While highlighting a number of recent state-level victories on behalf of individual 403(b) advisors, NTSA Executive Director Chris DeGrassi kicked off the 2015 NTSA 403(b) Summit in Nashville June 28 by emphasizing that the biggest battles still loom at the federal level.
DeGrassi told a packed ballroom at the Gaylord Opryland Hotel that the strong advocacy efforts by NTSA members have helped get legislation passed in multiple states allowing for teacher choice in retirement plans. He cited multiple instances in which states have implemented consolidated retirement plans, including Virginia and Iowa.
Fiduciary Rule on the Horizon
DeGrassi said that recent successes in those states and others — such as North Carolina and California, which both loosened previous restrictions on who could manage K-12 teachers’ retirement accounts — give the NTSA momentum as the focus shifts towards the federal level, where the Obama administration is on the verge of issuing fiduciary regulations that are likely to dramatically alter the business model of many advisors.
The rules, which as proposed would implement strict guidelines on who constitutes a plan fiduciary, are likely to go into effect late this year, DeGrassi said. While there has been some resistance in Congress, DeGrassi said the rules are almost certain to be finalized. He also indicated that NTSA (and its umbrella organization, the American Retirement Association) will work with the Department of Labor to find common ground, and will issue a letter in the near future outlining their proposals.
“The Republicans… are not shutting down the government over this,” DeGrassi said. “As a result, we are looking for solutions that create a best interest standard but don’t affect how [NTSA members] do business.”
NTSA President Kent Schutte, of EFS Advisors in Cambridge, Minn., who serves as the Committee Chair of the 2015 NTSA 403(b) Summit, said that NTSA is developing a professional credential that “has the word fiduciary in it,” reflecting the increasing importance of fiduciary responsibility in light of the regulatory proposal.
“We’re going to embrace this,” Schutte said. “If the DOL wants us to take on a fiduciary responsibility, then we’ve got to figure out exactly what that should be.”
Robo-Advisors
DeGrassi said that robo-advisors are another issue affecting advisors’ future, noting that while federal officials are seemingly very fond of cost algorithms that are designed to essentially replace the judgments of a human advisor, NTSA’s offerings, including the 403(b) Summit, would provide members with tips and techniques on how to adjust to an environment where computers are being presented as a viable replacement for human interaction from advisors.
“Robo-advisors can be your competitor, or they can be your partner,” DeGrassi said. “We need to think about how to build our practices so that robo-advisors are not a threat to us but rather a benefit. With $7.5 trillion in assets about to be subject to new rules from the federal government, this can be one of the most valuable times to be in the industry.”
Echoing a theme that carried throughout his speech, DeGrassi ended the opening session of the conference with a direct call for members to remain engaged in the legislative and rulemaking processes, both in Washington and in state capitals nationwide. He said that the great strides NTSA has made in the last few years will only continue if members get even more engaged, and also if they figure out ways to adjust to a changing landscape.
“Who is going to fight with me?” DeGrassi asked. “If you come fight with me, we can change the game altogether.”
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