As a Business Owner, Human Resource Professional, or Future Retiree, the Department of Labor recently issued a historical ruling known as the “Fiduciary Rule”. This controversial rule, which was opposed by many investment firms, should be viewed as a victory for retirement savers because consumers can now expect their advisors to act as “Fiduciaries.”(1) Prior to this 4/6/2016 ruling, advisors were not required to put the best interests of their clients first. Advisors will no longer be able to steer clients to inappropriate investment products. If you are a Plan Sponsor or Trustee at your place of employment, the new ruling is going to change how your 401k service providers interact with you going forward as they compare vendors, provide benchmark studies on fees and expenses, receive compensation, & build the investment line up. In the 401k vendor marketplace, each vendor & advisor does have the need & right to receive compensation for services rendered. However, in the past it wasn’t always clear who or how various parties were getting paid. In order for you to determine whether or not you are meeting your fiduciary responsibility to your employees, here are questions to ask your 401k plan provider:
• Am I paying a flat fee for service or a commission based fee?
• Will you be (and does your firm allow you to be) acting as a fiduciary to our plan & participants?
• Do all employees pay the same percentage fee or are some investment choices generating more revenue for the record-keeper?
• Do our fees automatically go down as the plan assets grow?
• How do you decide which funds are included in the fund line up offered to our employees?
• When was the last time a vendor comparison was made to compare features, benefits, & costs?
• Can our Target Date Fund provider be changed without increasing our fee schedule?
• Are you failing a discrimination test which limits owners/high income participants from fully funding their account?
• Should you offer investments from multiple fund families instead of only offering 1 family of mutual funds?
• Ask your advisor how many 401k plans they personally oversee, to assure it is their primary business.
If you have not had these discussions with your retirement plan adviser but believe you should, feel free to call or email me at: 757-271-8824 or firstname.lastname@example.org
(1) Market Watch 4/21/2016
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Don is a Certified Financial Planner (CFP) and has been in the advisory business since 1987. He is a founding partner of Planning Solutions Group, which was formed in 2001. Planning Solutions Group is a leader in family wealth management comprised of 30 employees and over 1,500 clients with offices in Maryland and Virginia Beach. Don’s practice focuses in the areas of wealth management, business continuity planning, fringe benefit design, and estate planning.
Don is a frequent speaker/educator who empowers high net worth business owners. He provides educational workshops and seminars throughout the nation at Colleges, Universities, Clubs, and Associations including Christopher Newport University, Montgomery College, and Johns Hopkins University. He has been a featured speaker for many trade associations including, the DC Bar, Associated Builders & Contractors, Johns Hopkins University-Physicians, Maryland Dental Association, Intermodal Association, National Electrical Contractors Association, Printing & Graphics Association, Virginia Association of Roofing Professionals, and Air Conditioning Contractors Association, and Northeast Equipment Dealers Association. Don is a regular instructor at the NADA (National Automobile Dealers Association) Academy helping dealer candidates and family businesses transition to the next generation. He has been a guest on CNNFN’s TV show for Entrepreneurs Only, as well as a radio guest on WTOP, WEAA, WPGC and on WBAL Radio’s Ron Smith Show.
Don sits on the Board of Hampton Roads Financial Planning Association. He volunteers for the “500 Financially Fit Families Program” in Virginia Beach helping mentor citizens on budgeting and paying off debt. He formerly sat on the Board of Directors for the Johns Hopkins Bayview Burn Center and is a former Board Member of the Easter Seals Foundation of Central Maryland. Don is also the past president of the board of trustees at his church. Don has been recognized as a Five Star Wealth Manager for two consecutive years.