Paper Examines Liability and Business Opportunity from Advice

The paper, “Pension Protection Act of 2006: Is An Expanded Fiduciary Role The Right Choice For Financial Professionals?’, offers help for financial professionals in understanding the new investment advisory role and determining if the potential liability is worth the increased business opportunity. It suggests potential strategies for financial professionals who wish to capitalize on these opportunities are either defensive (protecting the adviser from liability) or offensive (geared toward expanding business).

According to the paper, defensive strategies include:

• Staying ahead of the curve by studying the anticipated regulations to stay abreast of changes and gain a thorough understanding of their impact, and
• Positioning expertise in terms of consulting plan sponsors on the implications of the Pension Protection Act (PPA), rather than actively providing investment advice to participants.

Offensive strategies include:

• Actively promoting past experience and track record as an investment adviser,
• Adding an educational component to seminars and presentations that demonstrates knowledge of the PPA to plan sponsors and participants, and
• Partnering with an organization that has extensive expertise in assisting plan sponsors with the design and implementation of retirement plans.

In addition, the white paper examines key issues surrounding the fiduciary role, such as:

• Consumers’ growing need for investment advice,
• The newly created role of the fiduciary adviser and duties of a fiduciary,
• Compensation and fee guidelines,
• Disclosure and audit requirements, and
• Requirements related to the use of computer modeling in providing investment advice.

The Principal white paper is available here.