“Your Retirement is Set!” Really?
April 18, 2016
Recently I saw a very annoying TV commercial from a major insurance company which apparently is “on my side”. In fact I could not take in the ridiculous claim that was being made. The ad was fast paced and confident, and featured a suited man equipped with a laptop. He quickly turned the laptop to show the screen to a couple of docile clients, and joyfully exclaimed “OK, your retirement is set!” Apparently with this person on your side, a retirement plan can be resolved in a snap. How ridiculous!
As a family office we do many things for our clients, but our core service is based on financial planning and managing assets. In all this work I can attest that none of our professionals has ever told a client that “your retirement is set”.
Retirement planning is not a quick exercise, and it is certainly not something that can be checked off a list like paying a monthly utility bill. Planning for retirement is an organic, living issue. Our lives and circumstances change, as does the external world. Who’s spinning laptop can possibly set a hard and accurate prediction for retirement over a 30 plus year span? Beware of anyone who claims that such complex and evolving issue can be “set”.
On a related issue, you might have seen news this week of a forthcoming regulatory change which is meant to be good for retirees, but not necessarily for brokers. The proposed regulations affect those who sell investment products to investors with retirement assets such as 401(k) plans and IRAs. The centerpiece of these new rules is the requirement for retirement advisers to act in the best interests of their clients.
For a registered investment advisor, such as our firm, the principle of acting in our clients’ best interest is nothing new. That approach is in our blood. Moreover, it is a legal obligation under the SEC regulations that governs our work. It might surprise you to learn that this is not been the case for the brokers. To date the brokerage community has only been held to the standard of “suitability” defined to mean that the client has been informed of the inherent risks, and that they understand these risks. The commission, or the sales charge being paid to the broker is not taken into account when determining suitability, even if the charge is self serving and egregious.
As a consequence, the proposed new regulations for clients and their retirement assets will create a whole new world for brokers. Not surprisingly, the brokerage community has long fought the changes and the rules that emerged this week are watered-down versions of earlier proposals. Nevertheless, the legal world had just become a little brighter for holders of retirement assets.
Carl Gambrell
