Insights from the experts in investment fiduciary responsibility.

A Winning Proposition: The AIF® Partnering with an Independent Auto Rollover IRA Provider

Posted by Mark Koeppen and Jeff Linkowski, AIF® on October 15, 2018

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A Winning Proposition: The AIF® Partnering with an Independent Auto Rollover IRA Provider

Year-end planning for business owners takes on many forms, but for those that sponsor 401(k) plans, it should include a review of the company plan and preparing amendments accordingly. For AIF® Designees and advisors, that means a thorough review of the plan, including arrangements, agreements and service providers.

One persistent plan sponsor challenge (that results in wasted productivity) involves terminated participants, especially former employees and/or participants now missing or unresponsive. Low-balance terminated participants can be automatically removed via mandatory force-out (Fi360 Prudent Practices® Criteria 3.2.5).

The nature of these participants presents a range of issues for sponsors, as they are required to deliver formal plan disclosures and, in some cases, additional IRS and DOL reporting. Unresponsive former employees also drive up participant numbers while decreasing the average account balance, leading to less favorable recordkeeping plan pricing.  Removing them in a timely manner is in the best interest of the plan sponsor.  Advisors who specialize in the 401(k) market would be wise to use the year-end review as an opportunity to help plan sponsor clients address this challenge.  As you strive to both maintain your current plans and identify additional business opportunities heading into 2019, removing or simulating the removal of de minimis participants can pave the way for new opportunities.

Forms 5500, Schedule C and Schedule H offer insight into how many company plan participants are former employees, how much the plan is paying in administrative fees and other fee arrangements. This gives you the opportunity to present strategies that improve the plan’s numbers.  In addition, advisors can ask about IRS 8955-SSA, a not-for-public form filed by the plan sponsor when a participant separates from service covered by the plan in a plan year, and the participant is entitled to a deferred vested benefit under the plan.

Establish a plan

Advisors can partner with an independent IRA rollover provider to create a cleaner, more efficient plan for a record keeper to price. Plus maintaining that partnership with the IRA rollover provider is portable between recordkeepers and can provide stability that you can trust. This adds value to current clients and will establish your value with a potential client before securing that new plan.

The primary benefits of implementing automatic IRA rollovers include:

  • Reducing administrative time and actual expenditures for plan sponsors
    • Participant disclosures must still be made to ALL participants
  • Mitigating fiduciary liability
  • Leveraging these reductions to decrease plan pricing and the cost to existing participants,
  • Enabling plan sponsors to focus on the participants who matter most and can drastically reduce red flags that lead to DOL audits
  • Offering terminated employees a post-plan experience
    • Reduce 401(k) leakage by providing the right IRA rollover experience the is low cost, generous default crediting rate and a user experience that is focused on financial wellness

Although the benefits are evident, many plan sponsors don’t take time to evaluate the services of an IRA rollover provider, which creates an opportunity for advisors to point out and help the client comply with their Duty of Prudence.

Auto rollovers/Mandatory Force-outs

As part of the mandatory 401(k) force-out process, when an employee leaves a company, accounts from $1,000 to $5,000 must be transferred into an individual retirement account. For accounts under $1,000, it’s generally assumed that participants will be forced out in cash, but unfortunately, this often results in uncashed checks.  Adhering to that elementary thought process means missing a great opportunity to add value to your plan-sponsor client. As an alternative, recommend changing the force-out language in the plan document to indicate all accounts under $5,000 will be transferred to an IRA, with the help of an independent rollover provider.

This will alleviate a major pain point for plan sponsors, as again, accounts under $1,000 often result in uncashed checks. Whether the terminated employees can’t be located or simply aren’t being responsive, they and their assets are still officially part of the plan until those checks get cashed. The best way to attract and retain clients is by continuing to add value year-over-year.

Implementing strategies to address the missing participant issue, deal with uncashed checks and institute a totally free solution by forcing out all accounts under $5,000 into an IRA creates good will among current clients, strengthens your role as a trusted advisor and enhances the value that can be offered to potential clients.

Do the math

The two major factors that typically figure into a recordkeeper’s cost analysis/pricing for a 401(k) plan are: the number of participants and average account balance. Removing low-balance terminated participants results in fewer participants, while simultaneously increasing average balance among remaining participants. Decreasing the former and increasing the latter offers a great scenario to obtain a better price. It also helps adhere to several Fi360 Practices and Criteria regarding Monitoring.  Both objectives can be achieved by rolling over all accounts under $5,000 into an IRA.  Furthermore, uncashed checks can lead to fines from the DOL since sponsors have a fiduciary duty to act in the best interest of all plan participants.  Such audits can result in fines that may cause the sponsor and recordkeeper to argue over who should pay, with you getting pulled into the middle. Implementing automatic IRA rollovers helps avert this type of contentious situation that can jeopardize client relationships.

