The CFP Board said it has published a guide to help CFP® professionals provide advice on retirement rollovers while maintaining their ethical standards and putting their clients’ best interests first.
The Guide to Applying the Fiduciary Duty to Rollovers is part of an ongoing series of resources aimed at helping certified financial planners with their practices.
The guide assists CFP® professionals in providing financial advice on whether to roll over assets from an employer plan while fulfilling their fiduciary obligations and adhering to the CFP Board’s Code of Ethics and Standards of Conduct.
“For many Americans, a rollover involves life savings they have worked decades to build, and the consequences can last a lifetime,” said CFP Board CEO K. Dane Snowden. “With this much at stake, people deserve competent, ethical advice that puts their interests first. This new guide gives CFP® professionals practical direction for helping clients protect what they’ve earned.”
The board notes that millions of 401(k) rollovers occur every year, resulting in over $1 trillion in assets being transferred to IRAs or new employer-sponsored plans. These rollovers can offer broader investment choices and make it easier to administer and keep track of assets.
“But bad or conflicted advice can expose the client to unnecessary costs or significant tax penalties,” the board stated. “A CFP® professional should encourage individuals who are considering a rollover to obtain financial advice before making that important decision.”
The guide points out that a CFP® professional must disclose and manage several material conflicts of interest that are raised in providing advice to roll over assets into an IRA.
The guide also applies to a rollover recommendation the 7-step process for complying with the Duty of Care when providing financial advice. A CFP® professional may follow this process to act in the best interests of the client when providing financial advice about a rollover.
The guide:
- Provides examples of the qualitative and quantitative information about the client’s personal and financial circumstances that a CFP® professional should gather;
- Clarifies that financial advice about a rollover consists of several related, but distinct, recommendations;
- Identifies four potential alternative courses of action and ten features of the client’s current employer plan and each alternative that a CFP® professional should, if applicable, consider; and
- Describes eight characteristics of each alternative course of action that a CFP® professional might assess in developing a recommendation
Hyman Cotter PC represents advisors, brokers and other financial professional in all matters involving the CFP Board, including CFP Board investigations. Headquartered in Chicago, our securities attorneys represent clients nationwide. For more information relating to CFP Board investigations and discipline or other matters, contact Hyman Cotter at (833) 665-0784 or through our online contact form for a free consultation.
