Fighting the Fiduciary Rule Before It’s Been Even Proposed

Not long after President Obama expressed the desire that the Department of Labor (DOL) implement a fiduciary rule for brokers who work on retirement plans; did one of Wall Street’s paid minions strike back.

Rep. Ann Wagner submitted a bill to delay the DOL’s fiduciary rule until the Securities Exchange Commission (SEC) issue its own fiduciary rule. Wagner said she introduced the bill because Obama: “presented a solution in search of a problem by proposing another massive rulemaking from Washington that will harm thousands of low- and middle-income Americans’ ability to save and invest for their future.”

I have empathy and I have written articles that states what a great trait it is to have. I understand why brokers and broker dealers wouldn’t want brokers to serve as fiduciaries. Would you accept more legal responsibility for probably less money? Becoming a plan fiduciary takes a lot of responsibility and then brokers would have to end getting better trails for the mutual funds they are pushing rather than what’s in the best interest of the plan sponsor. I understand their dilemma and what maybe fair for retirement plan sponsors, plan participants, and registered investment advisors who are fiduciaries may not be fair for brokers.

What I don’t like about the fight against the fiduciary rule is the propaganda propagated by Wall Street. A fiduciary rule will not increase costs for plan sponsors. It will not cause plan sponsors to ditch their retirement plans or end employer contributions to their plans. What it will do is push smaller broker-dealers out of the retirement plan business if they don’t want to be fiduciaries and it will create a level playing field by making sure that anyone advertising themselves as a retirement plan advisor has skin in the game by being a fiduciary because too many plan sponsors don’t understand that level of service and legal culpability.

Wall Street protected gloom and doom with the fee disclosure regulation promulgated by the DOL in 2012. They claimed that retirement plans would ditch their retirement plans because of those fee disclosure regulations. That didn’t happen. I think the gloom and doom won’t happen with a new fiduciary rule either.

I think Wall Street should allow the DOL to propose the rule before trying to stop it.

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401(k) Enrollment Meetings Should Be More Livelier Than Funerals

I have been to many funerals and many 401(k) enrollment meetings and I have to say that most funerals are livelier than 401(k) enrollment meetings.  It doesn’t have to be that way.

When I started my own practice and wrote my articles free of my old law firm’s marketing department, besides the typos, I was able to interject humor and movie references that allowed my articles to be widely read and distributed. I took something that is ERISAese and wrote it in a way that has been entertaining at times. The same can be done with 401(k) enrollment meetings.

Advisors who work these enrollment meetings can liven it up by lowering the language to a level that most plan participants can understand and when I say lower the language, I’m not talking about cursing. I’m talking about using a language that most non-financial professionals can understand. It’s all about connecting with the audience and better connected audience at an enrollment meeting will get more 401(k) deferrals and more assets under management as a financial advisor.

A financial advisor should run a trivia contest or a raffle and use a $25 gift card to a store or restaurant as bait to entice attendance and participation. Anything that can get more involvement by plan participants to get engaged at these meetings will help a plan sponsor limit their liability and get financial advisors more assets under management. It’s a win-win and more livelier than a funeral.

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Enrollment Meetings Don’t Have To Be Run Like Funerals

I have been to many funerals and many 401(k) enrollment meetings and I have to say that most funerals are livelier than 401(k) enrollment meetings.  It doesn’t have to be that way.

When I started my own practice and wrote my articles free of my old law firm’s marketing department, besides the typos, I was able to interject humor and movie references that allowed my articles to be widely read and distributed. I took something that is ERISAese and wrote it in a way that has been entertaining at times. The same can be done with 401(k) enrollment meetings.

Advisors who work these enrollment meetings can liven it up by lowering the language to a level that most plan participants can understand and when I say lower the language, I’m not talking about cursing. I’m talking about using a language that most non-financial professionals can understand. It’s all about connecting with the audience and better connected audience at an enrollment meeting will get more 401(k) deferrals and more assets under management as a financial advisor.

A financial advisor should run a trivia contest or a raffle and use a $25 gift card to a store or restaurant as bait to entice attendance and participation. Anything that can get more involvement by plan participants to get engaged at these meetings will help a plan sponsor limit their liability and get financial advisors more assets under management. It’s a win-win and more livelier than a funeral.

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The White House wants a new fiduciary rule

The White House unveiled their plan to direct the Department of Labor to unveil a new fiduciary standard rule that will curb the conflict of interest and excessive fees that the White House says that mars 401(k) and IRA investing.

