Wednesday, June 20, 2012

Self Directed Brokerage Window Brou Ha Ha!


It took a few weeks, but the industry made enough noise about FAQ 30 from the DOL's May 7th release of FAQ's pertaining to Fee Disclosure.  This author posted on June 6th that our interpretation of this FAQ is that it made it effectively impractical for Self Directed Brokerage Accounts to exist in plans of any real size.  Phyllis C. Borzi, assistant secretary of labor for DOL's Employee Benefits Security Administration (EBSA), said June 18 at the SPARK National Conference that a second set of FAQ's will be forthcoming after July 1st some time.

At the same conference, she did discuss FAQ 30 and basically stated that the industry was overreacting to it and that the spirt of it is that plan fiduciaries must have policies in place to monitor investments and ensure prudence.  See below for an article that discusses the dialogue.

Our interpretation of the FAQ remains the same.  Ms. Borzi's comments simply reiterate what we feel which is that Self Directed Accounts can still be used in plans, but from a practical perspective can become a very difficult investment choice because of the need to monitor the underlying holdings.  When these brokerage accounts are not in a vendor window, but rather are scattered among various/many brokers it can be a near impossible task for any plan with a substantial number of brokerage accounts.

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