Service Providers

AIF Designees subscribe to the Prudent Practices®.  Such practices mandate due diligence in all aspects, including reviewing service providers and agreements.  As a good rule of thumb, it is generally better to use an independent auto rollover provider separate from the bundled recordkeeper.  Many large bundled recordkeepers like to move low-balance, terminated participants into their own IRA product and will not accept accounts under $1,000 or be proactive in locating missing participants.  Recordkeepers could also enter into an exclusive arrangement with an IRA provider who is paying the record keeper for transferring accounts.  In the latter, the recordkeeper may be acting in a fiduciary role by selecting a single provider and not offering the plan sponsor any alternative.  Moreover, said revenue arrangements should be disclosed as they represent a possible conflict of interest.

From all of these perspectives, and as an AIF® Designee and advisor, you should help your clients comply with their fiduciary obligations and provide comparisons to aid in their due diligence.  In your annual meetings, reviewing the auto rollover IRA solutions should be added to your standard benchmarks and ensure your clients are following their document by removing terminated participants regularly.  The evidence supports that partnering with an independent IRA rollover provider is a winning proposition.

Some specific Fi360 Prudent Practices® criteria references regarding auto-rollovers are:

  • 1.3.2      Acknowledge Status as a Fiduciary
  • 1.4         Conflict of Interest – Service Provider
  • 1.5.2      ERISA Disclosure
  • 3.1         Due Diligence on Service Providers
  • 3.2.5      Auto Rollovers
  • 4.4         Fees
  • 4.4.1      Who is being paid what?

Mark Koeppen is Senior Vice President of Strategic Rollovers at FPS Trust Company in Centennial, Co.

Jeff Linkowski, AIF®, is Director of Sales for FPS Trust


Don't forget to check out Fi360's webinar on mandatory force-outs on Tuesday, October 16 from 2:00 - 3:00 PM E.T.

Register here

A Math Nerd's Evaluation of Blaine's Reputation White Paper

Posted by Tyler Kirkland, AIF®, PPC®, Director of Business Development and Client Engagement on August 31, 2018

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A Math Nerd's Evaluation of Blaine's Reputation White Paper

Warning #1: This post is a little different from my typical playful delivery.

I recently sat in on a webinar called "How much is your reputation worth?" It was presented by Scott Revare, AIF®, managing director with Fi360 and Blaine F. Aikin, AIFA®, CFA, CFP®, executive chairman with Fi360 and CEFEX.

During the webinar, Blaine presented a slide that featured an equation for trust, sourced from The Trusted Advisor, a book by David Maister, Charles Green, and Robert Gaiford, 2001.


The moment I saw the following slide, I knew I wanted to write about it!

Warning #2: If you don’t enjoy math to some degree, you may want to stop reading at this point. There are plenty of posts out there that you will enjoy a lot more!

The Variables

The trust equation tells us that one’s level of trust is a function of ones: Credibility, Reliability, Intimacy and Self-Orientation.

Let’s break down the variables, shall we?

  • Credibility is the quality or power of inspiring belief. One can be credible or not credible, but when it come to the idea of credibility, we can establish that credibility itself, cannot be a negative value. Further, someone can have zero credibility.
  • Reliability can be defined as the quality or state of being reliable…. -_-  As an aside, I hate when a definition includes the root word.  Apparently, Merriam-Webster does not share my frustration. Let’s go with definition number 2. Reliability is the extent to which an experiment, test, or measuring procedure yields the same results on repeated trials. Better! By applying similar logic as we did to Credibility, we see that someone is either reliable or un reliable, but the idea of reliability cannot be a negative value… And as sure as you are living, you know someone who has 0 reliability.

  • Intimacy the state of being intimate… really? Intimacy is something of a personal or private nature. I am sure you know what’s coming next. One can be intimate or not intimate but intimacy cannot exist as a negative value.

  • Self-Orientation This definition is tricky as it doesn’t exist in the M-W Dictionary, so we must derive it. Easy, right?!

    • Self - the union of elements (such as body, emotions, thoughts, and sensations) that constitute the individuality and identity of a person

    • Orientation - a usually general or lasting direction of thought, inclination, or interest

    • Thus, Self-Orientation is focusing one’s thoughts, inclinations or interests on their typical character and behavior. We will dig further into this variable, as we look at it relative to trust.

The Equations

Now that we have an understanding of the variables, we can take a stab at an analysis of the Trust Equation.

