What’s ‘Reasonable’ Compensation in an IRA?
Many questions remain about the Department of Labor’s fiduciary reproposal, and it seems as though more emerge every week.
But, asked to rank and/or ask the question they’d most like answered about the Department of Labor’s fiduciary reproposal, NAPA Net readers chose:
- What is “reasonable” compensation in an IRA? (The basic standards of impartial conduct under the Best Interest Contract PTE is that the advisor receive no more than reasonable compensation.)
The rest of the top 10 requested by NAPA Net readers were:
- How is enforcement going to work? (The DOL has the power to write these rules, but has no enforcement authority over IRAs — enforcement is up to the IRS, who currently has very few people nationally focused on IRA compliance.)
- Are discretionary fiduciaries prohibited from helping participants with rollovers?
- How will this affect the ability of retirement plan advisors to help plan participants with rollover decisions?
- What is the potential exemption for "low-fee" investments?
- Despite the fact that the DOL states that common forms of compensation are preserved, are they really? (For example, if the conditions necessary to do something are so onerous, does that in effect make it a prohibition?)
- What is the impact on bundled service providers?
- When is this fiduciary rule change likely to be effective? (There is to be a 75-day comment period, a hearing within 30 days of end of the comment period, an additional 30-day comment period following the hearing, with the final rule effective 60 days after publication. Compliance required 8 months after publication.)
- Will/how will this new standard be reconciled with standards from SEC and FINRA?
- What does "principles-based" mean in the context of this rule?
Other questions on our list:
- Any person recommending a participant roll over their balances to another plan or IRA may be fiduciaries? Who does that exclude/include?
- Why does the DOL continue to ignore the need for a comprehensive training program for workplace fiduciaries?
- If I am an RIA, does any of this really matter to me?
- Did the line between investment education and advice get moved? (Short answer: Yes.)
- Does the Best Interest Contract (BIC) exemption apply to rollovers?
- Would I really have to post my fees on a public website to qualify for the Best Interest Contract (BIC) exemption?
- How are robo-advisors affected?
- What happened to the seller's exemption?
One reader addition also bears mentioning: “How about recognizing that without the advisor's involvement, people will NOT save enough no matter how low the fees?”
Thanks to everyone who participated in our NAPA Net reader poll!
Note: Many of the above questions (and more) were addressed in this week’s NAPA Net webcast — stay tuned to NAPA Net in the weeks ahead as we continue to flesh out the implications of this proposal, and the NAPA GAC team works to help improve it. This will also be a focus of the NAPA DC Fly-In, July 21-22. Find out more at http://napadcflyin.org/.