NO recommendations in IRAs?
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OK, I spoke wth my FSD. Here are his exact words (more or less):
"It's not anything new. The law has been around since ERISA was enacted in the 70's. We were just throwing it out there to remind people of the law. But nothing is really changing. The IRS is coming down harder on this topic, so we wanted to make sure people understood it. The bottom line is to make sure you are not forcing your clients into certain invstments, but at least showing them that there are different alternatives for their situation, based on their needs, and that the decision is ultimately up to the client what they choose. We need to make sure clients understand that they were not forced into just one investment option for their IRA or 401K. Most FA's I have spoken with have siad that this is really not a big deal - most FA's talk to their clients about different options, and then tell the client what their recommendation would be." Now, obviously, each FSD is an individual, and each interpret things and administer thigns differently. But based on my conversation, it doesn't sound like I need to change a single thing with how I currently do business.[quote=B24]OK, I spoke wth my FSD. Here are his exact words (more or less):
"It's not anything new. The law has been around since ERISA was enacted in the 70's. We were just throwing it out there to remind people of the law. But nothing is really changing. The IRS is coming down harder on this topic, so we wanted to make sure people understood it. The bottom line is to make sure you are not forcing your clients into certain invstments, but at least showing them that there are different alternatives for their situation, based on their needs, and that the decision is ultimately up to the client what they choose. We need to make sure clients understand that they were not forced into just one investment option for their IRA or 401K. Most FA's I have spoken with have siad that this is really not a big deal - most FA's talk to their clients about different options, and then tell the client what their recommendation would be." Now, obviously, each FSD is an individual, and each interpret things and administer thigns differently. But based on my conversation, it doesn't sound like I need to change a single thing with how I currently do business.[/quote] So your FSD said that we can continue to talk to our clients about different options and then tell the client what our recommendation would be? My FSD said that we are explicitly precluded from making any recommendations in IRAs going forward.Bottom line, it sounds like typical compliance advice inconsistencies. One compliance person will give one interpretation that sounds reasonable and another compliance person with “small member syndrome” will make a huge mountain of the same issue. What Borker says sounds ridiculous. What B24 says sounds reasonable. I have no doubt that both are telling the truth. That’s just how maddeningly inconsistent compliance advice is. In the past 3.5 years of independence, I’ve had at least two issues that I can think of where two different compliance people gave me two completely different answers to the exact same question. That’s just another example about why reps hate the business prevention department.
[quote=Borker Boy][quote=B24]OK, I spoke wth my FSD. Here are his exact words (more or less):
"It's not anything new. The law has been around since ERISA was enacted in the 70's. We were just throwing it out there to remind people of the law. But nothing is really changing. The IRS is coming down harder on this topic, so we wanted to make sure people understood it. The bottom line is to make sure you are not forcing your clients into certain invstments, but at least showing them that there are different alternatives for their situation, based on their needs, and that the decision is ultimately up to the client what they choose. We need to make sure clients understand that they were not forced into just one investment option for their IRA or 401K. Most FA's I have spoken with have siad that this is really not a big deal - most FA's talk to their clients about different options, and then tell the client what their recommendation would be." Now, obviously, each FSD is an individual, and each interpret things and administer thigns differently. But based on my conversation, it doesn't sound like I need to change a single thing with how I currently do business.[/quote] So your FSD said that we can continue to talk to our clients about different options and then tell the client what our recommendation would be? My FSD said that we are explicitly precluded from making any recommendations in IRAs going forward. [/quote] Yes, that's what he said. We can give clients options (as most of us do), and tell them which option we would recommend, but that it is ultimately up to them. The way I normally handle most clients is (after getting to know their situation) recommend different portfolios based on how much risk they are willing to take. Here's the potential upside and downside. We can even protect and insure some of the income (i.e. annuities). I will tell them "knowing what I know about you and your situation, this is what I would suggest, but if you are more comfortable doing this or that, then we can do it that way." Borker, my guess is that most people are doing something along these lines, not just cramming one portfolio down people's throats. My opinion is that your guy is covering his own tracks so that if he runs into problems with one of his FA's, he can say "well this is what I told them....". It was funny, my FSD seemed very un-moved by me asking the question. He seemed to be implying that this was more of a cover-your-bases memo than anything. Like Spiff said, if it was some big deal, we would have had all kinds of bells and whistles going off. I didn't hear a single thing about it until you brought it up. He also told me that as far as he knows, there is no plans for any further communications, and no need for written documentation from clients.Why would you offer the client a choice? By the time you are recommending a particular investment, you should know that client's financial situation (and their financial goals) inside and out. Thus there should not be two "good" choices, but ONE appropriate choice. Why would I let a client pick a substandard choice?