This is nothing new, except a new renewed push to get brokers up to the same standards that registered investment advisors (RIAs) have to follow. Hebrew National always touted their frankfurters had to answer to a higher authority than the USDA because they were kosher and RIAs always had to answer to a higher standard because they were fiduciaries. Let’s not panic because it will be months before the DOL comes out with a proposed rule. So it will give time for everybody to get ready for rulemaking and then the fighting as a result.

Why the fighting? It’s not the first time the DOL will propose a rule on the fiduciary standard. It’s going to be whether the DOL can withstand the pressure of Wall Street political interest money that will influence Congressional leaders from both sides of the party to fight it. That is why the DOL withdrew their first proposed change a few years back.

The Wall Street attack will be severe and will get Congressional leaders stating that the fiduciary standard for all 401(k) investment professionals will increase costs because many broker-dealers will withdraw from the marketplace. They said the same thing about 401(k) fee disclosures and how it would make plan sponsors ditch their 401(k) plans which didn’t happen. Will the DOL withstand the attacks and the Wall Street propaganda this time? Your guess is as good as mine.

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Lockhead Martin and the Trickle Down Effect

Lockhead Martin settled their excess fee lawsuit concerning their 401(k) plan by making a $62 million settlement with plan participants. That is probably the highest excess fee settlement on record. I know how people think and most plan sponsors like yourself will say: what me worry? I don’t even have $62 million in my 401(k) plan that I sponsor.

Settlements like this Lockhead Martin case s always about a trickle down effect. There will be more concern about excessive fees and companies as large or even smaller than Lockhead Martin will get a review from an ERISA litigator interested in potential class action lawsuits. A small or medium sized plan sponsor may not get the lawsuit from a class action ERISA litigator, but there are other concerns. There can always be that lone wolf former plan participant who will threaten litigation for a quick 5 figure settlement or there maybe action by the Internal Revenue Service and the Department of Labor that can certainly get traction.

A plan sponsor needs to be vigilant about excess fees and a $62 million settlement may never be an issue for their smaller plan, but there is always a trickle down effect that excess fees will bring more litigations and more oversight by the government.

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Reasons When A Plan Sponsor Should Change Their Plan Providers

My latest JDSupra.com article can be found here.

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When you get fired, there maybe a bigger story out there

When I used to date in school, I would get some crazy breakup lines that I knew had nothing to do with reality. “The maybe it’s fate we won’t be together” or “you’d make a great husband” lines are something that were just excuses to disguise another reason and when you get fired by a plan sponsor as a plan provider, you may get a line that is as inauthentic.

You may get fired by a client who may claim that you were inattentive or you were too expensive and the reasons don’t jibe. Maybe you got fired only because you were hired by the previous corporate administration and you’re perceived as someone else’s guy. Sometimes you get fired because they want to give the work to a relative because cousin Johnny needs more assets under management. I had a broker who was quickly fired, then re-hired as the broker of record. It turned out that the new CEO had fired him so a new broker of record could give a kickback to the CEO. When the skim was discovered, the CEO was fired and the broker was rehired.

Sometimes you will get fired for the wrong reason and as long as you did your job, there is nothing you can do about it. If you lose your job because of nepotism or some illegal kickback scheme, there is nothing you can do and just chalk it up to the crazy business you’re in. Plus you’ll have a wonderful story to tell for many years.

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What Retirement Plan Sponsors Have To Fear

My latest article for JDSupra.com can be found here.

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A great Retirement Plan? It’s not in the water.

I love bagels and one of the greatest debates out there is what makes them great. People swear up and down that it’s the water from New York. They believe it so much so that there are businesses who advertise that they either bake bagel using New York water or have water filtered like New York. I don’t know, I always think it has something to do with how they are baked. A great bagel is boiled then put in the oven. Some places cheap out in this process and only use a steamer before they bake.

Regardless, there is very little debate on what is the reason for what makes a good retirement plan. When push comes to shove, it centers on a vigilant retirement plan sponsor. A well-run retirement plan doesn’t happen by accident, it’s the retirement plan sponsor that puts it all into place. Sure, there are great retirement plan providers out there, but who hires them?  There is no such thing as luck when it comes to good plans, retirement plan sponsors make their own luck by taking care of their job in setting up the plan and maintaining it.

So while the debate remains as to why New York bagels are so great, there is no debate on what is the reason why retirement plans can be great. It rests on the retirement plan sponsor.

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