Trust = (Credibility + Reliability + Intimacy) / Self-Orientation

What I find most interesting about this equation is what can be derived by applying a simple math concept.

The Limits

I think it is amazing that mathematically you can model concepts that are obvious or inferred in “real life."

For example:

Mathematically we see that as one focusses more on oneself, the trust that has been established will head towards 0.

The fastest way to destroy trust is to focus solely on oneself.

On the other hand, with Self-Orientation being in the denominator of the Trust Equation, one cannot be completely selfless (Self-orientation ≠ 0). This makes sense as one who does not care about himself will fail to exist and therefore eliminate the potential of trust.

In other words, if one has no Self-Orientation, there can exist no trust. What happens if we approach zero Self-Orientation from a high level of Self-Orientation?

We see Trust growing towards infinity by multiple of one’s Credibility + Reliability + Intimacy but to infinity, none the less. BUT, Self-Orientation must exist (Self-orientation ≠ 0) in order for Trust to exist. This paradox speaks to the need of a standard which focuses on trust… sound familiar?

The Root

The root of an equation occurs when equality occurs. In plan terms, when will one’s level of trust equal their (Credibility + Reliability + Intimacy) / Self-Orientation? 

We have established that Self-orientation ≠ 0. This implies that the only way equality can occur is if Credibility + Reliability + Intimacy = Trust. The only time this can occur is if one is not credible, not reliable and has no level of intimacy. When these variables are equal to zero, there will be No Trust.

Trust = (0+0+0) / Self-Orientation = 0 -> No Trust

Conclusion: For Fiduciaries, trust is a must!

If one is a fiduciary, trust must exist as an investment fiduciary stands in a special relationship of trust, confidence, and/or legal responsibility.

(Credibility + Reliability + Intimacy) / Self-Orientation > 0

Since Self-Orientation must be greater than 0, we can also imply...

Credibility + Reliability + Intimacy > 0

...for trust to be established.

Although the Trust Equation has no Maxima, and continues towards infinity, it gets there faster when all of the following are true, as well.

Credibility > 0
Reliability > 0
Intimacy > 0

Your ability to inspire belief, your showing up and your relationships will build trust. Your motives have the ability to destroy it, rapidly if misplaced.

What if your reputation were the vehicle by which trust was transferred between people… Someone should model THAT equation.

RFP Best Practices

Posted by Tyler Kirkland, AIF®, PPC®, Director of Business Development and Client Engagement on August 10, 2018

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RFP Best Practices

Let’s get on the same page…

A Request for Proposal, or RFP, is a document that a business, non-profit, or government agency creates to outline the requirements for a specific project. They use the RFP process to solicit bids from qualified vendors and identify which vendor might be the best-qualified to complete the project.

You see, the primary plan fiduciary has a duty to control and account for all investment-related fees and expenses. There are three components underlying this duty. They must decide:

  1. Who is getting paid
  2. How much they are getting paid
  3. Whether such payments are fair and reasonable for the services provided

Fair and reasonable is generally examined according to a relative to a standard. In other words, the fees and expenses are evaluated relative to the charges that would be incurred if the same services were supplied by a leading competitor.

This is why a formal “request for proposals” or “RFP” process is suggested to select service providers and, as much as possible, to make apple-to-apple comparisons.

An RFP allows you to clearly state service requirements, call for clear disclosure of fees, and document the factors that were weighed in making the selection.

Where do I go from here?

Establish a successful RFP process and remember, it is not enough to set it and forget it. After service providers are selected (through a process, of course) they must be monitored. Practice 1.5, from the Prudent Practices® for Investment Advisors Handbook, calls for comparative reviews of service agreements to be conducted and documented approximately every three years.

We suggest using a methodology similar to the one depicted below.

  1. A consultative process is used to understand the specific requirements and needs of a plan
  2. These requirements are screened through an extensive database of provider capabilities and possible viable candidates
  3. Once service provider candidates are chosen, an online request for proposal is created, featuring investment, pricing and additional information requirements customized to fit the specific needs of the plan sponsor
  4. After a provider selection is made, a report is created and archived to document the entire selection process

Don’t you forget about me!

It is not always about the Benjamins

A common mistake when conducting RFPs is focusing on price. Take a step back and look at the big picture. If a provider is priced higher than a peer, it does not mean they should be down for the count. Take a look at the services relative to peers. Remember sometimes you get what you pay for. It is important to keep in mind your client’s needs when considering providers.

With RFPs, less is more

Inviting too many respondents can overwhelm sponsors. It is imperative to the process to do some initial screening and invite only those who meet a majority of your plan’s needs or wants.

Friends, how many of us have them?

