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2020 Off to Crazy Start Thanks to Secure Act

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It’s barely started, but 2020 is proving to be a busy, crazy year. Much of the mayhem is tied to the passage of the Setting Every Community Up for Retirement Enhancement Act of late 2019.

As Washington Bureau Chief Melanie Waddell highlights in “Washington Watch,” the Internal Revenue Service has been rushing to share guidance on new rules affecting required minimum distributions under the Secure Act, which pushed RMD starting age up to 72 from 70½.

Advisors “should reassure any client who turns 70½ in 2020 that they do NOT have an RMD this year, even though they received a statement from their IRA custodian saying they do. That statement is incorrect — so advisors can tell clients not to worry,” said IRA specialist Ed Slott of Ed Slott & Co. (Clients who turned 70½ in 2019, though, do have RMDs.) “There is lots of confusion here for advisors to deal with,” Slott added.

And it’s not just investors in their early 70s who are fretting about retirement-related issues. In a recent Schwab survey, 65% of those within five years of leaving the workforce say they feel overwhelmed by the need to save enough for retirement, and 52% are overwhelmed by how they can manage their different sources of income in retirement.

Even worse, 70% of those polled say they know little to nothing about RMDs, and a similar number are in the dark about the tax implications of retirement account withdrawals. Plus, about 50% worry about paying too much for advice on managing retirement income. Roughly 60% find it difficult to project how long their savings will last and to how they will manage unexpected expenses.

The Secure Act may help, explains Michael Finke of the American College of Financial Services, in this month’s cover story “A New Road to Retirement Income.” By lowering the fiduciary risk of adding an annuity to a retirement plan (via a safe harbor) and paving the way for no-cost annuity portability, a large number of plan sponsors interested in offering lifetime income solutions could start adding annuities to their plans, Finke explains.

In other news, advisors and executives at the recent TD Ameritrade Institutional LINC conference in Orlando, Florida, discussed lots of details tied to the $26 billion Charles Schwab-TD Ameritrade merger.

As Tim Welsh explains in “Industry Insights,” many questions remain unanswered, but there’ll be no need to “repaper” most client accounts. TD Ameritrade Institutional President Tom Nally believes the blending of the two firms “is going to take time,” likely two to three years, Jeff Berman writes in “RIA Lessons & Leaders.”

At LINC 2020, Tom Ruggie — president of Central Florida-based RIA Ruggie Wealth Management, which joined Carson Group last year — told advisors: “If you’re not creating value for your clients, you’re not going to keep your clients,” especially as the industry “continues to move more and more towards commoditization.”

In Angie Herbers’ view, hybrid fee models are expanding and “giving investors more choices in how they can work with advisors.” As a result, more people are interested in financial advice than ever before, she explains in this month’s “The Fast Track” column.

“This is good news because it means there’s room for everyone,” Herbers said. “Of course, it assumes you can clearly articulate and explain what you are able to do for a client and that you aren’t trying to do it all.”

Given the many factors involved with the current “profound transformation” of financial advice, Pershing Advisor Solutions’ Mark Tibergien suggests that advisors “stay on top of the changes afoot.” The present M&A craze is “a natural stage in the evolution of any industry as pioneers phase out and new capital finds opportunities for great returns,” he adds.

According to Tibergien’s latest “Formulas for Success” column, “This change is not negative in itself, but the uninformed run the risk of being on the wrong end of a deal.”

We endeavor to keep you as informed as possible to minimize such risk. Please let us know of any ideas or thoughts you have about our coverage by writing to me via [email protected].