(New York)

Rollovers are obviously critical to almost all advisors, yet many don’t have seem to have gotten the memo: rollovers are changing significantly. The big change stems from the fact that Biden just let the new Trump era fiduciary rule go into effect, which was unexpected. According to the new rule, rollovers count as fiduciary advice. This is counterintuitive for many, as one leading industry lawyer, Brad Campbell from Faegre Drinker, commented “People have made the argument that rollovers cannot be fiduciary advice because it’s a one-time recommendation”. Here is the full analysis: “If you and the participant that you’re recommending rollover to, even though you advised them to do the rollover now, when you entered into that arrangement to give that advice, did both of you intend that you would meet again in the future to give more advice? To actually manage the assets or advise about managing the assets in the IRA? … If the answer is yes, we both intend to meet in the future, then DOL views it as an anticipated ongoing relationship. In other words, the beginning of an advice relationship that is fiduciary from the initial advice”.

FINSUM: This is pretty clear once you understand the logic, but on the surface it is a little hard to discern. Because no one expected this rule to actually go into effect since the election, many seem to be unprepared.