In Practice September 11, 2023

10 Questions for Advisers To Ask When Brand Building

Rebecca Hourihan, founder of 401(k) Marketing, shares how to attract clients through personal branding.

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In today’s market, 86% of plan sponsors are willing to commit before meeting an adviser and instead are making their decision based on advisers’ offline and online reputations, says Rebecca Hourihan, founder and CMO of 401(k) Marketing LLC, at the PLANADVISER National Conference. There she revealed the questions her firm asks clients when onboarding a marketing strategy.

“When you go through this with your team, it’s going to help unify your sales team, and it’s going to help them attract clients, generate those wonderful valuable referrals that we all love and help you build widespread brand loyalty,” she says.

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  1. Tell me about your firm.

“When your peers go out and they talk to prospects and they’re explaining what you do, you’re not hearing it. When your team describes your firm, write that down and put it in my pocket for later. It will be very interesting to hear so have everybody go around and record the conversation.”

  1. Where would you like your business to grow in the next three years?

“This helps us figure out what has fuel in the tank. If you want to start offering PEPs, that’s going to take resources, budget. If you want financial wellness programs, time, talent, resources, budget, you’re going to have to do the research, the due diligence screening, understand current mechanics, and that also is going to take time. This question also helps us understand what is important and what isn’t.

  1. How many times per year does your firm typically speak with each client?

“What you’re going to learn is some of the teammates next to you probably operate slightly differently. You might think, ‘That’s interesting, I wonder why,’ or, ‘OK, I’m going to work on something here. Maybe I can take a page from that book. That can be pretty good for my business.’”

  1. Tell us a story about a time when you helped a client.

“An adviser will say, ‘I helped an employer save $100,000 in taxes.’ Leaders also have powerful stories about advisers who had a meaningful conversation with an employee and put them farther on the path of retirement. What they demonstrate is values. It shows problem-solving skills, communication abilities, empathy and the ability to approach overall client satisfaction.”

  1. How does your firm engage clients? As a 3(21) co-fiduciary? A 3(38) fiduciary?

“This is an easier question. Like I mentioned, it kind of brings the air back into the room. Again, you work better when setting service expectations amongst your entire organization and getting them on top it. You create consistency across the board.”

  1. What are your thoughts on participant advice vs. education?

“This question goes into what is expected versus what is happening. For example, with financial wellness, how often do you say to do financial wellness meetings? What do they include? What’s your definition of financial wellness advice versus education? Then how we can bridge those?”

  1. What does being a fiduciary mean to you?

“Now, the next time you’re updating your website, and there’s a whole section on your website about fiduciary services, go back to Question 7. This is your “why.” You will have so much copy, phrases and terminology for what you’re trying to describe.”

  1. How prepared for retirement are the participants in your plans? How are you encouraging better outcomes?

“When your team goes around, you’ll see they’ve come up with really dynamic, interesting ways of helping to solve the problem of undersaving Americans. They might have done webinars, in-person office hours, one-to-one education or advice. They might have had  meaningful conversations, and they’re going to tell these stories. Those are going to be awesome stories in the future for case studies. You can start thinking about: How you can take this and start to build in more marketing content surrounding that material?”

  1. If given unlimited resources, how would you fix the 401(k) system?

“If you have a magic eraser and a Sharpie, you can erase anything you want. Whatever you want, you can do it. Every single person in this room has years of experience and expertise. You should bring these ideas to the forefront.”

  1. Over the next 15 years, how would you like to see our industry evolve?

“You can identify trends that your company wants to partake in and then also add in their succession planning and next-generation advisers. Right now, a lot of firms are struggling with having that next generation of advisers come in, so how is your organization making that possible?”

Compliance September 11, 2023

DOL Sends New Adviser Fiduciary Rule to OMB for Review

The rule is expected to broaden when investment advice is considered fiduciary advice under ERISA.

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The Department of Labor has sent a new fiduciary rule proposal to the Office of Management and Budget for review.

Though the text of the proposal is not yet available, the DOL says the proposal is designed to “more appropriately define when persons who render investment advice for a fee to employee benefit plans and IRAs are fiduciaries.”

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Specifically, the proposal has a focus on “the ways advisers are compensated that can subject advisers to harmful conflicts of interest.”

The Department of Labor, starting with the administration of former President Barack Obama, has twice—using different mechanisms—tried to institute a fiduciary rule regarding retirement investments, and twice federal courts have rejected them.

In 2018, the U.S. 5th Circuit Court of Appeals overturned a DOL regulation finalized in 2016 which would have applied fiduciary status as understood under the Employee Retirement Income Security Act to advisers who recommend that a client transfer assets from an ERISA-covered plan to an IRA, as well as advisers who provide continuing advice on how to invest those assets once the rollover is complete.

This rule replaced the previous five-part test that had applied to advisers considered a 3(21) fiduciary. Under that test, an adviser has to: provide investment advice to a plan; on a regular basis; pursuant to an agreement; that is the primary basis for investment decisions; and whose advice is individualized to the plan.

The appeals court’s decision striking down the 2016 rule effectively restored the five-part test. The court wrote that the rule overstepped the DOL’s authority to regulate IRAs under ERISA because the financial professionals swept up by the rule did not have a “special relationship of trust and confidence,” because recommendations for rollovers are one-time advice.

Jason Berkowitz, the chief legal and regulatory affairs officer at the Insured Retirement Institute, notes that whatever the proposal says, the DOL is looking to “bring more financial professionals under the fiduciary status of ERISA.” He adds that making the proposal “consistent with the Fifth Circuit ruling is going to be a challenge for them.” Nevertheless, Berkowitz expects “they will propose some sort of change to the five-part test.”

According to the Berkowitz, the “key thing” for the new proposal to survive judicial review is that it cannot assign ERISA fiduciary status unless “there is a relationship of trust and confidence,” a phrase which appears many times in the Fifth Circuit opinion when discussing the common law definition of fiduciary.

The SEC also has rules of its own under Regulation Best Interest, and “there’s not a need for further rulemaking,” says Berkowitz.

This sentiment is echoed by Susan Neely, the CEO of the American Council of Life Insurers. In an emailed statement, Neely argued that “the SEC and the states are positioned to address conflicts of interest, the Labor Department’s main focus.” The SEC regulates adviser conflicts through Reg BI, which does not have the same prohibited transaction rules that come with ERISA fiduciary status.

Berkowitz adds that the frequent proposals and re-proposals in this domain “create an air of greater uncertainty and risk for advisers and the consumers they work with.”

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