Hello and welcome to this week's edition of 401k Real Talk. This is WealthManagement.com's Fred Barstein Omnichannel RPA Contributing Editor & CEO at TRAU, TPSU & 401kTV – I Review everything from the past week's stories and pick out the most relevant and interesting ones, providing an open and honest discussion that you wouldn't get anyway. So let's get real!
As Yankee great Yogi Berra once said, it's de ja vu again as a Texas court where regulations go to die issued a statement in the DOL's latest edition of their fiduciary rule. In issuing the stay, the U.S. District Court for the Northern District of Texas wrote that it was virtually certain that the plaintiffs would succeed on the merits and suffer irreparable harm if the rule went into effect. They also noted that there was no need to push for the rule to take effect on September 23st.
Did the overturning of the Chevron case, which gave agency distinctions over courts interpreting ambiguous laws, have an impact? Will a new administration reverse the DOL's stance as it did in 2018 when the previous fiduciary rule was released? And will it take an act of Congress to implement this rule?
At issue is whether advisers who recommend rollovers and insurance agents who sell annuities will be held to a fiduciary standard. Although DC participants expect advisers to act in their best interest, the fundamental question is whether the DOL should impose that requirement.
There is an increase soil blowing from DC participants to get advice at work, according to a recent Schwab survey. Over 60% want or need advice, up from 55% in 2023 with 39% getting that advice through their 40K plan, another 35% from a financial advisor, 27% from a friend or family member, and 25% % from their provider.
Surprisingly, 61% were satisfied with getting advice through ChatGPT, up from 49% although people preferred it by 3 to 1.
With uncertainty surrounding Social Security, 43% expect to receive income from their 401k plan, a hopeful sign for the nascent industry.
Now the issue is who can provide advice on the scale that may be affected by the fate of the DOL's fiduciary rule.
After a North Texas district court found that the DOL's ESG rule, which allows plans to consider the economic effects of ESG funds if they equally serve the plan's financial interests, did not violate ERISA, 5th The U.S. Circuit Court of Appeals vacated the decision and remanded it in light of the U.S. Supreme Court's Loper decision to dismiss their Chevron case. In the meantime, the rule will remain in effect.
All of this raises the question of whether the courts or the DOL should be the primary decision makers regarding pension-related rules with the answer now clearly in favor of the courts, most of which, until a decade ago, could not even write ERISA.
The defined contribution industry is rife with the potential for advisers and providers to exploit the convergence of wealth, retirement and workplace benefits. And while there are some skeptics, there are also very few counselors and providers capable of fully participating.
So is convergence a fad that will only benefit a select group, and not really, as we've seen with retirement income, or will it determine the winners and losers in the DC world?
Read my latest WealthManagement.com column outlining the pros and cons and make your decision.
So those were the top stories from last week. I listed a few others that I thought were worth reading:
Please let me know if I missed anything or if you would like to comment. Otherwise, I look forward to talking with you next week on 401k Real Talk.