From analyzing the developing definition of fiduciary to discussing the best ways for advisers to differentiate themselves from the competition, the American Society of Pension Professionals & Actuaries' "10th anniversary 401(k) SUMMIT" gave more than 950 attendees plenty of tricks of the trade to improve their business and stay informed on industry developments. Held March 6-8 in Las Vegas, the SUMMIT drew a range of retirement advisers, recordkeepers, plan administrators and others from across the country.
Know your value
In the session "Building Your Team's Value Proposition," presenters Sue Kelley of Ann Schleck & Co. and Invesco's Rich Schainker detailed the benefits of having - and actually using - a well-developed value proposition to retain clients and attract prospects.
The most common trap in creating a value proposition, according to Schainker, is focusing on your own experience and not stating first how that experience can help the client with their needs.
"Work very hard to express what you do in the form of a benefit to the client," said Schainker. "It's not about you, it's about them."
Many advisers make the mistake of "basically regurgitating a resume," he says. Clients want to know their adviser is knowledgeable, not just that they have experience.
A value proposition is worthless if clients and prospects can't understand it or how it relates to them, added Kelley. While the messaging might change depending on the target audience, Kelley explained that it's important to use your value proposition to improve your relationship with existing clients, not just prospects.
Such an approach will help improve cross-selling opportunities and increase client retention, she said.
Schainker and Kelley detailed four factors that keep most value propositions from being a differentiator for advisers:
1) They're too high-level and generic in nature.
2) They lack specific recommendations and insights.
3) They don't highlight the firm's proprietary tools and methodologies.
4) They focus on capabilities and process instead of outcomes.
There are also four steps to developing a value proposition. Step one, "Determine Your Differentiators," involves brainstorming very specifically about what makes you stand out from the crowd, then clustering the results into related groups.
During step two, "Build Your Fact Database," each team member should be familiar with the answers to questions about how you do what you do and why you do it.
In step three, "Determine Themes and Sales Messages," advisers need to change their thought process of emphasizing a laundry list of things they do well. None of them matter unless they apply to a specific client's needs, said Schainker.
Finally, step four, "Develop the Story," requires practice, practice, practice of delivering the value proposition - at least seven times, according to Schainker - before it can be done in public.
"Managing your message can often be the difference between winning and losing in a competitive marketplace," he said.
ASPPA's Brian Graff moderated a discussion with the Senate Health, Education, Labor and Pensions committee's chief council Gregory Dean on legal and regulatory developments. Graff addressed with Dean the concerns of the broker community that federal changes to the definition of fiduciary will expand the quantity of fiduciaries, but not the quality.
ASPPA's position on the new fiduciary definition proposal is "middle of the road," Graff maintained. "We supported the proposal in principle, but had a lot of concern about some of the things it did," such as the fact that "if you present yourself as being an ERISA fiduciary - guess what? You're an ERISA fiduciary," he said.
Dean was light on specifics, but promised ASPPA members that both Congress and the White House were paying attention to their concerns.
"I want you to know that your voice is being heard," he said.
What will the changes mean for advisers? "Probably since you're fiduciaries now, you're going to [remain] fiduciaries," said Dean.
Even so, he predicted that there is "a long way to go" before the Securities and Exchange Commission makes any decisions on how fiduciary duties will change, but added that the Department of Labor "is racing ahead" on their efforts to broaden the definition of a fiduciary.
On the topic of "Plan Design Trends and Technical Expertise for the Advisor," Prudential's Jennifer Lima and Paul D'Aiutolo of UBS Institutional Consulting Group shared insights into how advisers and recordkeepers can work together effectively.
The audience - approximately half recordkeepers and half advisers - was likely not surprised when D'Aiutolo explained that the worlds of recordkeeping and advising are "starting to commingle."
D'Aiutolo shared his experience of the plan sponsor's view of the recordkeeper: "When the relationship starts with the adviser they tend to view the recordkeeper as more mechanical: operations, administrative."
Then, Lima discussed what plan sponsors think should be the role of their advisers.
"We want somebody who's independent," they told her. "We're looking for that independent guidance."
A trusted adviser/recordkeeper relationship, according to D'Aiutolo and Lima, is able to deliver service agreements, rules of engagement, legislation and regulatory updates, plan design and testing, and communications to the plan sponsor, as well as to explain who is responsible for which services.
Of course, the role the adviser plays in the deliverables is likely to change from one recordkeeper to another, based on the recordkeeper's capabilities, D'Aiutolo noted.
One powerful tool of the adviser is the ability to "force the recordkeeper to take action and stand behind their decisions," said D'Aiutolo.
At the same time, he urged advisers to "leverage your recordkeeper because they can become an endorsement for you."
In the session, "Tools and Techniques for Your Retirement Plan Practice," Alexander Assaley of AFS Financial Group and Amy Glynn of Pension Resource Institute urged the audience to use the tools offered by third parties, such as practice management and benchmarking, to grow their business.
"The days of winning business through investment due diligence are certainly long gone," said Assaley.
He assured the audience that there is a marketplace for both fiduciary and non-fiduciary advisers. Such areas include committee management - "a huge area that I think can be exploited," said Glynn - and participant advice.
When working with a third party, there are four steps to follow for a successful relationship:
1) Review the TPA's tools for specific services and conduct a fee analysis.
2) Select the TPA that integrates most effectively with your business.
3) Apply the tools consistently across all clients and prospects.
4) Utilize the tools consistently. "A common pitfall is altering, stopping or changing third-party tools too frequently," warned Assaley.
Recent controversy over target-date funds has put a spotlight on Qualified Default Investment Alternatives, and in their workshop, "QDIA - Silver Bullet or Headache," Mercer's Muriel Knapp and Lisa Lund Lattan of American Century Investments cautioned that assuming QDIAs are for everyone is dangerous, and shared key questions to ask when determining if a QDIA is the right fit. According to Lattan, "the big question is will the use of a QDIA help or hurt participants in the plan achieve their retirement goals?"
Issues facing users and advisers of target-date funds include the ability to monitory performance and custom versus off-the-shelf products: what are the cost differences and role of the investment manager?
When weighing their liability and exposure risks, advisers should always keep in mind the employer's investment policy statement, said Lattan.
While "a lot of people don't know where they put it," he said, it's important to locate the document and ensure that QDIA and monitoring plans are specifically added.
In their session, "Increased IRS & DOL Enforcement - What Role Can You Play?" Laura Gaynor of Diversified Investment Advisors, David Levine of Groom Law Group and Monika Templeman of the Internal Revenue Service went over the differences between an IRS compliance check and an audit.
During a compliance check, participants can expect their information on return filing to be verified, but books and records will not be inspected, unlike during an audit.
There was a question as to whether people who were randomly selected for a 401(k) compliance questionnaire by the IRS in May 2010 were being subject to audits based on the data they supplied, but Templeman assured advisers that was not the case.
To close the workshop, the trio listed the "top 10" 401(k) plan errors:
1) plan documentation failure
2) failure to follow the terms of the plan
3) failure to use the plan's definition of compensation
4) failure to follow the plan's matching contribution provisions
5) failure to satisfy the ADP/ACP nondiscrimination testing
6) failure to include all eligible employees
7) failure to limit election deferrals to the Code Section 402(g) limits for the calendar year
8) failure to timely deposit elective deferrals
9) failure to follow the plan's loan provisions and violation of Code Section 72(p)
10) failure to follow the plan's terms regarding hardship distributions
According to Templeman, "loans and hardship distributions are now becoming serious issues."
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