I don't want a doctor to offer me two types of pills, and then ask me to make the choice. I want him to evaluate me and prescribe me the best possible choice.I don’t think it’s a matter of giving them a substandard option. It is a matter of giving them two different cars in which to drive. Whichever one they choose is up to them. I believe, unlike with religion, that there are many paths to the same goal. It could be as simple as telling the client that I believe they should be investing in Hartford Funds. Now, they can choose to do that inside a VA with some guarantees or just in funds without the guarantees but with lower expenses. It’s up to them.
I agree that Borker's FSD is either playing CYA or is one of those that just likes to make our lives as miserable as possible. I think I'd call another one and find out if you get the same story. Or shoot them a suggbox wire and see if they respond. Actually, I like it when my doctor tells me about different medications. For instance, I used to take two different medications, but the last time I was in for a checkup he said they now make one that will cover both symptoms. He said he was happy with my results using what I was using, but it might be a little easier just to take the one. I appreciate that I have options, but it's up to me whether I want to take them or not.[quote=iceco1d][quote=now_indy]
Why would you offer the client a choice? By the time you are recommending a particular investment, you should know that client's financial situation (and their financial goals) inside and out. Thus there should not be two "good" choices, but ONE appropriate choice. Why would I let a client pick a substandard choice?
I don't want a doctor to offer me two types of pills, and then ask me to make the choice. I want him to evaluate me and prescribe me the best possible choice. [/quote] +1 x 1,000[/quote] If you look at it from the FINRA side of things, even if you know your clients better than anyone else and you've done your homework, I think you might be setting yourself up for some big arbitration hearings if you only give them one investment option. Ice, if your client someday files a complaint against you with FINRA that says you didn't work in their best interest because you only told them to invest in ETFs or indexes, but their neighbor invested in a VA, what defense do you have? Or what if you run a C share biz and the client wants to take you to arbitration because he thinks he's paying you too much. I promise you (been there) that FINRA will ask you why you did AND didn't offer this or that. You are absolutely right on KYC. You should know them before you make recommendation. But you put yourself at a much greater risk when you only talk about one thing with a client.I thought Borker was full of crap…called FSD and she said that we can NEVER, NEVER, NEVER make recommendations to clients in ira’s…we can present 2 or more options when it comes to fund families, funds, bonds, stocks, stocks vs bonds etc… but if client asks what they should do, we have to inform them that we are unable to tell them what they should do…sounds like we are working for fidelity. Been with Jones for 10+ years and have been considering leaving anyway, guess this seals the deal…have a couple buddies that this will push over the edge as well
what pisses me off the most is that they've allowed this info to simply "trickle" out to advisors hoping to stagger the backlash that is coming their way....this is major....we can no longer advise clients in their qualified accounts with Jones[quote=anotherstuckdrone]I thought Borker was full of crap…called FSD and she said that we can NEVER, NEVER, NEVER make recommendations to clients in ira’s…we can present 2 or more options when it comes to fund families, funds, bonds, stocks, stocks vs bonds etc… but if client asks what they should do, we have to inform them that we are unable to tell them what they should do…sounds like we are working for fidelity. Been with Jones for 10+ years and have been considering leaving anyway, guess this seals the deal…have a couple buddies that this will push over the edge as well
what pisses me off the most is that they've allowed this info to simply "trickle" out to advisors hoping to stagger the backlash that is coming their way....this is major....we can no longer advise clients in their qualified accounts with Jones[/quote] You're lying.......Spears.If this really were a big deal we wouldn’t all be wondering whether it is a big deal or not. We would know, with absolute certaintly, that we are to “NEVER, NEVER, NEVER make recommendations to clients in ira’s.”
