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IRA Rollovers: A Conversation with Tom Kmak of Fiduciary Decisions

In this blog post, we’re featuring a conversation with Tom Kmak, the co-founder and Chief Executive Officer of Fiduciary Decisions (formerly Fiduciary Benchmarks), founded in 2008.

Tom shared his perspective on how financial professionals can best help 401(k) plan participants with IRA Rollover decisions.

Tom, I know that you and the Fiduciary Decisions team have been staying on top of the ongoing regulatory developments for IRA Rollovers for some time now.

Yes — the Department of Labor (DOL) has referred to Rollovers as “one of the most significant financial decisions” retail investors can make, so we’ve focused on Rollovers ever since the 2016 DOL Fiduciary Rule. 

As many of your readers know, there are now multiple rules that govern IRA Rollovers:

  • FINRA 13-45 requires a “fair and balanced” approach in discussions with participants considering a Rollover recommendation.
  • The SEC Best Interest Rule requires that financial professionals act in the best interest of participants with respect to Rollover decisions.
  • The DOL recently released the Prohibited Transaction Exemption (PTE) on advice, which contains even more rules regarding Rollover recommendations.

And, as you detailed in a blog, the DOL is now in the process of rewriting the 1975 Fiduciary Rule. The final rule from the DOL will likely keep its strong focus on ensuring that financial advisors understand their fiduciary duties — and that IRA fees are reasonable.

Some financial professionals I’ve spoken with have been wondering about enforcement of these rules. What’s your take on this?

Everything we read and hear is that the SEC and the DOL are “dead serious” — they truly want to see financial services professionals act in the best interest of 401(k) plan participants considering IRA Rollovers. In some cases, these transactions can be more than $1 million.

At Princeton Financial Consultants, we’ve been advocating that financial services professionals should look at these regulations as opportunities to engage with potential Rollover clients — to demonstrate the value of the products and services they provide. Do you agree?

Absolutely! Of course, compliance is a must. But financial services firms should be looking beyond compliance to demonstrate the value of the services they offer. 

If a financial advisor takes the time to do a clear comparison of the fees, services, and features offered in a client’s 401(k) plan versus an IRA Rollover, many participants would certainly appreciate the “high-touch” service that the Financial Advisor will provide.

How can Fiduciary Decisions help with this process?

We designed IRA Best Interest Determination — a simple, easy-to-use solution that enables financial advisors to create a report that emphasizes not just the difference in fees, but also the differences in 23 services that could be important to 401(k) plan participants considering a Rollover. Services such as the ability to provide comprehensive financial planning advice or the ability to have an in-person meeting. We also show the differences in Investment Fees, Advice Fees and Administrative Fees between the plan and the IRA. 

So, just like our industry-leading benchmarking service, we focus first on “what you are getting” before we concentrate on “what you are paying.”

Note that this service is fully compliant with the FINRA, SEC and DOL regulations. It can do everything the new rules require, including capturing the entire process and documenting the actual reasons for the Rollover recommendation. These results can be viewed and summarized at the individual, office, branch, or firm-wide level for the annual review process, which must be certified by one of the key executives of the broker-dealer or RIA.

That’s a lot! Does it take a long time and lots of complexity to generate the report?

No. It only takes three easy steps, which advisors can complete in just a few minutes. Our system can accept existing data from their system. Or advisors can use alternative data per the regulations — which in this case is our benchmarking data from our industry-leading database of 325,000 plans — to make things go even faster.

Sounds great! If someone’s interested, what’s the best way to get started?

Send us a quick email or call us at 866-516-4909. Our Fiduciary Decisions team is ready to provide more information, arrange a demo, and answer any questions.

Focus on the Opportunities

Princeton Financial Consultants can help your firm take a business-focused approach to today’s regulatory environment that can create new opportunities. Contact us for a personalized consultation today.

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