americans.

The new rules come with complex implications for the financial services industry, and will keep lawyers busy for some time—but one area that clearly will be impacted is the huge rollover market from workplace retirement plans to Individual Retirement Accounts (IRAs). The new rules will govern any recommendation to roll money out of a qualified plan in the first place, and the investment advice provided once a rollover is completed. The rules will apply to plan advisors who work with individual participants, and to independent advisors—unaffiliated with the plan or sponsor—who are advising clients on their retirement rollovers.

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