BREAKING - U.S. Dept of Labor Releases New Landmark Rule Allowing Alternative Assets in 401(k) Plans

WEBVTT
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We have breaking news out of Washington, D.C.
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The U.S.
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Department of Labor has issued their final landmark rule allowing access to alternative assets in 401 plans.
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If you've been following my channel and the news on this, you know this was coming from President Trump's executive order about six months ago, where he said every American should have the opportunity to invest their 401 into alternative assets.
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The idea that the stock market is where every dollar in your 401 is gonna go is gone.
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And right now, the Department of Labor, this is the agency in the government that oversees 401ks and employer-based plans.
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They do all the rulemaking and the rules of what you can and can't do.
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They came out with their final rulemaking today, this morning.
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It was awesome.
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I read through the whole rule, it's 160 pages.
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Um, and it's a really good framework and a path forward to giving you options and choices.
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The stock market has gone from 8,000 publicly traded companies to 4,000.
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There are less and less options to where you can put your money in the stock market.
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There's more and more stuff just packaged up in the stock market from ETFs and mutual funds to a dwindling number of publicly traded companies.
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We have to have the ability to have other options to invest our dollars.
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And this is what this executive order and now the rulemaking coming out of the Department of Labor sets to do.
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So I'm just gonna quote here the U.S.
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Secretary of Labor, Keith Sonderling.
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He says the department's days of picking winners and losers are over.
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Our rule clearly spells out the man that managers must evaluate any need and all potential product offerings by following a prudent process.
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I'll get into what that prudent process here is in a second.
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And he says, this proposal is decidedly neutral and refrains from saying that any asset class is better or worse than any other investment type, as the law requires.
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In other words, the Department of Labor is saying you don't just have to buy stocks, bonds, and mutual funds that Wall Street's selling you and all the other ETFs and mutual funds that bundle up the same stuff.
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He's saying all investment options should be on the table.
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We shouldn't take a position on it as a government agency.
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Let people, the individuals with their 401ks, their advisors and managers decide what can go into your retirement account.
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This is big because the main issue in 401 plans is 401 providers did not want to let you invest an alternative asset in your 401 because they are deemed to have something called fiduciary liability.
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In other words, if you invested your 401 in something that went belly up, there's plaintiffs and trial lawyers out there that go and sue 401 plans and say, hey, this investment went bad.
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You're responsible.
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So what they end up doing is only let you invest in stuff that has little return, but has little or no risk and is in the public market because everybody thinks the public market is safe and that's always the place to be.
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Well, that's not what wealthy investors are doing.
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That's not what high net worth people are investing into.
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That's not what big pension plans and endowments are investing their money into.
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They're putting more and more money into private assets.
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Meanwhile, individual people with their 401ks can't get into that because every 401k planned fiduciary is scared that they're going to get sued.
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So they don't want to put their butts on the lines.
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So they let you buy ETFs and mutual funds because you won't lose anything, but you might not make that much either.
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And so this risk-adjusted return is a really important component.
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I'll come to that here in a second.
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But what this rule is all about is providing something called a safe harbor that basically says if you're a 401k provider, an advisor that advises 401ks, if you operate within the safe harbor in selecting alternative investments, like a menu of what people can invest in with their 401, if you act prudently and within this safe harbor, you cannot be liable.
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Trial lawyers can't chase you down.
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You can't go get sued under ERISA, which is the law governing retirement accounts.
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So the rule, 160 pages in all, focuses on primarily liability for people who provide 401 plans and advice specifically on 401k plans.
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So here's what the rule says the rule gets into a prudent process.
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And by the way, what we're talking about here is alternative assets.
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And when someone's selecting alternative assets in a 401k plan, a 401k provider saying, here's a menu of alternative assets you can invest into.
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They've got to follow a prudent process.
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Well, what are these alternative assets?
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What are we actually talking about here?
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President Trump outlined what those are in his executive order.
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This is actually back in August of 2025, where he said, these assets include private market investments, that means private equity, direct and indirect interests in real estate, that means real estate funds are directly owning real estate, and investments in digital assets.
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That's crypto, Bitcoin, and other assets.
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Now, the executive order gives a little more definition to these assets.
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There's other alternative assets here, but I think for the typical 401k investor, they're gonna be looking at private equity, real estate, or crypto digital assets.
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Those are gonna be the three big ones I think individuals are gonna go after and have interest in putting a portion of their 401 into.
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All right, so these alternative assets.
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Now, when a 401k plan provider is gonna select those alternative assets, the new rule that the 401k plan provider has is they have to act within this rule of prudence.
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Now, this is something that's been in ERISA, this is the federal laws for a long time, but they're outlining these safe harbors as it specifically applies to alternative assets.
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And the short of it is if I'm someone that's a 401k plan provider, and I'm gonna say, all right, we're not just making everyone go over here into public stock market.
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Meanwhile, the rest of the investment landscape, high net worth investors, endowments, pension plans can go everywhere to find the best investment.
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We're just saying you can only go over here to this side, the publicly traded stuff, because you're not smart enough, so you need to just go over here.
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That's kind of been like basically how the rules have been.
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Now they're saying, oh, we're gonna remove the barrier.
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401k plans can come over here.
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You can invest in this alternative assets.
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But what you need to decide is the 401k plan advisor or provider of these 401k plans is prudently, this is the rule of prudence, is the risk adjusted returns of these investment of these investments comparable to what they could get in the public markets?
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And that's a really key.
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Is the risk-adjusted return reasonable?
