Visions

Given their lack of time, budgets and new media marketing savvy, ongoing business development is the biggest challenge facing advisors. To be truly successful, advisors must distinguish themselves, expand their audience, increase activity and brand with their “local” community. When broadcast on The CFDD Station, the turnkey Local Business Leaders Internet radio show is the most powerful, cost effective, convenient and compliance friendly way for advisors to grow their business.

Good, bad or indifferent, ERISA is what it is. It may not be fashionable to acknowledge it, but ERISA is based on process rather than results. To avoid liability, the rules must be followed and documentation must be maintained. Regardless of their approach to delegation, sponsors cannot be entirely relieved from their fiduciary responsibility and or liability.

The primary challenge facing advisors today is the lack of time and budget available for ongoing business development. To differentiate their practice, advisors are beginning to market expanded fiduciary roles. While new trends provide opportunities, the skills applicable to investment counseling and investment management are very different. There are at least 3 different types of 3(38) managers serving 401(k) plans, but some do not believe 3(38) was intended to apply to investment advisors. Those who become managers without the necessary experience and corresponding change in support services could be increasing their litigation risk. At the same time, E&O insurance may actually exclude coverage for a 3(38) role.

To generate leads and motivate key individuals to open their rolodex, the CFDD has developed a Local Business Leaders template for retirement plan advisors who wish to host their own internet broadcasting show. After an initial interview with the advisor host, the Local Business Leaders strategy positions the advisor as an expert and provides them with a broadcasting platform to interview other local experts, i.e., CEOs, business owners, ERISA attorneys, CPAs, doctors, human resource executives, not-for-profit officials, etc., in their geographic area.

ERISA Section 411 specifically precludes those convicted of a variety of crimes, including financial shortcomings, from serving ERISA plans. Ironically, plan sponsors rarely perform background checks before hiring an advisor. In addition to insurance policy reviews and discounts, the EAE Program will offer plan sponsors an "optional" advisor background check service. While the sponsor must pay for the service, the advisor finalists must give their permission before the background check is initiated. Advisors would see the report in advance and be given the opportunity to correct any inaccuracies.

Plan sponsors and advisors using the ERISA Advisor Evaluator (EAE) Program are pre-qualified to receive a signficant discount on their respective fiduciary liability and E&O Insurance. Advisors registered for the 2010 Advisor Conference with proof of attendance qualify for the same E&O insurance discount.  Professionalism has its virtues and independent of EAE usage, the CFDD's advisor clients (EAE & Conference Registrants) may offer the fiduciary liability insurance discounts to ALL of their plan sponsor clients.

Most small plan sponsors lack fiduciary liability insurance and while they may not realize it, most advisors lack E&O coverage for fiduciary services provided to ERISA plans. In addition to little if any licensing, CE and net worth requirements, small RIA shops may not have ANY insurance. Non-specialized insurance brokers who sell E&O coverage have added to the confusion and contributed to the inadequate coverage.

The fiduciary status of advisors remains unsettled, but it has a significant impact on retirement plans, sponsor liability, claims, conflicts and prohibited transactions, including self-dealing. While non-specialists lack knowledge of the fiduciary duties and responsibilities imposed by ERISA, confusion surrounding the various roles is also common among highly skilled professionals. This confusion underscores the need for clarification of the distinctions between the different fiduciary roles and how those roles impact an advisor's practice as well as the services they render to plan sponsors.

Those who have ignored how ERISA fiduciary duties and prohibited transaction rules apply in these circumstances could be vulnerable for the very behavior they deemed to be in the best interest of their individual clients. Looking at it another way, those who are in compliance with state insurance laws, FINRA and the SEC may still be afoul of ERISA.

As the competitive marketplace evolves, including the advent of increased litigation & regulation, registered reps are rightly stampeding towards dual registration. This hybrid status allows advisors to maintain/increase market share, differentiate themselves, provide investment advice beyond that which is incidental, capture high net worth fee-based business and service smaller accounts on a commission basis. The IAR status also facilitates business with more sophisticated plan sponsors.