Concerned about the potential conflict of interests involving individual retirement account rollovers, the Financial Industry Regulatory Authority has issued an alert putting financial advisers on notice to review their practices to ensure they are not crossing into gray areas.
Specifically, FINRA urged broker-dealers to supervise their activities to reasonably ensure that conflicts of interest do not impair the judgment of a registered representative or another associated person about what is in the customer's interest, the guidance read. The December alert also reminded investment representatives to neither confuse investors nor interfere with important educational efforts.
The potential for conflicts of interest run the gamut. For instance, an investment adviser who recommends an investor roll over plan assets into an IRA may earn an asset-based fee as a result, but no compensation if assets are retained in the plan, FINRA said. A financial adviser then has an economic incentive to encourage an investor to roll plan assets into an IRA that he will represent as either a broker-dealer or an investment adviser representative.
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