Visions

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.

As the industry matures and buyers become more knowledgeable, registration status, fiduciary standards, conflict recognition, credentials, association memberships, reasonable fees and value are destined to play a larger role in the advisor selection process. Nevertheless, registration status, compensation methodology and fiduciary standards may not reflect knowledge, experience, expertise and or specialization. In short, buyers of the future will demand and get the whole enchilada.

While they dwell on the importance of fiduciary standards, none of the lobbyist initiatives mention the extensive knowledge, experience, training, resources and scale required to service ERISA plans. This is an important observation because only a small percentage of the practitioners in any profession reach a high level of competence. Credentials, designations and a mandated fiduciary standard are good things, but they do not qualify an advisor to service ERISA plans.

The mainstream media's coverage of DC plans ceased being real journalism many years ago. The agenda-driven output has morphed from journalism to entertainment and from entertainment into manufactured propaganda. Given that DC plans are the most successful savings vehicle in history and more important than ever before, the media's attempts to misrepresent, distort and attack supplemental savings plans is nothing less than disturbing. Media, academic and political bias against the DC plan system is also something that needs to be addressed publically.

Given the decades of fiscal mismanagement, huge federal debt, ongoing federal deficits, state & local deficits, wealth destruction, an aging nuclear deterrent, ongoing geopolitical challenges and already high tax burdens, growth is the sole solution to our problems and challenges. Capitalism can't survive without growth and neither can the financial services industry as we know it today. We cannot tax our way to a solution and adequate income streams cannot be supported by inadequate assets.