In Practice May 1, 2017

Product Restrictions, Platform Limitations, Drive Adviser Attrition

New Cerulli Associates research identifies “pain points” at the root of advisers’ decisions to change firms—and what leadership can do to address staff concerns before losing key advisers. 
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The May 2017 issue of The Cerulli Edge – U.S. Edition, offers advisers a checklist of common hurdles that commonly lead to staff discontent and attrition, finding there are many ways firms could do more to ensure their advisers stay committed.

According to the analysis, “adviser teaming, affiliation flexibility, culture, technology, operations and compliance, and the proposed Department of Labor conflict of interest rules are all emerging factors impacting recruitment and retention for broker/dealers and registered investment adviser (RIA) custodians.”

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It might seem like a fairly simple and innocuous list on first blush—but retirement industry practitioners will know that each of these items represents its own microcosm of challenges and opportunities. If an adviser or team of advisers has a problem with the way the firm is approaching any of these areas, it can quickly disrupt even the most well-established relationships. 

“Pain points are often at the root of an adviser’s decision to change firms,” says Kenton Shirk, director at Cerulli. “The choice may be triggered by factors such as restrictions on product use, client fees imposed for small accounts, changing compensation, unreliable technology, or minimum account size mandates.”

Shirk says these factors “will shape the growth—or decline—of channels and underlying firms in the marketplace.” Again it is important to stress the impact will not just be client-facing; the evolution of the advisory industry is also changing the internal organization and behavior of advisory firms and their service provider partners.  

“Because recruiting a large multi-adviser team is more complex and time-consuming, large broker/dealers are promoting teaming as a retention strategy and adjusting compensation to favor teams,” Shirk observes. “Cerulli finds that numerous independent broker/dealers have introduced their own RIA platforms in response to the attrition of large advisers to the RIA channel. Having their own platforms allows advisers to leverage them while an adviser holds a separate and independent RIA.”

NEXT: Independent B/Ds and IRAs work in concert 

The Cerulli Associates analysis presents evidence that multi-channel broker/dealers are positioning their RIA platforms “as a new way to attract advisers and serve them throughout their lifecycle regardless of regulatory structure.”

Another clear trend is that “culture is becoming a critical differentiator.” Advisory firm leaders may assume it is compensation or some other monetary-based factor that most sets firms apart, but from the perspective of advisers on the ground it is often more esoteric considerations that really determine happiness. 

“Of advisers in employee channels who switched firms in the past three years, 51% indicate that the quality of their broker/dealer’s culture was a major factor influencing their decision,” Shirk warns. “Similarly, technology is becoming an increasingly important factor when advisers choose a new firm. Advisers are beginning to recognize its large impact on productivity and client experience.”

Cerulli finds that among wirehouse advisers who would prefer joining the independent model if they leave their current firm, nearly half indicate that assuming additional compliance (48%) and operational (47%) responsibilities are major concerns.

“RIA aggregators and platforms use concerns about operations and compliance to win breakaway advisers in wirehouses who want to go independent but desire a turnkey infrastructure,” the Cerulli research concludes.

Information on obtaining Cerulli Associates research is available here. 

Products May 1, 2017

How Federal Judge Trends Can Inform ERISA Litigators

Jamie Fleckner, a partner with Goodwin Proctor LLP, tells PLANADVISER the judge assigned to the case does have an impact on how litigators think about defending the case and the strategy they might employ in litigating.
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If youe retirement plan sponsor client is facing an Employee Retirement Income Security Act (ERISA) lawsuit, it will want an attorney well-versed in its type of ERISA case, but it may also want an attorney with some “insider” information.

To that end, Bloomberg Law launched a number of new labor and employment tools and resources on its Labor & Employment Practice Center. The tools aim to give attorneys and their clients clear and powerful insights into the way U.S. federal courts interpret and decide ERISA litigation. 

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For example, the Litigation Analytics tool helps users craft litigation strategies and understand potential impacts specific judges and courts can have in the labor and employment space. A snapshot of the type of information included in the tool provided by Bloomberg shows Southern District of Texas Judge Lee Rosenthal grants motions for summary judgement 10% more often in ERISA cases than Northern District of Illinois Judge Harry Leinenweber. The judges grant such motions 60% and 50% of the time, respectively, the tools show. 

Another interesting example: Middle District of Florida Judge John Steele takes the shortest average length of time to decide ERISA cases, at 234 days.

In addition to the data on specific judges’ tendencies for granting summary judgement and the time it takes to close litigation, Bloomberg Law’s Litigation Analytics tool allows users to see trends in appeals outcomes; review past appeals attempts; and track appearances and case types. Users can also evaluate how many times a law firm or company has appeared before a particular judge.

The tools show Judge Jack Weinstein in the Eastern District of New York has been almost four times more likely to deny a motion to dismiss in full than Judge Jesse Furman in the Southern District of New York. And, Judge Leonard Stark in the District of Delaware had the busiest bench of the judges sampled over the past five years: the top three firms appearing before him appeared a total of 1,050 times.

Jo-el Meyer, managing editor for labor & employment, benefits and HR news, at Bloomberg Law, who is based in Arlington, Virginia, tells PLANADVISER, “We feel that for litigators to get an edge up and be better at their business, they need information about judges and how courts have handled cases. The Litigation Analytics tool was designed to enable litigators to look at judges’ histories of opinions, to see litigation results. Also how long a trial takes will tell them what resources to invest.”

Meyer says it may also help plan sponsors find an attorney. By using the tool, they can see what law firms handle ERISA cases and the outcomes firms have had.

NEXT: How information helps attorneys and their clients

Jamie Fleckner, a partner with Goodwin Procter LLP, who is based in Boston, tells PLANADVISER the judge assigned to the case does have an impact on how litigators think about defending the case and the strategy they might employ in litigating. For example, if a judge’s tendency is to not grant dispositive motions, as a litigator thinks about case strategy, he or she may make a strategic or tactical decision on whether or not to file such a motion, i.e. a motion to dismiss or for summary judgement.

Fleckner says knowing how much time a judge is expected to take with a case is critically important in managing client expectations. “Plan sponsors that find themselves in litigation will want to know the life cycle of the case and when next steps occur so they can plan accordingly and know what to expect.”

Regarding appellate outcomes, Fleckner says, “You always as a litigator think about potential appellate remedies and making sure you’re preserving a record of appeal.” He adds that there are broad strokes in judges’ past tendencies—certainly any case on its own might be an outlier—so litigators would have to carefully compare a judge’s tendencies with their particular case. “But, you certainly want to understand how strong an appellate case you have as you think about the strategy of your case overall,” he adds. “Do you have a strong ground for appeal? If the judge has been successfully appealed, or if the judge has often upheld a ruling on appeal, you have to think about whether the appellate path will be successful.”

Because each judge has his or her own way of conducting business and their own preference, it is important in any litigation to know a judge’s specific preferences, Fleckner concludes. But, aside from a database, he notes that local counsel can help a litigator understand a judge’s preferences and tendencies even if they don’t litigate ERISA cases.

Bloomberg Law’s Litigation Analytics includes extensive information on the litigation activities of companies (more than 70,000 public and 3.5 million private companies), as well as the law firms that represent them.

It offers unlimited use for subscribers at an all-inclusive price and full access to all that the platform has to offer, providing cost predictability. More information can be found at https://www.bna.com/labor-employment/?promocode=BLAW639AW. The product is available without additional cost to existing Bloomberg Law subscribers.

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