Only inviting providers you know is a detriment to your clients and could ultimately reflect poorly on you. Your clients should experience and evaluate providers that first and foremost meet their needs. This is not a time for tunnel vision.

The rules of engagement

You must. MUST. MUST establish ground rules. While it is not all about pricing, pricing can be significantly impacted if you let some providers include their proprietary target date funds or CIT investments.

Consider using an online vendor search and RFP tool

When done correctly, a prudent RFP process takes time, and time is money (as we all know).

Using an online vendor search and RFP tool can aid in your efficiency by providing:

  1. A faster process
  2. Electronic vendor responses
  3. Quick replication of your vendor instructions and key question
  4. Leverage of pre-collected questions and vendor answers to whittle down your list of candidates
  5. Online research of vendors and features
  6. Simplified presentation generation
  7. An apple-to-apples pricing presentation

The final countdown

Regular review of all vendor contracts helps foster an ongoing, mutually beneficial relationship.

At the end of the day you want to spend more time with firms that are the best fit for your plan and plan sponsor (and less time with those firms that don’t meet your needs). Keep in mind that sometimes the ultimate result is securing updated pricing and services from your current provider.

A prudent RFP process will allow operational efficiency and an overall greater client experience.  Your plan sponsor probably has not done a full RFP before, so this is your opportunity to add additional value and get to know you clients better.

Interested in seeing an online RFP solution in action?
Request a demo from our team!

What does Client Engagement Mean to Us?

Posted by Linda Groden, AIF®, Client Engagement Manager on July 27, 2018

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What does Client Engagement Mean to Us?

Fi360 has adopted a cultural model to ‘exceed our client’s expectations’ every day and in every way.

Whereas, the Fi360 Client Engagement Team might technically be referred to as the ‘support’ team, we are so much more.  Aside from providing assistance/support with all of the products and services available through Fi360, we seek to engage our clients throughout our long-term relationships.

Whether you are training to become an Fi360 Designee (AIF®, AIFA®, or PPC®), or have already been awarded a Designation, we are here to assist with questions relative to:

  • Your training program
  • Your annual renewal
  • Continuing education requirements
  • Locating and utilizing the resources in the Designee Library
  • Our annual Conference
  • And, everything in between

If you are new to our software solutions, we will assist you with ‘onboarding’ aka training options, and/or simply answering your questions. In our ongoing relationship with you, we know that all of your advisory client relationships may be unique, hence you might need guidance or a refresher on how to navigate the software to accomplish your objectives. Finally, you may not even be aware of all of the capabilities our software offers for specific areas of your practice management.

Please --- reach out to us via the contact information below, as we are here to Exceed Your Expectations!

Client Engagement Team

How to Get the Most Out of Model Portfolios

Posted by Travis Reeder, AIF®, Product Marketing Manager on July 20, 2018

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How to Get the Most Out of Model Portfolios

With the rise of target date funds, managed, it seems risk-based model portfolios are not seen as often in employer-sponsored retirement plans.  That doesn’t mean model portfolios are extinct or ineffective.  In fact, many people prefer the control offered by model portfolios.  Participants can pick and adjust their own asset allocation over time There’s also the added flexibility of not being stuck with only the proprietary fund that make up the overall target date vehicle.

Yes, target date funds are simple to market and simple to understand. Pick your retirement date and forget about it.  But if you work with plans that offer models, the question then becomes, how can model portfolios be showcased in an equally effective way?  At the end of the day, participants just want to say, “Oh! That’s me right there. That’s what I should do.  That’s my model.

One idea I recently found was to create personas and assign one to each pre-defined model in the plan.  As both a product manager and a plan participant myself, this idea resonated with me.  You can explain a model all you want, but sometimes, for the average investor, you just need a name, face and brief description of the typical person that would benefit from the model. This gives the model a more personal touch.  To put it another way, instead of simply showing an 8 percent, 10-year return and standard deviation of 9.13 percent, consider showing someone the 80 percent equity model this way:

Sally is 42 years old. She has two kids and likes to bake bread. She invests in the 80/20 model because she started saving for retirement later in life and still needs her money to grow significantly over the next 20 years so she can retire comfortably.

You can see how this description becomes more tangible for an investor. We don’t create model participant personas here at Fi360, but we do create advisor personas.  These help our software development team better understand who they are building our toolkit software for by understanding the ‘typical’ person that would use a feature.   I could see the same approach being helpful for plan participants who need to decide which asset allocation/model is right for them.

