Client Service June 11, 2015

Adviser Relationships Can Mean Rollover Opportunities

Plan participants who regularly work with a financial adviser are likelier to have discussed the pros and cons of a rollover.
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Nearly one in three Americans works with a paid financial professional, according to a new consumer study by the LIMRA Secure Retirement Institute. Fifty percent of consumers reported working with their financial adviser for five or more years, and nearly one-third have maintained the relationship for 10 or more years.

Consumers’ high levels of confidence in the relationship is one finding of “Spotlight on Advisors: Consumer Perception, Assessment and Experience.”

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Fewer than half (43%) of the survey respondents who are defined contribution (DC) plan participants discussed the advantages and disadvantages of potential rollover actions with someone. However, the institute discovered that plan participants who regularly work with financial advisers are more likely to have discussed the advantages and disadvantages of potential rollover actions than those who do not work with a financial adviser (60% vs. 30%). 

Three in four participants who worked with an adviser to make the decision to roll the money into an individual retirement account (IRA) said they continue to work with this adviser. This implies that the rollover transaction is usually not a one-time interaction but instead takes place inside the context of a long-term relationship, the report contended.

Consumers assessed their financial adviser by responding to five statements surrounding regulatory standards of care, such as the fiduciary versus the suitability standard. They were asked whether the adviser:

  1. Always puts their interests first;
  2. Recommends products that are suitable for them;
  3. Gathered sufficient detailed information about their finances before offering advice or recommending products;
  4. Understands their entire financial situation; and
  5. Provides excellent value for the costs associated with his/her services.

For all five criteria, 9 in 10 consumers agreed with the statements, no matter the compensation model of the adviser (fee-based or commission).

“The high prevalence of longer-term relationships suggests that clients are satisfied with the services they are receiving,” said Matthew Drinkwater, assistant vice president of the LIMRA Secure Retirement Institute. “In turn, the financial professionals who have longstanding clients are more likely to have a deeper understanding of their clients’ needs and preferences.”

LIMRA surveyed 3,900 U.S. citizens who worked with a financial adviser. A chart showing some of the report’s findings is here.

Compliance June 11, 2015

Supreme Court Seeks Input About ERISA Lawsuit Venue

The U.S. Supreme Court has been asked to weigh in on whether a retirement plan may dictate the venue in which participant lawsuits are filed.
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The U.S. Supreme Court has asked the U.S. Solicitor General to weigh in on whether the top federal court should agree to hear a case regarding whether a clause in a retirement plan document restricting the venue of lawsuits filed against the plan is enforceable.

According to the high court’s docket sheet on the case, it has asked the U.S. Solicitor General to submit the government’s opinion about whether a plan participant’s choice of venue for filing a lawsuit under the venue provisions of the Employee Retirement Income Security Act (ERISA) can be rejected based on a restriction of venue provided for inside the plan documents.                     

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Last November, the 6th U.S. Circuit Court of Appeals found the venue selection clause in Aegon Companies Pension Plan is not in conflict with ERISA. The appellate court refused to give deference to a brief filed in the case by the Department of Labor (DOL), saying the agency’s interpretation was not made with the force of law. The 6th Circuit noted that the DOL’s interpretation has been expressed only once previously, in one other amicus brief filed in a circuit court, and the agency has not issued any additional guidance or regulation about ERISA’s venue selection provisions.

A district court had dismissed the case because it was not filed in the federal district court dictated by the plan document. The appellate court affirmed the dismissal.

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