Your financial best interest must come first. It’s now the law


It is about time! 

On June 30, firms must now comply with Reg BI (Regulation Best Interest). So, what does that mean to you?  It means stockbrokers better not take advantage of their clients anymore.

For instance, the minute you now walk into a stockbroker’s office for a recommendation, they must provide you with the following:

No. 1 – Customer Relationship Summary: The documents outline the services, fees, cost, conflicts of interest and a standard of conduct which you must receive.

No. 2 – Regulation Best Interest Disclosure: This document summarizes the scope and terms of any applicable account agreement(s) between you and the investment advisor or the broker dealer. It’s eight pages long so you had better cozy up in your favorite chair before taking this one on.

What is important for you to know is there is now a law in effect which protects you from bad advice, such as not providing the cost of the investments and not putting your best interest first.  Hooray!!

Factors considered in determining whether a recommendation has taken place include whether the communication “reasonably could be viewed as a call to action.”  A rollover, which is referenced 78 times through the regulation, is a call to action.

The recommendations of rollovers and withdrawals from retirement accounts is one of the rule’s “most significant enhancements over the status quo,” said Jay Clayton, Securities and Exchange Commission chairman. And these recommendations “should be handled with care.”

Coupled with the highest unemployment rate in U.S. history due to COVID-19, now more than ever it is imperative to understand all options available when rolling over funds from an employer plan to an IRA. While each situation is unique, there are universal considerations advisors must keep in mind when helping clients faced with these important decisions.

Plan advantages: Losing or changing jobs can be stressful and overwhelming. It may be tempting for some people to ignore their retirement savings and leave those dollars in a former employer’s plan. This is not a thoughtful strategy. Funds should only remain in an employer plan only if there are compelling reasons to do so.

Federal creditor protection: Generally, company plan assets under ERISA receive federal creditor protection, outside of bankruptcy.  On the other hand, state law is the only protection offered to IRAs. Since state IRA protection varies, it’s important to know what your state offers.

Still working exception: Another reason to leave money in a plan is the still working exception.  If an individual is subject to required minimum distributions and believes his or her job will be restored after the pandemic, he/she might want to leave the money in the company plan.

The still working exemption allows the person to delay taking required minimum distributions until they officially retire, delaying additional income tax on those distributions until retirement.

Age 50/55 exceptions: When a plan participant is age 55 or older in the year he leaves his job, he can take withdrawals from that employer plan. The distributions will be subject to tax, but there is no 10% penalty. If he rolls the funds to an IRA, any withdrawals before 59 1/2 will be subject to the 10% early distribution penalty unless an exception applies, or he leaves the company.

There is an age 50 withdrawal exception for federal, state and local public safety employees.

This includes defined contribution and defined benefit plans including those employed in law enforcement, firefighters, EMTs, customs officials, border control officers, air traffic controllers, Capital police, Supreme Court police and diplomatic security special agents of the Department of State.

IRA rollover advantages: There are definitive advantages of rolling money into an IRA vs leaving it in an employer plan, such as:

Estate planning: IRA’s can be easier to coordinate with an estate plan. Some company plans force you to make your wife the beneficiary unless she signs a waiver, whereas IRAs allow you to name as many beneficiaries as you wish without a signed waiver from the spouse. This also allows for quicker changes without tons of administrative hurdles.

Investment options: IRA owners have more investment options as opposed to a company plans who will limit your options.

No withdrawal restriction: Some company plans dictate how much and when you can withdraw money. IRAs carry no such restrictions other than a penalty for withdrawal prior to age 59 1/2.

I hope this is helpful to you or maybe someone you love.

Frederic “Ric” Schilling is a Florida native, born in Jacksonville, Fl. Ric is President and founder of Senior Guardians of America, a local North Florida firm specializing in tax reduction, long term illness planning, asset protection, probate avoidance and life income planning. Ric is a National Speaker and Advocate on Senior Issues and has been featured by the Florida Times Union and WJXT, TV-4 in Jacksonville as an authority on Estate Planning and Retirement Issues. Senior Guardians has an A+ rating with the Better Business Bureau and is a member in excellent standing with the National Ethics Association. Ric Schilling is a Certified Financial Fiduciary (CFF). You may contact Ric at 904-371-3302 or 888-891-3381. Please visit:

This article is not intended to give tax or legal advice. Securities offered through Center Street Securities, Inc. (CSS), a registered Broker-Dealer & member FINRA & SIPC. Investment Advisory Services offered through Center Street Advisors, Inc. (CSA), a SEC Registered Investment Advisor. Schilling and Associates (d/b/a Senior Guardians of America) and CSA are independent of CSS.


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