More than half (52%) plan to place
the money in their savings account, 25% plan to reduce debt and 17% intend to
simply spend the money, according to a survey by John Hancock.
Half of investors expect to receive
a 2014 federal tax refund, and 29% anticipate owing taxes, according to the
survey of household financial decisionmakers with a household income of at
least $75,000 and assets of at least $100,000.
Of the refund spenders, nearly four
in ten (38%) plan to spend their tax refund on a vacation, a decrease from last
year. One in five will devote their refund to basic household needs and only
one in 20 plans on using the refund for a luxury item.
In a possible indicator of tight
financial times, the results seem at odds with the recent
Hancock survey that claimed investor sentiment is peaking.
In that report, most (81%) of
respondents said 2015 would be a good year for the average investor, up from 73%
in the first quarter of 2014. Three-quarters of those surveyed also said they
are optimistic that the U.S. economy will be stronger two years from now.
Almost two out of three respondents (62%) also claimed that now is a good or
very good time to invest in stocks, stock mutual funds and balanced mutual
funds.
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The DOL’s release on Tuesday of the reworded fiduciary proposal was a critical event for the industry—so there was no shortage of either positive or negative commentary following the proposed rule's release.
It’s
safe to put Congresswoman Ann Wagner (R-Missouri) in the camp that deeply
disfavors the proposal: “Today’s proposed rule from the Department of Labor
potentially harms the very people that it claims to protect: low- and
moderate-income Americans seeking advice for investing for their retirement,” said
Rep. Wagner, a member of the House Financial Services Committee.
“[The
proposal] would greatly expand the definition of a fiduciary under the Employee
Retirement Income Security Act (ERISA) and fails to take into account the vast
regulatory structure already in place,” she added. Wagner also cited
the length (or shortness) of time of the Office of Management and Budget (OMB)
review as a potential red flag.
The
Securities and Exchange Commission (SEC) should go first in regulating this
space, Wagner believes. “We hope that Democrats who have supported that
position previously continue to do so,” she said. (Wagner in February introduced
a bill that was passed by the House Financial Services Committee to counter
the proposed rule.)
Wagner
came out in a full-on attack on President Barack Obama and Senator Elizabeth Warren
(D-Massachusetts), calling the proposal an “ill-advised, top-down assault on
local financial advisers and broker/dealers” that is typical of the president
and the senator. “Instead of allowing hard-working Americans access to
affordable, sound financial advice to prepare for the future, they have created
a solution in search of a problem to further hurt the middle class,” she contended.
The National
Association of Plan Advisors (NAPA) holds
steady on its position. The DOL’s
long-awaited fiduciary re-proposal will add cost and complexity to the rollover process, the group said in
a statement, citing written contracts with multiple signatures, along with potentially burdensome initial and
annual disclosures.
“Requiring so many
layers of duplicative disclosures could be counterproductive and
cost-prohibitive to offering this critical level of support to 401(k)
participants at a crucial point in their retirement planning,” Brian Graff,
executive director NAPA, cautioned in a statement.
NAPA Remains Concerned
Graff acknowledged
what he called the department’s “dedicated staff” and their diligent work in
trying to balance concerns about protecting the interests of consumers with the
ability of those same consumers to work with the advisers they choose. “We remain
concerned that the compliance costs may outweigh the benefits, but look forward
to continuing to work with the DOL to further streamline and enhance this new
proposal,” Graff said.
Some are taking the watchful view: The proposal deserves
close study, believes Paul Schott Stevens, president and chief executive of the
Investment Company Institute (ICI). “We will carefully review the hundreds of
pages of the rule and the proposed exemptions to ensure that America’s
retirement savers can still receive the information, guidance, and choices they
need to make sound investment decisions,” Stevens said in a statement.
Stevens pointed to the support and information that the
mutual fund industry offers retirement savers, including disclosure on the cost
of investing, and states that mutual fund fees in retirement plans have been
dropping for the last two decades. At the same time, he says, “the services
provided to employers and plan participants have increased. The new rule must
ensure that employers and savers still have access to that support and
service.”
The National Association of Insurance and
Financial Advisors (NAIFA) is also waiting.
“According to the DOL’s summary of the proposed regulations,
fiduciaries must provide impartial advice in their clients’ best interests and
cannot accept payments creating a conflict of interest, unless they satisfy one
of two, possibly three, exemptions,” noted Juli Y. McNeely, president of NAIFA.
“Generally, the adviser and the client would be required to
enter into a written contract that has specific provisions, including that all
advice be in the best interests of the client, that conflicts be clearly
disclosed, and that procedures be in place to encourage advisers to make
recommendations in the clients' best interests,” McNeely pointed out.
Time to read and analyze the regulation is
needed, she said, before being able to determine the impact on NAIFA members
and those they help prepare for retirement. Additional PLANADVISER coverage of the structure of the new rule proposal is here.