Advisors Advantage - January 2014


Things They Never Tell You as a Retirement Plan Provider.

Stuff plan providers should avoid.

I always say that whatever I learned as an ERISA attorney and the retirement plan business; I couldn't have learned it in class or in a textbook. So if you're a retirement plan provider, this article will have some short spurts of "wisdom" no plan provider textbook will tell you.

To read the article, please click here.

Don't let Plan Sponsors get you out of your level of comfort.


Getting outside that level maybe a mistake.


The law firm I started a few years back is actually more than 13 years old as it was a shell where I could offer legal services on the side while I did my normal day job. It was an experiment on whether I could go out on my own and I learned during that time what worked and didn't.  I can tell you that advertising in the local Pennysaver or advertising yourself as a low cost legal provider are likely misses.


So part of my practice was offering most services such as tax preparation and wills on a flat fee. For a time, wills were ridiculously low such as a will for $100. I had a tax client who wanted me to do a will and she knew about those fill in the blank forms that Staples offered.  I had software that produced wills in a Microsoft Word format. The clients asked me whether I would do their wills using those fill in the blank forms and whether I would cut my fee. I told them I wouldn't because that was outside my comfort zone and my will fee was ridiculously low as it was.

A good part of my practice is working with financial advisors and TPAs. Some have me on a monthly retainer; most just call out of the blue with questions (feel free to call). Many advisors ask for my opinion on clients who request something outside the box, such as asking an ERISA §3(38) fiduciary who uses index funds to retain some of the actively managed funds that the previous advisor added to the fund lineup or a financial advisor being asked to assist a plan sponsor with an Internal Revenue Service (IRS). Being a retirement plan provider is hard enough without adding stuff to your plate that may put yourself out of your level of comfort. If you are a §3(38) fiduciary, the whole point was for the plan sponsor to offer discretionary control over plan investments and you don't have control when the plan sponsors is asking you to retain their previously added investment options. Being a financial advisor doesn't mean being an ERISA attorney in handling plan audits.


The road to hell is paved with good intentions and I am sure that there have been plan providers being sued for errors caused in favors these providers did for specific plan sponsor clients that the provider knew was out of their level of comfort.


It's easier to say yes to every plan sponsor request, but it takes a better businessperson to turn down business that may increase your liability and get you out of that zone of comfort.

Sorry is the hardest word in this business, but the best word to calm tensions.

It's hard to say, but much easier than the alternatives.


I referred work to an accountant I knew for a retirement plan audit. He did a terrible job and there are issues regarding his registration to do the work. Making a lousy referral is even worse than doing poor work of your own because at least you had control over your own work.


Of course, I'm embarrassed and the accountant is just coming up with so many embarrassing excuses and I look like a moron in front of this plan sponsor. Yet, despite everything, all I wanted was an apology from the accountant.

Sometimes all you have to do is to say sorry if you mess up or if the client is disappointed in anyway even if it was something out of your control.  Saying sorry and not making any excuses is a good way for your clients to release tension because unhappy clients leave and just fighting over something just because you won't simply say sorry is silly. Saying you are sorry isn't the same as admitting guilt and sometimes, it's better to give in even though apologizing is not giving in.


Clients needs to know you care and just being indignant in refusing to apologize for anything can go a long way in causing grief for your business that you do not need.


Any relationship in the retirement plan business requires trust.

It all starts with trust


Suppose someone you never met before comes up to you and asks whether they can stay at your house or someone you never heard of, all of a sudden wants to be your partner and best friend. Any business relationship and any personal relationship you have requires trust and trust is something that doesn't develop over night.


When I started my own law practice three and a half years ago, I knew that I needed time to develop my business. Financial advisors and third party administrators weren't going to recommend their clients to me based on a couple of articles. It was going to take time in developing relationships by building my reputation and by developing trust.


Yet I'm always baffled by the broker who calls me up out of the blue and starts inquiring about my clients and whether my clients are happy with their current financial advisors, which is disconcerting to me when a good chunk of the time, a financial advisor has referred me this client. Even if a financial advisor didn't refer me this client, I barely know this broker. I can recall how many times in my law practice where I met an insurance agent to network and all of a sudden, they are trying to sell my life insurance that I couldn't afford and didn't need.

When I talk to other retirement plan providers, I don't ask them which ERISA attorney they work with. These people know what I do and if they like what they hear from me or see what I do, then maybe they will hire me or refer me when there is a need for an ERISA attorney.


Networking and developing relationships in this business is like dating. It's a process, it takes time, and most of the time, you'll come up short if you cut to the hoop too quickly.


Whether it's working with clients or other retirement plan providers, you need to know that any worthwhile relationship will take time and requires trust.

New DOL Fiduciary Rule Delayed Again.

It will take some compromise to get it done.


When I was a freshman at Stony Brook University, there was a shooting on campus at a concert where the performer refused to perform after being 5 hours late. No one was shot, but it brought up the question on whether our university police force (Public Safety) should be armed since they weren't at the time and had to get armed backup from Suffolk County Police. The President of the University, the late John Marburger said he was going to study the issue and decide whether Public Safety should be armed and the campus was divided on the issue. Two years later after so many committees and reports, Marburger made a decision that made no one happy, he made a compromise, where public safety would not be armed at all times, but would have access to their weapons by a lock box. Just like now, people don't like the politics of compromise.


If you were busy like I was the last week of December (mainly with my kids being homes), you might have missed articles concerning the Department of Labor (DOL) and the proposed fiduciary rule. The DOL, for years, has been trying to expand the definition of plan fiduciary to include stock-brokers and put them almost on the same footing as registered investment advisors (RIAs) who take on that role. At the end of December, the DOL announced that they would hold off on proposing a new rule until August so they could work on it with both sides (those for it and those against it). While we know the stock brokers are against the rule, so many in Congress (who receive many contributions from Wall Street, regardless of political party) are against it too.


Like fee disclosure, I believe a new fiduciary rule will be implemented. The head of the Employee Benefit Security Administration, Phyllis Borzi has been trying at expanding the rule for years and I hate to bet against someone so determined as Ms. Borzi. However, like arming public safety at Stony Brook, both sides will not be happy. You will have a fiduciary rule that will be expanded that neither side will like because while it will add brokers to the rule, it may allow exemptions for commissions and other exemptions that may water down the standards for those brokers who will be added.  While people at both extremes of the political debate fail to to realize is that often any change is as a result of a compromise, it rarely is all or nothing. So you will likely see a new fiduciary rule in 2014, but something neither brokers or RIAs will be so excited about.


An event worth attending.
In the retirement plan business, there are way too many events and they cost a ton. Well, what if there was an event that cost a little bit of money, but you learned a whole lot.

Two of my best friends in the business, James Holland and Chuck Hammond have developed Evolution (k), a two-day event in Charlotte for financial advisors who want to be major players in the 401(k) plan space. The event will be March 3rd and 4th. Rumor has it that I will be there too and it's not just an excuse to visit the NASCAR Hall of Fame (obligatory pro-Jeff Gordon and Jimmie Johnson message here).

  Instead of shelling out thousands for one or two things you might learn about the business, Evolution(k) allows you to spend less and learn more from the experts.


Click here for more information.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ary Rosenbaum, The Rosenbaum Law Firm P.C. | Attorney Advertising

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