Dive Brief:
- Employers offering retirement plan benefits, such as 401(k)s, should continue to pay attention to the trend that investment brokers, looking to meet new federal rules governing their fiduciary responsibility with employees saving for retirement, may begin raising fees and reducing investment choices to reduce risk, according to the Wall Street Journal.
- The Journal reported that the brokerage firm Edward Jones, knowing that the federal government's new fiduciary rule that will require brokers to put investor interests first, announced last week that it would stop offering mutual funds and other options in commission-based retirement accounts.
- It's the first "brand" name broker to make that admission, the Journal reports, and if the trend continues as expected, employees saving for retirement may have to adjust their strategies under the federal government’s new rule, which begins in April.
Dive Insight:
According to the Journal, analysts and researchers thought the Edward Jones’s decision might be premature because most affected investment firms are expecting more information from the Labor Dept., which drafted the new fiduciary rule.
However, Michael Wong, a Morningstar analyst, told the Journal that it could be a smart move for Edward Jones. “As long as you have any large disparity in how those mutual funds are structured or how the payments are done, they’ll always have that looming risk of a client coming back to say, ‘You chose this high-fee fund inappropriately,’” Wong told the Journal.
For employers offering affected retirement benefit plans, this development is worth continued monitoring. In addition, the rule also could also have a negative impact on health savings accounts (HSA), according to some experts who offer those types of accounts.