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Are you acting reasonable and prudent in saying, hey, you can invest in this private equity fund?
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The stock market might be performing at a 10% average over the last five years.
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This private equity fund might be performing at a 15% return rate, but it might have a little bit higher risk too.
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So is the additional return you can get worth the additional risk?
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You could say the same thing in digital assets.
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Let's go to Bitcoin for a second.
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Definitely a lot more risky of an asset, but is the is the return expectation and potential of that asset worth that risk?
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Okay, so this risk-adjusted returns is really what's critical and what it's gonna be boiling down to when any 401k plan provider says, we're gonna allow you to take your 401k or a portion of it.
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A lot of them are gonna put restrictions and say maybe 20% of your 401k can invest in that.
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That'll be the next wave we'll see on this.
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But for now, this menu option of alternative assets, it's gonna include private equity options.
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It'll include crypto and digital assets, and it will include real estate options.
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These, the the things that are gonna get selected that will be like on the menu type options fall under these risk-adjusted return.
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And someone, the plan advisor, uh, the providers of the 401k determining prudently under this rule of prudence that those assets have the ability to provide a greater outcome or at least the same outcome as other assets that they're gonna allow in the portfolio.
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And frankly, the way that they wrote the rule, they have to say the same thing on what you're investing in the stock market or the bonds that you could buy.
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All right.
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So they're giving the same treatment.
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They're not treating alternative assets differently than public assets.
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This rule applies to all assets.
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Okay, the uh what's gonna happen next?
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So this rule is sitting for 60 days.
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It came out this morning, March 30th, and there's a 60-day comment period.
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You can throw in comments, go ahead, go to DOL, tell them what you think.
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You love it, you hate it, read through it, give an opinion of what you might want to do.
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I might throw my own little comment in here as well.
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Um, but the Department of Labor is receiving comments.
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And um and that's gonna be a 60-day window.
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After that 60 days, they generally go to a final rulemaking.
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Now, when Trump announced his President Trump announced his executive order back in August, he tasked two agencies to come up with rulemaking.
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One was Department of Labor, who has issued this rulemaking here.
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Now that was the Deputy Secretary of Labor that I that I quoted earlier, Keith Sonderling, who gave his notes on it and they released this.
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Um, but that was one eight government agency.
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The second government agency is the SEC.
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We're still awaiting that.
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That we're probably days away from that um of when that's going to get released.
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But the SEC has some stuff they have to put out in terms of accredited investor rules and qualifications for people in 401k plans because some investment assets have rules about who can invest in that, who can own private equity, or some of these private funds, whether it's a digital asset private fund or a real estate private fund.
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There's certain rules around those from a securities law standpoint.
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So the SEC has to come out with guidance as to those rules as well.
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Um, but this is big news.
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Uh and and I found it um exciting.
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I know many of you might be like, Matt, this is not that big of a deal, but I'm telling you, 401ks and retirement plans are going to change this year.
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They were never, they will never be the same after this year.
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This rule, democratizing assets to access to alternative assets and 401k plans is massive.
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There's$18 trillion in 401k plans and employer plans where the individual gets to decide how their money is invested.
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Is this in an ETF, a target date fund, a stock?
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Maybe some of it's into alternative assets here.
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You're finally going to get to decide and have access to those other asset classes that before has just been off the menu, not a chance.
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Maybe you're at an innovative 401k provider, like our company's 401k plan, you can already invest in to alternative assets.
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I've been doing it out of my 401k in my law firm for 15 years now, buying real estate, private funds, and all those types of assets.
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So you've been able to do this, but most big companies and 401k providers have not been wanting to do this because of this fiduciary liability risk.
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And this is what the rule here in this new safe harbor that will provide protections to those who offer alternative assets and 401k plans, it's a big rule.
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Now, the most important thing I actually want to make sure you're aware of as you're watching this is your IRA can already do this.
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You do not need to wait for the federal government.
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If you have an IRA, and there's actually more money in IRAs than there is in 401ks and employer plans now, but if you have an IRA, traditional IRA, Roth IRA, a rollover IRA from an old 401, you can use that IRA to invest in real estate, in a small business, in a startup, in a private fund, in crypto.
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You can do that now because there's no fiduciary issue there.
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There's no employer anymore governing your money.
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You're the individual directing that account that has ultimate investment authority and responsibility.
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So in an IRA, an individual retirement account, this stuff doesn't even apply.
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The roadblocks are not there.
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Now you can learn more about how your IRA can invest in real estate, private funds, crypto at our company's website, directed IRA.
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I'm CEO of directed IRA.
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We have 3.5 billion assets, 25,000 accounts.
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We'll open 50 to 100 accounts sometimes a day.
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And sometimes we've opened over a thousand new accounts in a month of new people coming in, wanting to take control of their retirement and invest their retirement account dollars, IRAs, into assets they know and believe in.
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Because the greatest opportunity to have a retirement you're looking forward to is to invest those retirement account dollars in what you believe is the best investment.
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I'm not talking about your IRA buying the best stock and putting you in a corner of like you can only find the best investment that's on the stock market.
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No, I want you to find the best investment that can provide the greatest return, whether that's cash flow, appreciation in the asset, whatever it may be.
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I want you to find that best asset that your retirement account can own to build and grow so you have a retirement you're looking forward to.
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And that's what you can do with a self-directed IRA.
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Make sure you're subscribed to the channel here.
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I'll be giving you updates on what your 401k can invest in.
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We'll let you know the update as it comes out from the SEC.
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And as these final rules go into effect, I will update you here.
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