The author of the Labor Department’s fiduciary standard, now vacated by a federal court, believes the Securities and Exchange Commission’s best-interest initiatives are “terrific” steps forward in protecting investors. But Phyllis Borzi also worries about the “virtual tsunami” of retirees who are rolling over their ERISA-protected 401(k) assets while regulators determine the best way to protect those investors.
“It concerns me that the SEC is not addressing rollovers” in its deliberations, Borzi said, adding that consumers who “know best” their retirement plan recordkeepers, many of which have proprietary products, may not be making the most informed choices on where to roll over their retirement assets.
Moreover, she worries that financial services providers who had been “far along in complying” with Labor’s fiduciary standard “have started to roll back” those fiduciary-friendly approaches to the possible detriment of consumers.
Borzi was speaking at a virtual press conference called by the Institute for the Fiduciary Standard, whose speakers included institute co-founder Knut Rostad, Geof Brown of the National Association of Personal Financial Planners and Jim Allen, head of capital markets policy for the Americas at the CFA Institute.
Rostad highlighted findings of The Retail Market for Investment Advice, a study released in October by the SEC’s Office of the Investor Advocate (OIAD) and the Rand Corporation. That study, which included consumer focus groups and a survey, focused on whether investors understood the differences between brokers and investment advisors, and what consumers expected from those advice givers, particularly when it came to their compensation and potential conflicts of interest.
The issue of “investor confusion” over the retail advice market has been raised by both sides in the debate over whether all advisors should be subject to a fiduciary standard that puts the interests of consumers first when providing retirement advice.
Rostad reported that the consumer survey found that 51% of investors answered that it was “important” or “very important” that their financial professional receive “all his/her compensation from you directly.” Twenty-two percent said it was not important, while 28% were unsure of the importance.