The Mystery Behind SECURE 2.0 and Partial Annuitization

Michelle RichterAdvisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

SECURE 2.0 contained a provision that gave favorable treatment to partial annuitization. The reason you haven’t heard about this is because those transactions cannot increase commissionable income.

Increased transactional income, however, is not the only reason to educate an advisor on a law change. Another reason to educate “financial advisors,” who are not “investment advisors,” is to help Americans who receive financial advisory services receive this information, even if it isn’t directly compensable to a financial professional (FP) under today’s regulatory framework.

Ten months have passed since the passage of SECURE 2.0. The financial services industry has seen a flurry of activity to prepare for meeting the roughly 90 provisions outlined in the act. Given the number of objectives mandated by SECURE, any of us should be forgiven for not yet being experts on a given provision, especially if it does not directly impact our practice.

But with all the (very helpful!) media coverage around implementation of SECURE’s many provisions, how could it be that the one impacting the tax treatment of an entire industry segment1escaped the industry media attention necessary for the education of financial professionals?

One reason for lack of media coverage of that provision would be if it improves treatment for an activity that cannot favorably impact FPs’ compensation.

Allow me to explain further.