Client Service September 15, 2021

Practice Progress: How to Lose a Client (or Not)—Lessons Learned From Unsuccessful Advisory Relationships

Julia Carlson and David J. Wright of Financial Freedom Wealth Management discuss how the loss of clients during the firm’s growth resulted in new opportunities for successes.   

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PLANADVISER’s most recent Practice Progress webinar offered suggestions for financial advisers who are debating about leaving a struggling client relationship.

Julia Carlson, founder and CEO of Financial Freedom Wealth Management Group in Newport, Oregon, began the webinar by recounting the positives—and negatives—of growing her firm, a move that ultimately ended up losing her several clients.

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At first, Carlson worked on her own as the sole adviser at her firm and only hired assistants to help her with scheduling or organizing paperwork. When she began to hire additional advisers as the firm increased its size and assets, Carlson was met with some pushback from clients who had worked with her since the start. Former clients who had partnered with Carlson for years refused to work with newer advisers at the firm.

“Those clients that I had 20 years ago, they were always expecting just Julia,” Carlson explained. “And that’s a problem for a lot for advisers who are growing their practices. They were wanting all my attention, and in the past I could have done that, but now I couldn’t do that anymore.”

While Carlson said she recognized the loss of assets the firm faced when dropping a client—up to thousands of dollars in assets at times—she knew there would be a new set of clients who valued the work of an advisory team and not just an individual adviser.

“The clients trust that there is a team involved, that it’s not just one person,” she said. “They want that partnership value. They want someone who they can rely on and who can be that fiduciary for them.”

Today, Carlson employs seven financial advisers and eight support staff on her team at Financial Freedom Wealth Management Group. David J. Wright, a portfolio manager and wealth adviser who works at the firm, said he’s found there’s a level of success that comes with collaborating in a financial service setting, rather than working in an individualized practice. While other firms may hire six advisers, each with a different role, he finds most clients prefer the synergy of a team and the alliance it creates. “A lot of clients want more than just investments,” he said during the webinar.

As she was growing her firm, Carlson said she realized that it’s not just clients who respond well to an advisory partnership—it’s new, prospective workers as well. As Carlson added new team members to Financial Freedom, she realized most employees appreciated having a group mentality.

“When you’re adding team members and you’re telling them about the process, people love that. That’s going to be an advantage to the adviser next door that doesn’t have that together,” she said.

Wright agreed, noting that at Financial Freedom, advisers work under a single unit on everything from investments to education. As a result, when one adviser thrives, “we all do well,” he added.

Fostering a team mentality in the workforce will likely translate well to working with clients, too, the two advisers said, since clients can see the firm as a team of advisers working to grow and protect their assets instead of as one person. And it can bring opportunities to work on more than just investments. Aside from providing financial education, for example, Financial Freedom hosts monthly webinars for clients and prospects and is active on Facebook, Twitter, LinkedIn and YouTube.

The team at Financial Freedom also partners with certified public accountants (CPAs) to tell clients how to read their 1040 tax returns and how to save money on taxes. Education on industry changes is also a priority, Carlson and Wright note, and one that might have proved useful during the market volatility in March 2020. When the team reached out to clients during the downturn, many of them weren’t too concerned, a response Wright and Carlson believe was attributed to the team’s education and client services, as well as their past efforts in working together.

Wright recalled that most conversations didn’t even involve investments or assets, and, instead, focused on the health of the people involved. “What amazed me is that most of the talks weren’t even about money—it was about how everything was going, how their health was and letting them know that we’re taking care of their money.”

Compliance September 14, 2021

DOL, IRS and PBGC Call for Comments on Form 5500 Revisions

In addition to asking for input on the SECURE Act’s requirements and the current Form 5500, the DOL has published a notice of proposed changes to its implementation of regulations under Title I of ERISA.

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The U.S. Department of Labor (DOL), via the Employee Benefits Security Administration (EBSA), has joined the Internal Revenue Service (IRS) and the Pension Benefit Guaranty Corporation (PBGC) in requesting public comments on proposed revisions to the Form 5500 Annual Return/Report. At the same time, EBSA is publishing a notice of proposed changes to its implementing regulations under Title I of the Employee Retirement Income Security Act (ERISA).

The Form 5500 is one of the key annual filings made by private-sector employee benefit plans, and the EBSA says it now needs changes, primarily to implement provisions of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.

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The proposed changes also include a limited number of other improvements to the annual return/report forms and instructions, says Acting Assistant Secretary for Employee Benefits Security Ali Khawar.

“The proposed form changes and related regulatory amendments address Setting Every Community Up for Retirement Enhancement Act changes, especially for multiple employer plans [MEPs], and improve this critical enforcement, research and public disclosure tool,” Khawar says. “The proposed changes would support the agencies’ oversight of employee benefit plans, provide better public access to Form 5500 data and allow interested private sector and other governmental stakeholders to expand their use of Form 5500 data in ways that help plan sponsors, fiduciaries and participants and beneficiaries understand their plans and plan investments better.”

The key proposed revisions and the proposed changes to the department’s implementing regulations would do the following:

  • Modify the Form 5500 Annual Return/Report and the department’s regulations to implement the SECURE Act requirement for the DOL and the Department of the Treasury to develop a consolidated annual report for groups of defined contribution (DC) retirement plans. Specifically, the proposal would establish a new type of direct filing entity called a Defined Contribution Group (DCG) Reporting Arrangement and add a new Schedule DCG (Individual Plan Information) that such reporting groups must file, in addition to meeting more generally applicable Form 5500 requirements for large pension plans.
  • Modify the Form 5500 Annual Return/Report to reflect pooled employer plans (PEPs) as a new type of retirement plan and implement SECURE Act changes to MEP reporting of participating employer information by establishing a new Schedule MEP (Multiple Employer Retirement Plan Information). Additionally, for multiple employer welfare plans that provide medical benefits, the proposal would move the questions regarding participating employers that are currently part of the Form 5500 Annual Return/Report to the Form M-1 and apply that reporting requirement to non-plan entities that file the Form M-1.
  • Improve financial reporting for retirement plans in general, including PEPs, other MEPs and the new DCG reporting arrangements. The proposed improvements would add new fee and expense reporting requirements and enhance the format and content of the existing schedules of assets held for investment.
  • Expand the number of DC pension plans that would be eligible for small plan simplified reporting options, including the conditional waiver of the independent qualified public accountant annual audit.
  • Add questions to improve financial and funding reporting by PBGC-covered defined benefit (DB) pension plans and to improve oversight and compliance of tax-qualified retirement plans.

According to the EBSA, the Form 5500 Annual Return/Report serves as the principal source of information and data available to the agencies concerning the operations, funding and investments of more than 800,000 pension and welfare benefit plans that file the annual return/report.

The publication of the proposals starts a 45-day comment period. The DOL says it will treat public comments submitted in response to this Notice of Proposed Forms Revisions as public comments on the Notice of Proposed Rulemaking—and vice versa.

Information about filing comments is available here.

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