In Practice September 12, 2012

PANC 2012: Team Building

“We consult with advisers on best practices,” Anders Smith, senior vice president, national sales manager, DCIO and strategic platforms at Nuveen Investments, told conference attendees.
Reported by

The panel discussed what makes a successful advisory team, and examined ways to create a team, how to build and maintain a healthy a cohesive group and danger signs to watch for.

According to Nuveen research, 74% of retirement plan advisory practices work in teams, Smith said. Teams provide better client service and are more effective at meeting the needs of plan sponsors and participants. Benefits include increased productivity, creativity, efficiency and clearer work objectives.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

Among the many advantages of working in a team, Smith pointed to enhanced communications, a motivated staff, higher levels of job satisfaction and less stress. In fact, team work can produce more business for you and your practice.

While most teams have some set players, Charles Williams, managing director, Sheridan Road Financial, said his firm aims to customize for the client based on their need. “A startup might look very different from a more established plan,” he noted. Generally there’s a marketing piece as well as an investment officer.

Team members’ personalities are a vital part of building the team, said Bruce D. Harrington, vice president, sales and business development at John Hancock Financial Network. He suggested using resources such as the Myers-Briggs Type Indicator, which can help specify personality characteristics. “We plot how people may fit well together,” Harrington said. Collaborative teams leverage people’s strengths, and in some cases have almost doubled productivity of an adviser group. Also, he noted, teams with identical personality types are doomed to fail.

When examining personnel as potential team members, Williams said he asks, “Are they bringing something we don’t have, something that’s unique?” Sometimes a staffer is uniquely good at education or some other part of plan service. “We look at how a personality fits in with what we have,” he said.

Trust is key, Williams emphasized. All team members must share the common goal: serving the client.

One of the biggest challenges is designing an appropriate compensation structure that works for everyone and is motivating, said Steve Wylam, partner at The 401(k) Team @CAMI. Harrington described a structure with a lead adviser who primarily generates revenue and everyone underneath the lead on salary. “I have found you have to back a new hire with 250K of new revenue,” Wylam said.

Smith noted a number of warning signs that say a team may need a boost:

  • decreased productivity;
  • conflicts or hostility among team members;
  • confusion about assignments, decisions misunderstood or not carried through properly; and
  • apathy and a lack of involvement, which would also be undesirable team traits.

“You might be starting to hear from clients that things aren’t what they used to be,” he said, “if you use surveys for feedback.”

Compliance September 12, 2012

PANC 2012: Cross Selling — Traps for the Unwary

It’s possible to broaden your practice successfully without running afoul of the rules, Roberta Ufford, principal at Groom Law Group, told conference attendees.
Reported by

Plan sponsors usually accept fiduciary roles when they act as plan administrator or “named fiduciary” for investments. But “settler” activities are not fiduciary activities. An adviser may be a fiduciary when he or she is a 3(38) or 3(21) adviser. Fiduciaries are defined functionally by their professional actions. A person is a fiduciary if they:

  • Exercise discretionary authority or control in the management of a plan;
  • Exercise authority or control concerning the management of plan assets;
  • Have discretionary authority or responsibility for plan administration; or
  • Render investment advice in return for a fee.

Under the rules of the Employee Retirement Income Security Act (ERISA), plans are prohibited from receiving services and paying fees to a party in interest unless certain conditions are met. The services must be necessary and appropriate. Plans must be deemed reasonable. In an arrangement that is reasonable under the terms of ERISA section 408(b)(2), the provider must deliver fee disclosures and the arrangement must be terminable on reasonably short notice.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

Self-interest is one of the pitfalls to watch for, according to Ufford. Provisions under ERISA 406(b) prohibit plan fiduciaries from causing a plan to engage in a transaction if the transaction might benefit the fiduciary (or someone in whom the fiduciary has an interest). Another prohibition would be if the fiduciary also acts on behalf of a person with interests that are in opposition to the interests of the plan or if the fiduciary would receive a kickback or other benefit from a third party.

Examples of cross-selling to sponsors include total benefits outsourcing such as 401(k) services bundled with payroll and nonqualified plan administration. In relationship banking, a bank might attempt to tie the sponsor’s credit line to the bank’s engagement to provide services to the plan. An investment manager’s relationship discount takes into account multiple accounts, including plan as well as non-plan assets.

In cross-selling to sponsors, a number of considerations must be evaluated. When a plan pays expenses using plan assets, the plan must be authorized to pay under governing plan documents. The services must be appropriate for the plan, and the amount paid must be reasonable. The provider must deliver required information, and the arrangement must not involve any fiduciary self-dealing or conflicts of interest. Examples of acceptable costs include those incurred by a fiduciary in the carrying-out of fiduciary plan duties, such as those of plan administration, trustee expenses and investment expenses.

Services provided to a different plan or third party would not fall into that category, nor would services that are not reasonably necessary to carrying out costs of the plan or that are provided for the employer’s benefit.

The bottom line, Ufford said, is that the sponsor has to be able to benchmark and show that expenses benefit the plan or are necessary to its administration. Ideally service providers and sponsors will not link plan and non-plan services.

«