IRA

Survey Says...

April 27, 2017

During the early part of 2017, Pacific Life conducted a survey of 736 financial professionals to get their thoughts on the potential impact of the DOL Fiduciary Rule on their businesses.

The survey results provide insights about advisor preparedness, impact on their IRA rollover practices, and guaranteed lifetime income for their clients

For example, when we asked financial professionals how they think the DOL rule will impact IRA rollovers, 74% said they thought it would have a significant impact. 

Since the completion of the survey, we received confirmation that the DOL rule and the exemptions will be delayed for 60 days, making the new applicability date June 9.

The reason for the 60-day extension is to give the DOL more time to complete the examination mandated by the president and to make a preliminary determination whether significant changes are necessary to the rule and exemptions.

However, regardless of what the outcome is with the DOL Fiduciary Rule, acting in a client’s best interest has always been crucial to building sound advisor-client relationships, especially when recommending IRA rollovers.

Pacific Life provides insightful strategies, tips, and tools to help you satisfy best-interest standards, and we are pleased to share a summary of the survey results below.
 

Advisor Preparedness

More than a quarter (27%) of financial professionals do not feel confident that they will be fully prepared for the DOL Fiduciary Rule when it goes into effect.

More than forty percent (43%) of financial professionals say they have an average to no understanding of a general overview of the DOL Fiduciary Rule.

Just less than a quarter (23%) of financial professionals rarely (or never) document client conversations when making a recommendation to roll assets out of employer-sponsored plans, while 28% said that their knowledge of IRA rollover recommendations and best-interest standards are well understood.

Only 18% of financial professionals felt that their knowledge of the Best Interest Contract (BIC) Exemption is well understood.


Impact of Rule – IRA Rollovers

Just less than three quarters (74%) of financial professionals at least somewhat agree that the DOL rule will have a significant impact on their practices with regard to recommending IRA rollovers; 33% strongly agree there would be a significant impact.

When asked about the transition from a suitability standard to a fiduciary standard, 85% of financial professionals noted they have at least a good understanding.

Just over forty percent (42%) of financial professionals surveyed always recommend (if appropriate) that a client keep his or her assets in an employer-sponsored plan rather than rolling assets to an IRA.

For financial professionals responding that 81–100% of their clients have assets in an employer-sponsored retirement plan, only 29% of this group always discuss strategies that include guaranteed lifetime income when making a recommendation to roll assets out of the plan.

Planning Opportunity: A financial professional acting in a client’s best interest should discuss lifetime income (e.g., annuity lifetime income options) because pensions are becoming less common and other sources of guaranteed income (e.g., Social Security) are currently in flux.


Guaranteed Lifetime Income

There were three areas that financial professionals thought they are somewhat to not well versed in.

1.     Strategies for creating guaranteed lifetime income (31%)

2.     Strategies for using annuitization (42%)

3.     Qualified longevity annuity contracts (QLACs) (62%)

For financial professionals responding that 41–60% of their business is made up of IRA assets, 60% of this group indicated the need for additional training or education on QLACs.

Of the financial professionals who responded that they never discuss strategies that include guaranteed lifetime income when making recommendations to roll assets out of an employer-sponsored plan, roughly 65% indicated a need for additional training or education regarding strategies for creating guaranteed lifetime income.

Planning Opportunity: Financial professionals have a need for additional training/education on annuitization and QLAC strategies.

Regardless of the outcome of the DOL rule, Pacific Life has provided a new series of educational resources for financial professionals, including a helpful IRA Rollovers Resource Guide that contains information and best-practice ideas to successfully navigate the changes to consider when having rollover discussions.

The guide also contains an IRA Rollover Checklist that can help advisors walk clients through the comprehensive evaluation and documentation needed when evaluating their options. We hope you find this information valuable, and we look forward to helping you Thrive with Pacific Life.


You can also contact the Retirement Strategies Group directly at (800) 722-2333, ext. 3939, or send an e-mail to RSG@PacificLife.com

Picture of Gary Pence

Gary is the Home Office Manager of the Retirement Strategies Group in the Retirement Solutions Division at Pacific Life. With over 24 years of experience in the financial industry and for the past 15 years, he has worked with the Retirement Strategies Group dedicated to helping advisors address complex tax, estate, charitable, and retirement planning issues for their clients and their tax and legal professionals.

Pacific Life, its distributors, and respective representatives do not provide tax, accounting, or legal advice. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor or attorney.

Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products.

Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. 

Variable insurance products are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company (Newport Beach, CA) and an affiliate of Pacific Life & Annuity Company. Variable and fixed annuity products are available through licensed third parties.

No bank guarantee • Not a deposit • Not FDIC/NCUA insured • May lose value • Not insured by any federal government agency