Here’s a scenario for you: a group health and wellness client you’ve represented for over ten years approaches you to be his/her adviser on a 401(k) plan.
Congrats! You’ve worked hard to position yourself as a valued adviser. No doubt you’d like to reap the fruits of your labor.
But your next action is extremely important. It may have not only ethical consequences, but legal ones as well. It is vital that you go forward with a “good karma” mindset — for both you and your client.
Since I don’t know you (or do I?), here’s the first of my two qualifying questions for you:
Are you both experienced and qualified to service your client’s retirement plan?
If not, take the high road! Tell your client you are grateful for the opportunity, but to service him/her better, you would like to bring in a colleague who specializes in this area. By doing so, you will probably save your health and welfare business, not to mention garnering your client’s further respect and appreciation.
If you cannot find a retirement specialist you know and trust, it is better to walk away from this scenario. Again, take the high road!
If you are properly licensed; if a retirement specialist sees no conflict of interest; and if the specialist has his/her broker-dealer’s approval; then you may receive compensation. Keep in mind that the broker-dealer will want proof of your licenses. Also, if the 401(k) is a registered product, the broker-dealer will insist that you are under its BD before any compensation may be granted to you.
Here’s another scenario: you have a handful of retirement plans that you are servicing. In this case, my question for you is: Have you asked your clients if they are looking for investment advice, or investment education as their adviser?
Listen carefully! There is both an ethical and a legal consideration here!
If your client wants investment advice for participants, are you an RIA? If you don’t know what that stands for, you’re not!
Please, please, for the integrity of our industry and to reduce your risk and the risk of the fiduciaries in this plan, say to your client, “I’d like you to consider engaging our services via the ‘certified computer education’ model versus the investment advice model. I would further recommend that if your staff needs investment advice, they use a fee-only CFP. This way, you are not endorsing me as an adviser and adding unnecessary exposure.”
By acting ethically, we find ourselves working well within the law.
The retirement plan may be delivered to you on the silver platter, but make sure your story won’t tarnish if the DOL comes knocking!
Are there any burning ethical issues that you believe our industry needs to address? Please let me know.
Arnoff is the co-author of The Three R’s of Employee Benefits: Recruiting, Retention, Rewards. He will soon appear on the Wealth Channel at
