Are Your 401k Participants Getting Conflicting IRA Rollover Advice?
From the founders of Waze which help drivers find the best routes with less traffic comes a new fee comparison tool that helps advisors determine if they should be rolling their assets out of a 401k or 403b plan into an IRA.
With the implementation of the DOL fiduciary rule covering defined contribution plans and IRAs, most advisors are now required to determine if the act of rolling over their assets into an IRA is in the best interest of their client considering the fees, funds and protection afforded, not just whether the investments are suitable.
Feex, founded in 2012, specializes in fee analysis technology for retirement and investment accounts like 401k’s, IRA’s, Brokerage accounts. Their new tool analyzes participant fee disclosure information found in form 404a5 which providers are required to send to participants in ERISA plans as well as information from outside accounts which they obtain from a so-called data aggregator. The tool provides a side by side comparison reviewing fees as well as asset allocations v. model portfolios.
While advisors and their individual clients would benefit the most, plan sponsors should also be concerned about whether their employees are getting good advice about what to do with their plan assets when they separate from service.
The administrator of an 8,000 eligible 401k plan attending a TPSU program held at Vanderbilt University receives all the notifications about employees rolling their assets into an IRA and sees many going to small, local advisors. He is concerned that these employees may not be getting the best advice and that the advisors are not acting in the investors best interest.
Specifically he wonders whether the advisor may be conflicted about whether the investor should actually be moving their money out of the plan which has many low-cost options overseen not just by the employer’s investment committee but also by an advisor selected and monitored by the company whose fees are generally lower than what an individual investor may pay an outside advisor.
Beyond paternalistic concern, if the plan’s advisor is giving conflicting advice on rollovers because they get higher fees on outside assets, plan sponsors may be named in lawsuits for not properly monitoring third party fiduciaries they hire.
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