3 Ways BDs are Responding to PTE 2020-02

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Michael Freeman


We are frequently asked "What are firms doing with PTE 2020-02? How are our BD peers handling 401k rollovers?"

We see Broker-Dealers falling into one of 3 different groups: 

  1. ROBUST TOOL:  Firms have a robust tool to support the financial professional with rollovers which do three things:

    1.  Gathers the plan data and expenses for the 401k plan

    2.  Provides the ability to create a rollover portfolio, including a weighted average expense

    3.  Document the comparison of the ERISA plan to the IRA and provide a justification for the rollover

  2. UNSOLICITED:  Firms have opted for a wait-and-see approach, classifying their rollovers as unsolicited, meaning no recommendations. These BDS certainly accept rollovers but only at the client's direction.

  3. MANUAL:  The last group of firms would be in the manual fillable PDF camp. Putting the responsibility on the financial professional to gather the 404(a)(5) documentation or make a reasonable effort to gather the appropriate documentation themselves.

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Each grouping carries a different level of risk and a different level of work to be done. In the past year, since firms have had time to consider their choices and been given directional feedback from regulators, we are already seeing more and more firms move to the "Robust Tool" camp. Expecting the financial professional to be able to figure this alone ("Manual" category) is not reasonable given everything else they have on their plate. An unsolicited route ("Unsolicited" category) may work for a short time, but a full-service Broker Dealer at its core is paid for advice. Expecting a no advice argument on the rollover will tend to be problematic.

The good news is that DDW has a PTE 2020-02 rollover tool that can easily be turned on and set up to meet your needs and current forms. We have partnered with a leading ERISA data firm to get the plan data and put it all together in very configurable output. We are known for creating technology with excellent usability that appeals to even the most hardened Advisors. If you haven't seen it yet, just ask, it just makes a lot of sense. 



MikeFor more information about the author DDW's products and services, contact Mike Freeman, President of DDW.

917.328.7498 | michael.freeman@duediligenceworks.com

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