During a recent radio address, President Bush said he supported the Retirement Security Advice Act, H.R. 2269, which recently passed the House. The act would allow financial institutions to provide personalized investment advice to plan participants and beneficiaries in ERISA plans. It's true the Labor Department late last year approved a plan allowing brokerage firms to dispense investment advice — if that advice was generated by a third-party expert — that is to say, not the broker or his firm, but someone else. Except for Merrill Lynch (which teamed up with Ibbotson) and perhaps a couple of others, most brokerages and sponsors are playing it safe, keeping brokers and financial advisors to basic educational issues on, say, how a bond fund works, instead of crafting personalized retirement plans.
Bush called the measure to change ERISA “common sense.” But not everyone is completely behind the idea. The Financial Planning Association, for one, doesn't like the exemption for bank and insurance agents. The FPA argues they're not qualified to offer investment advice (no Series 7 or Series 65). That may be, but there is a more important principle at stake. Employees need competent advice to make the right decisions about their retirement planning. Some 40 million Americans have money in 401(k)s. If they are smart enough to take responsibility for their financial futures, they are smart enough to distinguish smart advice from not-so-smart advice. It seems silly that ERISA inhibits them from getting any meaningful personal advice.
Speaking of good retirement planning advice, it's clear that many clients have not had any or didn't pay much attention to what they got. For more on what advisors are doing to help, see our special report beginning on page 30.
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On the Cover
Thanks to my friend and coverboy Svend Hansen Jr., who, once he does retire, may have a new career as a model.
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