And if this really is a big deal, leaving Jones for LPL or RJ won't solve the problem. Jones is reacting to an ERISA rule that has been in existence for years. And they aren't really reacting all that much, at least not so much that we should have spent this much time on it. LPL or RJ or the bank, wherever you think you might jump to, aren't excluded from having to follow ERISA rules. So, if you really are a 10 year Jones vet and this is the thing that drives you indy, good luck with your new endeavor.[quote=Spaceman Spiff]If this really were a big deal we wouldn’t all be wondering whether it is a big deal or not. We would know, with absolute certaintly, that we are to “NEVER, NEVER, NEVER make recommendations to clients in ira’s.”
And if this really is a big deal, leaving Jones for LPL or RJ won't solve the problem. Jones is reacting to an ERISA rule that has been in existence for years. And they aren't really reacting all that much, at least not so much that we should have spent this much time on it. LPL or RJ or the bank, wherever you think you might jump to, aren't excluded from having to follow ERISA rules. So, if you really are a 10 year Jones vet and this is the thing that drives you indy, good luck with your new endeavor. [/quote]Call me a cynic, but I think they're putting it in your procedures so they can leave you out to dry if/when the occasional arbitration comes up...other firms are probably doing this too and we just don't know it yet.
Just put all your clients in “Putnam Built for Balance” portfolio, Edwards and Jones loves it.
[quote=HymanRoth] [quote=Spaceman Spiff]If this really were a big deal we wouldn’t all be wondering whether it is a big deal or not. We would know, with absolute certaintly, that we are to “NEVER, NEVER, NEVER make recommendations to clients in ira’s.”
And if this really is a big deal, leaving Jones for LPL or RJ won't solve the problem. Jones is reacting to an ERISA rule that has been in existence for years. And they aren't really reacting all that much, at least not so much that we should have spent this much time on it. LPL or RJ or the bank, wherever you think you might jump to, aren't excluded from having to follow ERISA rules. So, if you really are a 10 year Jones vet and this is the thing that drives you indy, good luck with your new endeavor. [/quote]Call me a cynic, but I think they're putting it in your procedures so they can leave you out to dry if/when the occasional arbitration comes up...other firms are probably doing this too and we just don't know it yet.
[/quote] You may be correct. My guess would be an auditor read the compliance manual and found that it wasn't spelled out well enough, so as a result they had to put it in there and make a show of letting us know it's there now. Satisfy the regulators and play a little CYA at the same time. But since there has been no other official communication from the home office about it, I'm assuming it's not as big of an issue as Borker and that last guy are making it out to be.
They do? Is that why we kicked Putnam out of our program and have a SELL recommendation on their funds?
Sorry, Jones dropped Putnam from the preferred status a couple of years ago and stopped following them altogether last year. If I remember correctly, those portfolios didn't do all that bad from a performance standpoint.Just put all your clients in “Putnam Built for Balance” portfolio, Edwards and Jones loves it.
Sorry, Jones dropped Putnam from the preferred status a couple of years ago and stopped following them altogether last year. If I remember correctly, those portfolios didn't do all that bad from a performance standpoint. [/quote] Are you freakin serious? Not all that bad? Compared to what...the other six "preferred" fund families?[quote=outofjail]Just put all your clients in “Putnam Built for Balance” portfolio, Edwards and Jones loves it.
Now all you Jonies can go back and sell the Putnam and put your client's in another "preferred" family for 5.75%...great for the client!!!!They do? Is that why we kicked Putnam out of our program and have a SELL recommendation on their funds?
Sorry, Jones dropped Putnam from the preferred status a couple of years ago and stopped following them altogether last year. If I remember correctly, those portfolios didn't do all that bad from a performance standpoint. [/quote] Are you freakin serious? Not all that bad? Compared to what...the other six "preferred" fund families?[/quote] My apologies. I haven't looked at or sold any Putnam funds for a while. Even when they were still a part of the preferred list. But, I do remember looking at the built for balance portfolio a few years ago and thinking that it wasn't horrible. It wasn't good enough for me to use, but it wasn't the worst I'd seen.[quote=Spaceman Spiff][quote=outofjail]Just put all your clients in “Putnam Built for Balance” portfolio, Edwards and Jones loves it.