More On Legal & Compliancefrom The Advisor's Professional Library
- Using Solicitors to Attract Clients Rule 206(4)-3 under the Investment Advisors Act establishes requirements governing cash payments to solicitors. The rule permits payment of cash referral fees to individuals and companies recommending clients to an RIA, but requires four conditions are first satisfied.
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
On January 1, 2010, nearly $1.4 trillion of retirement assets will become eligible to be converted to a Roth IRA. The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) allows higher-income individuals to take advantage of a conversion opportunity once limited to taxpayers with an adjusted gross income of less than $100,000, notes John Hancock Funds.
This means that financial advisors can help both existing and potential clients to determine whether and how much of an individual's retirement assets should be converted.
"Now is the perfect time to start planning for that opportunity," the fund group says.
In addition, advisors should:
o Identify clients who have expiring tax losses or credits that could utilize income generated from the conversion;
o Determine whether their clients are eligible to take a distribution from a 401(k) or other qualified retirement plan that could be rolled into a Roth IRA; and
o Identify retirement accounts, especially those that recently lost value, to be converted.
According to Brandon Buckingham, vice president, advanced planning attorney and national manager of special markets for John Hancock, the amount converted to a Roth IRA will be included as ordinary income for the year in which the account was converted. However, for conversion in 2010 only, taxpayers can elect to defer half of their tax liability to 2011 and the other half to 2012.
In general, the Roth IRA can grow and be distributed tax-free as long as distributions are not taken within five years of the first contribution or conversion, and not until after age 59 1/2 . For more details, see www.jhfunds.com/iracenter.