Helping plan sponsors and investment committees is just as important as helping the participants. For the plan sponsor, you need to paint a different picture, one with graphs, benchmarks and portfolio level summaries that show prudent management. During my conversations with advisors, they often tell me that Fi360’s software and reporting does that. But more importantly, it helps them put a process around their models.  Those that have gone through our AIF® Designation training know process is a key component of acting in the best interest of investors. 

A process is great, but it’s not going to help a modern business without being an efficient process.  Many advisors who come to us for help would pull model data from one source, analyze and format it in excel, convert it to a PowerPoint or some type of PDF, and then finally present it to their clients. Unfortunately, this can take weeks.  What I hear from advisors is that our Fiduciary Focus Toolkit™ helps them follow a process. Not only that, but a process that is quick and free of error.  So, if you need to boost your efficiency, we can help you make the most of your model portfolios. See for yourself. We’re great with analytics and reports, but it’s up to you to write personas for your models. Only you can add that human touch! 

Fi360 and The Retireholi(k)s Review the Fiduciary Focus Toolkit

Posted by on July 13, 2018

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Fi360 and The Retireholi(k)s Review the Fiduciary Focus Toolkit

The group that makes up The Retireholi(k)s are from the TPA firm Plan Design Consultants, Inc.  and they have been in business since 1975. They love discussing all aspects of the retirement business with industry leaders in a unique and fun way. They visited the Fi360 Conference in April 2018 and filmed one of their episodes with our very own Dave Palascak, vice president, software product manager. Watch the full episode below! 


Educating Plan Sponsors to Win and Retain Business

Posted by Ryan Lynch, , AIF®, PPC®, Program Manager on July 09, 2018

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Educating Plan Sponsors to Win and Retain Business

At Fi360, our shared mission is to help our clients profitably gather, grow and protect assets through better investment and business decision-making.  To further this mission, we equip our nearly 11,000 designees with tools to help them retain and grow AUA. The latest offering is a white-labeled education series for plan sponsors, aptly titled, Plan Sponsor Education Series. It can be branded with your company logo and is included in the cost of the designation dues. (Not yet a designee? It’s time to change that!) 

What follows is an overview of the first three pieces in the Plan Sponsor Education Series, as well as a preview of what’s to come.

The purpose of the Committee Welcome Packet is to help educate a plan committee on their responsibilities, and create a document trail to corroborate conformance to a prudent process. It consists of a checklist of common documents required of plan fiduciaries. When all appropriate documents have been gathered, the aggregated packet can be provided to committee members to help them understand, and fulfill, their role.

You can use this document to showcase your fiduciary expertise by:

  • Helping an existing client gather and review fundamental committee documents
  • Demonstrating to a prospect the kind of value that they can expect in engaging your services

The second in the series, Best Practices for Investment Committees, is a great companion to the Committee Welcome Packet. It helps plan sponsors consider an investment committee appropriate to its plan size and resources. It also covers the basics of forming a committee and includes a helpful flow chart to aid in the committee formalization process.

You can use this document to showcase your fiduciary expertise by:

  • Helping a prospect understand the benefits and effort involved in establishing a committee
  • Standardizing your plan client onboarding process and setting appropriate expectations

Of the three, What You Need to Know About Fiduciary Responsibility is most oriented to your prospecting efforts. This short, minimally-jargoned white paper is a great way to introduce a plan sponsor to fiduciary concepts. Sections like ‘Are you a Fiduciary?’ and ‘Core Responsibilities’ provide concise explanations that will prime them to want to learn more. It concludes with a space to add your firm’s contact information so that they can get in touch with you for more information. A perfect leave-behind!

You can use this document to showcase your fiduciary expertise by:

  • Including a copy in your newsletter or a direct mail campaign
  • Highlighting the gravity of fiduciary responsibility
  • Turning a prospect’s fear of liability into a plan to achieve excellence (by employing the Prudent Practices®)

Next up in the Plan Sponsor Education Series is a piece for developing an effective participant education program. Present a broad scope of options to your clients and prospects and then help them hone in on a program that will best serve their employees.

Fi360 designees can access these valuable resources by logging into the Designee Portal. If you’re not a designee yet, but are interested in a preview of this content, please complete the form below.

Conformity Is Not the End: Part 1

Posted by Tyler Kirkland, AIF®, PPC®, Director of Business Development and Client Engagement on June 12, 2018

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Conformity Is Not the End: Part 1

Be sure to check out the introductory post for this series!

Define Your Client Service Strategy Goals

When the novelty becomes the norm, there is pressure to innovate. Therefore, conformity to elevated standards is simply the catalyst for growth and innovation

If everyone is operating at a high standard the only way to establish differentiation is by adding more value than your peers. But how?

