Commentary: Recently, the U.S. Chamber of Commerce released a white paper study, Locked Out of Retirement, which received a lot of media coverage. The study outlined the supposed harm, as a result of the proposed Department of Labor fiduciary responsibility regulations, that will befall small business owners who currently offer IRA-based retirement plans to their employees.
If the objective of the study was to scare small business owners, clearly it succeeded. If there were any study objectives related to education, guidance and counsel, it failed. The study painted a picture of the retirement plan marketplace which is incomplete and incorrect. As a lobbying tool for the brokerage industry, this study will likely be cited often. As an educational piece to help small business owners understand the implications of the proposed regulations, it can be disregarded. Let me explain why.
The study outlines the additional costs brokerage firms believe they need to incur to become fiduciaries to small business retirement plans. It assumes that brokerage firms will be forced to pass on these additional compliance costs to their small business clients, or that they may (gasp!) exit the small business market altogether.
Small business owners, I have some news for you. Your existing brokerage firm partner in your retirement plan has not been a good friend. Aside from the sad fact that they aren't fiduciaries already, and have lobbied hard for years not to be, they appear arrogant enough to assume that you don't have other, better solutions available in the marketplace. You do.
Any Registered Investment Advisor will welcome the opportunity to work with you, your participants and your retirement plan with open arms. RIAs have historically been required to sign on as fiduciaries to their clients which is what the brokerage firms are fighting hard not to do. RIAs are not affected by the proposed fiduciary regulations since they have always acted as fiduciaries to their clients. You will find their costs to be market competitive and their services robust. If you hire a RIA, your retirement plan will experience an immediate boost in quality by having the RIA sign on to your plan as a fiduciary. Rather than viewing your business as a compliance headache, RIAs will value you and your participants as clients.
Not sure whom to believe? Evaluate for yourself the services you could receive from a RIA side-by-side with your existing plan. If you are interested in locating an RIA in your area, simply Google Registered Investment Advisor along with your city and state.
Robert C. Lawton, AIF, CRPS is President of Lawton Retirement Plan Consultants, LLC, an RIA firm helping retirement plan sponsors with their investment, fiduciary, employee education and compliance responsibilities. He may be contacted at email@example.com or 414.828.4015.
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