In an effort to help people make the most of their retirement funds, Kentucky-based Unified Trust has come up with a rollover solution that assists workers with moving their 401(k) plans into IRAs when they leave their current employer, are terminated from their job or reach retirement age.

The firm’s Managed Rollover Solution determines what each person’s financial goals are and at what age they hope to retire; their 401(k) funds are then funneled into an IRA that matches those objectives.

“It’s very much focused on how much money you need to retire, replacing your income today, if you are on track or not,” says Kevin Avent, Unified Trust’s managing director of wealth management. “If you are not, it knows the changes you need to make to stay on track.”

The plan puts people into a diversified portfolio and constantly tracks how those investments are doing. Unified Trust makes sure people aren’t taking on too much risk or trying to keep up with the markets.

Many people who try to figure out what to do with their money after they leave a company or retire get sucked into retirement options that may not be in their best interest, Avent says. Those plans might have high fees, for example, or may not be the best investments for the person’s age or retirement goals.

“Unfortunately, the rollover market is ripe for some good sales folks who can sell products that may not be in the best interest of the participant,” he says.

What can employers do to help keep their former employees on track for retirement? They need to “care about their employees and offer education,” Avent says. He recommends hiring a fiduciary to work with plan participants and let them know what their options are.

Responsibility vs. expert advice

One of the myths of the retirement industry is that plan sponsors know everything about what is best for their employees when it comes to their retirement plan. The truth is that many plan sponsors aren’t very educated on the topic, Avent says. They have other responsibilities that take precedence over worrying about benefits.

“It’s really an industry problem. You need good guys in the industry to step up and promote that; promote the need for unbiased advice and the need for plan sponsors to provide that for employees and plan participants so they can make educated choices when life events do happen,” Avent says, noting that he thinks the DOL's fiduciary rule needs improvement and should apply to all investment advice, not just workplace plans and IRAs.

The fiduciary regulations will make it harder for advisers to work in the plan rollover market. Under the rule, recommending a rollover is a prohibited transaction because the adviser recommending the rollover might benefit from the transaction. If someone wants to make these types of recommendations through Dec. 31, they need to follow impartial conduct standards that require that advisers follow a “best interest standard of care, receive no more than reasonable compensation, and make no materially misleading statements,” according to Fred Reish, a partner in Drinker Biddle & Reath LLP’s Employee Benefits & Executive Compensation Practice Group, chair of the Financial Services ERISA Team and a member of the Retirement Income Team.

Some brokerage companies say they won’t allow their brokers to give 401(k) rollover recommendations because they don’t want the hassle of complying with the fiduciary rule.
The rule bothers Avent because there are so many more pages of regulation dealing with how to get around the regulation than there are informing advisers how they should treat clients and act in their best interest.

“I think it is going to muddy the waters a little bit. It will cause people who still can’t act in the best interest of their clients to call themselves a fiduciary. To me that is not a good thing. It is a scary thing,” he says.

He adds, “At least folks who are not acting in their best interest now can’t call themselves a fiduciary. They can’t hide under that. They are operating under a suitability standard, which is a lower standard.”

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