What to know about new rule on 401(k) rollovers

February 18, 2021

A measure for financial advisors helping people rollover 401(k) funds to retirement accounts set by the U.S. Labor Department went into effect this week.

PHOENIX — Editor's Note: The above video is from previous coverage on how to save money and build wealth. 

Financial advisors will now face heavier regulation when it comes to assisting clients with rolling over 401(k) funds to other retirement accounts.  

Thom Rindahl, a financial advisor with TruWest Wealth Management Services in Phoenix, explained what this new measure, that took effect Tuesday, means for clients.  

What is the new 401(k) rollover measure? 

The new rule aims to make sure financial advisors put the interests of their clients first and give them all the information they need to make the best financial decision possible.  

“Now, they really have to take a look at whether or not any sort of recommendations and advice they are giving is actually in the best interest, not just in that present moment, but on a long-term basis for the client,” Rindahl explained.  

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What does it mean for you, the client? 

This means financial advisors have a heightened obligation to provide information and advice upfront to consumers about investment choices, fees and other services. There should be more transparency and trust.  

“I think there is going to be a higher degree of confidence...comfort and confidence that they are making a good decision,” Rindahl said.  

The measure also gives clients who believe they have been given bad advice on a rollover an opportunity to potentially file a lawsuit 

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What are the benefits for the financial industry? 

Industry-wide this measure could mean more professionalism and trust between financial advisors and their clients, ensuring people feel their retirement savings are protected and in the best place to grow.  

“This industry very much is one of trust. Essentially, this industry is one of trust because we are dealing with people’s futures, and livelihoods and their hopes and dreams and goals and everything else, as well as being able to pass that along to other generations, Rindahl said.  

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Remember, you have options and a right to explore those options with a financial professional with your best interests in mind.