  1. Define your client service strategy goals and success metrics (this is our focus for this post)
  2. Develop your client service value proposition
  3. Design the service strategy
    • Client segments
    • Client team structure
    • Team roles
    • Services by segment
  4. Define the client experience and develop an implementation plan

Throughout this series, I will be walking you though how you can raise the bar with an Effective Client Services Strategy.  If you’re already doing the right thing when it comes to in the investment management process, you can add value to your clients by keeping them satisfied and retained!

#Goals #Priorities

On a consistent basis (annual is our best practice) be sure to review your client service strategy and establish client service expectations. Ruthless prioritization will advance your practice to the next level. Below is a framework for getting started.

Measuring success

Once your goals have been established, you can begin execution but.. What is success? Well, it depends on who you ask. Regardless of how you answered, in order to measure success you will want to establish an inventory of metrics, set target thresholds and document results.

When success is measured, you can now iterate and improve.

I recently ran a half marathon. My success metrics were completion and time. The thresholds were to finish a 13.1 mile run in 2 hours and 30 minutes.

Metric established, threshold set.

After I finished and realized I didn’t cause myself irreversible damage, while catching my breath, I looked up my official time: 2 hours 32 minutes 11 seconds. I was SOOO close! But it’s not over. These results are simply an opportunity for improvement and they prove to me that when you set a stretch goal, getting close is a healthy motivator.  Next year I will set a new threshold and make some adjustments during the race to improve my completion time. 

Now it's your turn! What goals will you set for your practice? Make them challenging and see just how far you can go. 

Progression to Excellence – Why You Don’t Need to Wait to be Great

Posted by Ryan Lynch, AIF®, PPC®, Program Manager on June 05, 2018

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Progression to Excellence – Why You Don’t Need to Wait to be Great

If you did not attend the 2018 Fi360 Conference in San Diego, this post is for you. In it, we’ll share a few gems from Blaine Aikin’s highly-rated session, “Opportunity Knocks.”

Fi360’s executive chairman lays out a “Progression to Excellence” that begins with the Prudent Practices® and culminates in third-party-verified conformity to the Practices. He also explores the connection between professional reputation and fiduciary conduct, surmising that business success follows from a well-built reputation.

Progression to Excellence

Before Fi360 had a single product, the Prudent Practices® were born. They are as foundational to the organization as to the application of fiduciary excellence itself. Blaine outlined the progression – in the context of Fi360 product offerings – in the chart below:

Why the Time is Right

In the wake of the DOL’s now-vacated fiduciary rule, confusion abounds among industry stakeholders. While the political pendulum will continue to swing, the invariable truth of fiduciary principles will remain.

Reputation – one’s greatest asset – proceeds from character which, fortunately, is under your control. Quantifying the benefit of a sound reputation, Blaine cites a 2006 study that suggests reputable professionals can command an 8 percent price premium (good news in the age of fee compression). 1

Interested in learning more about how you can curate an industry-leading reputation? Get your free copy of Blaine’s whitepaper, “Fiduciary Conduct and Your Reputation.”



1 THE VALUE OF REPUTATION ON EBAY: A CONTROLLED EXPERIMENT by Paul Resnick , Richard Zeckhauser, John Swanson, and Kate Lockwood https://sites.

Conformity Is Not the End: Introduction

Posted by Tyler Kirkland, AIF®, PPC®, Director of Business Development and Client Engagement on May 22, 2018

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Conformity Is Not the End: Introduction

Conforming to the Fiduciary Standard

Adherence to a standard can be the foundation for trust… and what good is the financial services industry without trust?  Standards provide a framework for consistency, risk management and increased efficiency and effectiveness.

At Fi360, the Prudent Practices® are organized under a four-step Fiduciary Quality Management System (FQMS). The steps are consistent with the global ISO 9000 Quality Management System standard, which emphasizes continual improvement to a decision-making process. In other words, meeting the standards is only the first part of implementing the system. 

Step 1: Organize

During the organize stage, the investment fiduciary identifies laws, governing documents, and other sources of guidance for fiduciary conduct.

Step 2: Formalize

During the formalize stage, the investment fiduciary identifies the substantive investment objectives and constraints, formulates asset allocation strategies and adopts an investment policy statement to guide the investment decision-making process. 

Step 3: Implement

The implement stage is when investment and service provider due diligence is performed and decisions about investment safe harbors are made. 

Step 4: Monitor

During the monitoring stage, the investment fiduciary engages in periodic reviews to ensure that the investment objectives and constraints are being met and that the Prudent Practices® are consistently applied. 

