Education vs. Advice
Art by Alessandro Gottardo
Part of the reason the qualified default investment alternative regulation—found in the Pension Protection Act of 2006 (PPA)—was viewed as so helpful to participants was because they often just want an answer to the question: “What should I do?” Under the regulation, participants could be told that if they didn’t want to make a decision, it would be made for them. Many in the industry argued this would eliminate the need for advice, but that hasn’t been the case.
The evolution in the industry has, however, changed the way both education and advice are seen and delivered. Education has evolved away from its prior focus on investment type—large cap, small cap, growth and value—to include topics such as savings rates, and despite the popularity of target-date funds (TDFs) and qualified default investment alternatives (QDIAs), people still need advice about managing their account or savings priorities and actions to take, such as whether to take a loan. There has always been a clear line between education and advice, and some question whether that line has been changed in light of the Department of Labor (DOL) fiduciary rule. The rule—at least the part already in effect—expands the definition of plan fiduciary beyond someone who gives advice on an ongoing basis to now include anyone offering any recommendation and thereby benefiting financially. This change, some advisers think, will discourage advisers from offering any advice—including basic education—even if from an independent third party. But there may be new opportunities elsewhere. As “The Next Step” explains, by outsourcing education to recordkeepers, advisers can sidestep any legal ramifications from those types of communications, experts say.
As a retirement plan adviser, you are familiar with various forms of benchmarking, be they to measure investment performance or to compare provider services and fees. “Peer Review” empowers you to benchmark your own services and business model by providing insight into competitors’ strategies through the 2017 PLANADVISER Practice Benchmarking Survey.
The 2017 PLANADVISER National Conference (PANC) was held October 11 through 13 in Orlando, Florida. You’ll find extensive coverage of the conference in this edition.
One of the greatest challenges that retirement plan advisers encounter is how to convince plan sponsor clients to adopt best practices to strengthen their plan and elevate participant outcomes. “Aggressive Plan Design” takes a deep dive into this dilemma.
“Professional Groups” presents a myriad plan-related ideas that advisers can suggest to doctors’, lawyers’ and accountants’ practices. Of course, the logical first step is to ensure that a group’s 401(k) is a safe harbor plan so it passes nondiscrimination testing and the highly compensated participants will have their retirement savings intact at the end of the year. Then, advisers have many other options to offer, including cross-tested plans, cash balance plans, nonqualified deferred compensation (NQDC) plans, defined benefit (DB) plans, executive bonus insurance policies and annuities.
As 2017 comes to a close, we hope the features we have showcased in PLANADVISER have opened the door to new ways of doing business and additional revenue streams—and we look forward to bringing you additional great ideas in 2018.