The United States Department of Labor has indicated that a large percentage of assets in Individual Retirement Accounts in the United States are derived from rollovers of assets and monies from 401(k) and other employer-sponsored retirement plans. In addition to the 5.7 trillion dollars in IRA accounts, the United States Labor Department statistics indicate that another 3.8 trillion dollars was held in 401(k) at the end of June 2013.
What most investors don’t realize is that once they rollover assets from an employer-sponsored ERISA-qualified plan into a separate IRA/IRA Rollover account is that there may well be a lesser standard of fiduciary diligence and fiduciary responsibility, which might serve to expose individual investors to considerable, enhanced risk.
Current regulatory provisions afford financial advisors a one-time basis grace period to avoid the fiduciary requirement at the time of the rollover of monies from a 401(k) plan into an IRA Rollover account. The currently-pending Retail Investor Protection Act, which has passed the House but not the Senate, might make even make it easier for financial advisors, their firms and mutual fund companies to steer investors into investments which would afford these firms and their advisors revenue-sharing opportunities for investments.
Further, firms might incentify their financial advisors to steer customers into the purchase of the firm’s own sponsored products, which likewise carry higher sales commission and ongoing annual fees. The fiduciary-related laws and provisions of the securities industry are generally more flexible in the definition of a fiduciary under ERISA, the federal statute which more strictly governs certain 401(k) plans, as opposed to Rollover IRA accounts. In many aspects, the fiduciary standard expected of investment advisors is less stringent when dealing with IRA accounts as opposed to ERISA-sponsored plans, including 401(k)’s.
We offer a free initial consultation to investors who feel they have been victimized in their IRA and 401(k) plans.
The Law Offices of Timothy J. O’Connor practices securities law in the Tri-City Capital District of Albany, Schenectady and Troy. We also represent victimized investors throughout the rest of New York State, including Buffalo, Binghamton, Rochester, Syracuse, Watertown, Utica, Kingston, Poughkeepsie, New York City/Manhattan, Long Island, and everywhere in between, as well as in the surrounding states of Massachusetts, Vermont, New Hampshire, Connecticut, and New Jersey.