As time goes on, the number of people conforming to The Standard continues to increase. With so many financial intermediaries following a higher code of conduct, does an individual’s competitive edge dull?  Maybe mass conformity isn’t such a good idea… 

Raising the Bar

This is the basic principle of progress. When the novelty becomes the norm, there is pressure to innovate. Therefore, conformity to elevated standards is simply the catalyst for growth. 

If everyone is operating at a high standard the only way to establish differentiation is by adding more value than your peers. But how?

  1. Define your client service strategy goals and success metrics
  2. Develop your client service value proposition
  3. Design the service strategy
    • Client segments
    • Client team structure
    • Team roles 
    • Services by segment
  4. Define the client experience; develop an implementation plan

Throughout this series, I will walk you through how you can raise the bar with an Effective Client Services Strategy.  If you’re already doing the right thing when it comes to in the investment management process, you can add value for your clients and continue to delight them, making them clients for life! 

Continuous Improvement

In both the FQMS and a client services strategy, an iterative process is applicable and almost necessary. 

As a matter of fact, Practice 4.5 from the Prudent Practice Handbook for Investment Advisors reads:

There is a process to periodically review an organization’s effectiveness in meeting its fiduciary responsibilities.

This practice and its underlying criteria challenge complacency. Just because you conform to the practice once does not imply the work is done. 

Through regular assessments you can identify:

  • Conformities to fiduciary best practices;
  • Non-conformities to the same;
  • And opportunities for improvement.

An honest reflection of what worked and what didn’t will only empower you to exceed the expectations of your clients, your peers and even yourself.

P.S. For more information on the Fiduciary Standard of Excellence, the Fiduciary Quality Management System and the benefits of regular assessment, check out our Learning and Development Solutions.

Smile! 2018 Fi360 Conference Photos

Posted by Fi360 on May 21, 2018

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Fi360 Reacts to SEC Fiduciary Rule Proposal

Posted by Fi360 on April 23, 2018

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The SEC’s mind-numbing thousand-page, three-part “fiduciary” rule package didn’t deliver everything we wanted but it was what we expected (Check out Fi360 Executive Chairman Blaine Aikin’s recent piece for InvestmentNews on this.). While disappointing that investors will continue to receive advice from both fiduciary investment advisers and non-fiduciary brokers, the bar for both has been raised – marginally for advisers, and according to the SEC, materially for brokers. Of course we won’t know how high the bar has been raised until a final rule is adopted.

It is a back to the future scenario. Assuming the DOL rule stays dead for lack of an appeal back to the Fifth Circuit Court of Appeals, fiduciary advisors under ERISA will revert to the higher “sole interest” standard for retirement advisors that existed up until June of last year. Brokers that would have been fiduciaries under the DOL rule will fall down to a new, non-fiduciary “Regulation Best Interest” standard that brings with it quasi-fiduciary versions of the duties of loyalty and care. Interestingly, new model suitability rules coming out from insurance regulators more closely track the DOL’s Impartial Conduct Standards and with more robust fiduciary characteristics than are found in this first stage of the SEC’s rulemaking.

The shortest section of the newly proposed SEC rule (38 pages) notes that it’s largely status quo when it comes to the fiduciary status of registered investment advisors (RIAs). They will have additional disclosure requirements captured in a new Part 3 added to the ADV. This short (4-page maximum) document will also be required of brokers and dually-registered advisors providing consistency and the ability for investors to see specific standard of conduct differences across business models. The proposal also solicits comments on the merits of imposing a new Continuing Education requirement for advisors, similar to what is required of brokers, along with possible net capital and bonding requirements. Ironically, most state-licensed advisors have had the latter requirements for decades.

Brokers will have a new, higher “Care Duty” and conflict avoidance or management obligations, along with prohibitions against using the title “advisor” or “adviser” unless they properly register with the SEC. Interestingly, the proposal notes the potential competitive advantage of firms that are accustomed to working as fiduciary advisors and already prepared to comply with the new rules.

The devil is in the details and in bringing a final rule to pass that meets fiduciary muster. The initial rulemaking may be only a modest step forward in terms of investor protection, but it is not a leap backward as feared by some fiduciary advocates. For Fi360 stakeholders, timing of the SEC’s proposal is perfect. Next week, top practitioners, academics, regulators, and thought leaders will gather for the nation’s foremost fiduciary event – the Fi360 Annual Conference, which convenes in San Diego. We will follow up soon with the latest, most insightful coverage of the SEC’s proposed rule.

You Can Help Shape the Strategies of Retirement Advisors

Posted by Ryan Lynch, AIF®, PPC®, Program Manager on April 15, 2018

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You Can Help Shape the Strategies of Retirement Advisors

Believe it or not, it’s been a full 18-months since our last Retirement Plan Specialist Advisor Practice Management Benchmarker survey. If you are one of the 337 advisor teams who participated in 2016, we can’t thank you enough. Your responses are powering industry-leading insights that help shape the strategies of retirement advisors throughout the country.

