Impact of the fiduciary rule on personal investment accounts

Wealthmanagement.us offers non-conflicted advisory services to the participants in non-profit organzation retirement plans.

The financial services industry is speculating that the newly issued ‘fiduciary rule’ issued by the Department of Labor will have wider implication than originally expected. The fiduciary rule, simply stated, is that the investment firm has a duty to manage the account in the client’s best interest. Previously the standard was simply that the firm could not do anything improper. Regulators believed that the impact was that fees on retirement plan participants were higher than otherwise would be the case. The financial services industry disputes that assumption.

Technically, the new fiduciary rule does not apply to regular personal, trust or taxable investment accounts. But we wonder whether investment companies wish to offer two levels of service to retail clients: using one set of disclosure documents and internal training for retirement accounts and another less stringent standard for all other accounts? We suspect not. The fiduciary standard rule may soon be the standard for all investment accounts.

I think the net effect is that more investors will utilize services that are disconnected from the investment firm. For example, a tax preparer might assist with the setup of a Simplified Employee Pension plan or an IRA account deposit transaction that goes into an existing index mutual fund. These transactions that generate little or no revenue for investment firms are of little interest and retail clients are already complaining about the lack of providers available to handle these transactions.

This past tax season I read complaints on social media from several tax preparers that they did not know who to turn to to handle these simple investment transactions. Accountants often fear running afoul of investment advisory regulations if they charge clients for these services. They may not be aware of the de minimis and other exceptions available under most states’ laws that would appear to apply to most of these situations.

Biography of Tony Novak, CPA, MBA, MT

Career

Since 1987 – Independent accountant/adviser to small business and self-employed clients.

1986-1987 Account Executive with Drexel Burnham Lambert in Jenkintown, PA, focusing on pension plan sales to self-employed individuals and small business owners

1985-1986 Pension Accountant with Pension Plan Services Inc. in Philadelphia, PA , preparing financial statements for IRS Form 5500 filings

Education

Academic credentials are expanded here

Masters in Taxation (MT) from Villanova Law School, 1995 with a focus of study in compensation planning

Master in Business Administration (MBA) from Temple University, 1985 with a focus of study on finance and accounting particularly related to portfolio management

Bachelor of Science Degree from Delaware Valley College, 1982. Served as resident dormitory adviser, editor of the student newspaper and an Academic All-American

Methacton High School, Fairview Village, PA 1978. National Honor Society

Licenses, Registrations, Certifications

Certified Public Accountant, Delaware license ##CC-0003632

Certified QuickBooks ProAdvisor

Former Registered Investment Adviser with the Securities Exchange Commission in 1983-1997, Commonwealth of Pennsylvania in 1985-1998, and the State of New Jersey 2002-2007. (terminated)

Licensed life, accident & health insurance agent in all states and the District of Columbia, varying start dates, all licenses are current (current)

National Association of Securities Dealers licensing certification for series 3, 6, 7, 15, 22, 26, 63, 65, encompassing licensing for securities, stocks, bonds, mutual funds, options, commodities and foreign currency options (terminated)

Completed IRS administered course on individual income tax preparation 1995

Management

Recruited and trained more than 25 independent agents as producers for Fortis Financial Group 1993-1995 building agency premium volume approaching $1 million in 1995

Operated an independent financial planning office with a staff of 2-4 from 1987 through 2001 focusing on employee benefits for building contractors

Teaching

Instructor for “Current Events in Employee Benefits” a professional continuing education course offered through a non-profit affiliate organization. The course was approved for CE credits in Pennsylvania for accountants, attorneys and financial planners, 1997-2000

Former adjunct faculty at Delaware Valley University teaching financial planning and professional continuing education programs

Host of public radio show featuring call-in questions on various financial planning topics; host or guest on various Internet Web-casts including a featured interview by “Financial Planning Online” in 2000

Publications

“Health Savings Accounts: How to Implement and Administer an HSA in Your Organization”, National Seminars Group/ Padgett-Thompson, 2006

“Employer’s Guide to Health Reimbursement Arrangements”, 2004, 2005,2006, self-published

“Small Business Owners Guide to Employee Benefit Plans” 1986, self-published

Writer and Publisher of “Novak’s Money Minute” (2006), “OnlineAdviser Topics” (2003-2006), and “State Street Journal” (1987-1996). These Web publications and e-mail subscriptions are read by financial professionals and consumers with an interest in financial planning topics

A contributor to dozens of business and tax-related publications including NY Enterprise Report, Insight into 90’s Living, Life Insurance Magazine, Financial Planning Magazine, Opticourier, Life Association News and others

Internet-based Activity

Former discussion host for AdvisorMax.com, an industry-leading service for professional financial advisers

Volunteer adviser for OnlineAdviser and Allexperts.com providing advice in tax and benefits law issues to the public, 1998-2004

Former discussion moderator at “Financial Planning Interactive” 1997-2006, the nation’s largest online resource for financial planners at www.financial-planning.com published by Securities Data Publishing Inc., NY, a division of Thompson Publishing

Founder of MedSave and OnlineNavigator Web-based health insurance exchange services

Family

Married with two children and three step-children ranging in age from 18 to 24

Advocacy and Activities

Founder of BaySave Foundation, a privately-funded environmental advocacy project based in Newport NJ

Operator of Money Island Marina and Nantuxent Seafood

Affiliations

Former Member of Sustainable Business Network of Greater Philadelphia

Former Member of the National Association of Health Underwriters

Former Member of Toastmasters International

Former Member and Youth Programs Liaison for Rotary Club of Ardmore

Member, contributing writer, speaker, lecturer for the New Jersey Society of Certified Public Accountants

Former accredited business member of the Greater Philadelphia Better Business Bureau

Former Member of America’s Health Insurance Plans

Member of the Brain Injury Association of New Jersey

Former Board Member of the Somers Point Jazz Society, founding co-chairman of “Brown Bag It with the Arts” and “Bucks Fever” for the Central Bucks Chamber of Commerce and a “Producer” level sponsor for WXPN radio

Former member and discussion group facilitator for interfaith couples group for Main Line Reform Temple

Member, committee co-chair and Past President of the Bucks/Mont Chapter of the National Association of Remodeling Industry (NARI)

Former coach of the Main Line Wrestling Club, Warrington A.A.U. Wrestling Club and Upper Merion Wrestling Club. Former assistant coach at Delaware Valley College, Central Bucks High School, Archbishop Wood High School and Friends Central High School

Organizer of the Money Island Property Owners Association