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Why brokers from Nationwide, LPL, Merrill Lynch and others are giving RIAs a cut of their 401(k) action

RIAs and brokers alike are wary of the fox-in-hen-house effect but DOL is creating strange bedfellows

Author Lisa Shidler May 29, 2012 at 3:46 PM
1 Comment
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Jason Roberts: The broker wants to make sure the advisor isn't taking the clients to lunch.

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RIA Compliance



May 29, 2012 — 8:05 PM

Good article, but note that non-fiduciary advisors who outsource fiduciary services to leading 3rd party firms can cause headaches for their competitors, not for themselves. These services were designed and positioned to enhance the advisor’s value proposition while enabling advisors and sponsors to offload some risk. Contracts may vary, but these advisors and their sponsor clients are generally indemnified with respect to 3rd party lawsuits regarding fund selection and monitoring. Driven initially by small retirement plan providers and now the BD community, the trend towards outsourced fiduciary services is alive, well and will continue to grow. Small RIAs may also start to use these outsourced services. In addition to the vendor’s financial substance, becoming a fiduciary to a small plan is a risky business. When the outsourced 3rd party fiduciary services are teamed with the major players, i.e., Mesirow, Morningstar and Wilshire, advisors without these services, including small RIAs, could be at a competitive disadvantage. There are some very skilled RIAs serving the retirement plans market, but as market becomes more complicated, very few firms are fully capable of providing high level services. Small RIAs are unlikely to capture much of this outsourced business because they cannot compete with the financial substance, risk management committees, insurance coverage and organizational depth of the leading providers mentioned above. Unlike small traditional RIAs, these providers do not compete with non-fiduciary advisors. In addition to limited insurance coverage, small RIAs offering these services could also compromise their own insurance coverage.

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Mentioned in this article:

LPL Financial
RIA-Friendly Broker-Dealer, RIA Welcoming Breakaways, Advisory Firm
Top Executive: Dan Arnold

SageView Advisory Group, LLC
401k Plan Consultant, Advisory Firm
Top Executive: Randy Long

Pension Resource Institute, LLC
Compliance Expert
Top Executive: Jason C. Roberts

Retirement Law Group, PC

Top Executive: Jason C. Roberts

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