Guide to Applying the Fiduciary Duty to Rollovers

Millions of 401(k) rollovers occur every year, resulting in the transfer of over $1 trillion in assets to IRAs or new employer-sponsored plans. Rolling over a 401(k) to an IRA is a significant financial decision that 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. A CFP® professional should encourage individuals who are considering a rollover to obtain financial advice before making that important decision.

The Guide to Applying the Fiduciary Duty to Rollovers can help CFP® professionals provide financial advice on whether to roll over assets from an employer plan while fulfilling their fiduciary obligations and adhering to CFP Board’s Code of Ethics and Standards of Conduct. It points out that financial advice to roll over assets into an IRA raises several Material Conflicts of Interest that a CFP® professional must disclose and manage. The guide also applies to a rollover recommendation the 7-step process for complying with the Duty of Care when providing Financial Advice, which a CFP® professional may follow to make a recommendation that’s in the best interests of the Client.

Among other things, 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 10 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.

Download the Guide

Also inside the guide: Detailed checklists with examples of what should be considered at each step of the Duty of Care process