“We’re from the Government, and We’re Here To Help”

Despite the variety of advisers, practices, business models, and broker-dealer affiliations at our recent PLANADVISER National Conference, there was a remarkable degree of convergence of purpose in evidence. That was perhaps to have been expected—after all, this was a group of some of the most successful retirement plan advisers in the country. There were, however, a couple of points where perspectives diverged—most intriguingly, IMHO, on the subject of participant advice.

Not on whether or not participant advice is needed, of course—mostly on whether or not they should provide advice as a fiduciary adviser. Both National Retirement Partners (NRP) and LPL have signed on with DALBAR’S Fiduciary Adviser Network (FAN), positioning their advisers to be classified as fiduciary advisers under the Pension Protection Act (see “The Future of the Independent Adviser” at ). Meanwhile, firms like Merrill Lynch, Raymond James, and Principal have taken a different stance; generally either finding the legislative structure around the fiduciary adviser role to be insufficiently clear, or perhaps even unnecessary to helping participants make sound investment decisions (under the Pension Protection Act, the fiduciary adviser role deals only with participant-level device).


Different “Strokes”

As things stand today, it seems to me that both perspectives have merit. Certainly, the PPA’s fiduciary adviser role seems to provide valuable protections for both the plan sponsor and the adviser, offers a structure for review and oversight of the adviser’s services by the plan fiduciary, and affords some additional flexibility in how an adviser may be compensated for those services. Consider that the dominant reason long proffered by plan sponsors for not offering advice is fiduciary concerns and one can quickly grasp the allure of being able to offer assurances on that count.

On the other hand, there are a variety of ways for advisers to offer impactful education, and even full-fledged advice, without running afoul of regulatory prohibitions or having to fulfill the obligations attendant with the assumption of a fiduciary adviser role (which, it should be noted, is quite a separate thing from being an adviser who is a fiduciary), most notably utilizing independent asset-allocation models or embracing a level-fee service approach.

Still, the current “debate” over how to offer advice (or, more accurately, IMHO, how to get paid for offering advice) misses a significant point: It’s not just advisers who think participants need advice, or plan sponsors, or even plan participants themselves. What is most interesting to me is just how eager the Department of Labor seems to be to facilitate that help.

“Far” Reaching?

One of the so-called great “lies” is “We’re from the government, and we’re here to help.” Yet, to this day, I am struck by just how far the government, specifically the DoL, was willing to extend the definition of education—and thus allow participants to get help without causing advisers to run afoul of the advice fee prohibitions in 1996 with Interpretive Bulletin 96-1 (see “How Far Can Education Go Without Crossing the Line?” ). In 2001, they saw yet another opportunity to encourage advice and issued Advisory Opinion 2001-09 , more commonly referred to as the SunAmerica opinion. While requested on behalf of a specific provider, the DoL took advantage of the opportunity to extend their response to include any comparable offering. This allowed the use of independent asset-allocation models without imposing a flat fee requirement, and has now been largely embodied in the computer model exception in the PPA’s fiduciary adviser definition. Just this year, the DoL issued FAB 2007-01, which “clarified” a point for enforcement officers in the field that I’m reasonably sure most plan sponsors weren’t (and perhaps still aren’t) aware of—their liability for the selection and monitoring of the adviser, not the advice (see “IMHO: A Little ‘Free’ Advice”).

But while I think the DoL has long and consistently been supportive of helping us offer advice to participants, there is one thing that they have been just as consistently—and rightly, IMHO—concerned about; advice biased by the compensation of the person making the recommendation. Participants need help, after all—but not in being betrayed by the interests of unscrupulous advisers.

- Nevin E. Adams, JD