Once again, we are asking for your input. By participating in the 2018 survey, you will receive a comprehensive report detailing best practices in staffing, sales, marketing, fees and services, and much more. This aggregated data helps you understand what other retirement specialist advisors are doing so that you can formulate your growth strategy. 

Those who participate in the survey will receive detailed information such as:

When should I hire additional staff? Common indicators advisors use to determine when to hire include:

  • Every $100,000 to $250,000 in revenue
  • When case load per advisor exceeds 30
  • Every 5 to 10 new plans

How many opportunities should I have in my sales pipeline?

  • Generally, you should have 4x your annual sales goal in your pipeline at any point in time
  • Total pipeline opportunities range from 19.8 prospects (emerging practices) to 153.5 prospects (large practices)

Should I have a new business minimum?

  • 51% of practices have a minimum for taking on new business
  • Most commonly this is a revenue or plan asset size minimum depending on your target market

It’s advisors like you who provide the data who help to make it so valuable. With your participation, the insights become even more powerful. Won’t you help us crack open the future of retirement plan practice management? To participate and receive the complimentary report please complete the form below. We’ll contact you to provide more detailed instructions. Thank you in advance for your participation!


Heads up!

As a further thank you for your time and input, we will be doing a drawing for one $250 Visa gift card. To be eligible for the drawing you need to submit a fully qualified survey response; the winner will be notified after the survey closes. Respondents of previously submitted surveys will be entered in the drawing retroactively.


Official Rules.  NO PURCHASE NECESSARY.  This Sweepstakes is sponsored by Fi360, Inc., Three Penn Center West, Suite 400, Pittsburgh, PA 15276. The Sweepstakes runs through the duration of the survey.  The drawing will be held when official survey closes.  The winner will be chosen by a random drawing of all eligible entries and the winner will be contacted by e-mail or mail.  The random drawing will be conducted by representatives from Fi360, whose decisions are final and binding in all respects relating to this Sweepstakes. Only one entrant per person or household is permitted. All state, federal and local laws apply.  VOID WHERE PROHIBITED.  All entries become property of Fi360.  By answering Fi360’s survey and participating in this Sweepstakes, entrants agree to hold Fi360, Inc. and its respective directors, officers, employees and assigns harmless against any and all claims and liability arising out of or related to the Sweepstakes. Odds of winning depend on number of valid entries received. One winner will receive a $250 Visa® or similar gift card. The retail value of all available prizes is $250.  Prizes are non-transferable, and no prize substitutions are available. All taxes on prizes are the winner’s sole responsibility. This Sweepstakes is open only to residents of the United States 18 years of age or older. Employees of Fi360 and its respective affiliated companies, parents, subsidiaries and advertising and promotion agencies and their immediate families (spouse, parent, child, sibling and their respective spouses) and members of their households whether or not related, are ineligible to participate in this Sweepstakes. Where required by law, the name of the winner may be obtained by sending a self-addressed envelope to Fi360, Inc. All restrictions apply.

Fi360’s Conference is Awesome and Here’s Why!

Posted by Ryan Dunay, Client Engagement Specialist on April 15, 2018

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Fi360’s Conference is Awesome and Here’s Why!

Despite the recent snowfall, winter is actually over and I think we all could use some Vitamin D.  It just so happens we are hosting the 2018 Fi360 Conference in a city that has adopted a rather fitting alias, the City with Sol!  By the way, sol is Spanish for sun.  So now you know a tiny bit of Spanish, which will come in handy when you attend the Fi360 Conference in San Diego.

A Vacation with an Education

Work and play collide beautifully in sunny San Diego. Conference prepares you professionally for the ever-changing regulatory landscape.  Earn continuing education (CE) credits for your Fi360 designation and other industry credentials by attending a variety of informative sessions that showcase practical retirement and fiduciary-based knowledge.  We’ve added sessions focused on marketing, sales and overall business development strategies that can be implemented in your practice immediately.  It’s no wonder the Fi360 Conference was named the “Best Fiduciary Conference for Advisors” in 2017 by Michael Kitces.  

If you’re new to the fiduciary scene, take advantage of the AIF® Designation training before Conference!  Learn everything you need to know about the Prudent Practices® and how to apply them to your business.  AIFA® Designation training is also available pre-conference for AIF® Designees ready to perform fiduciary assessments on internal policies, procedures and workflows to verify or certify an entity's adherence to a "Global Fiduciary Standard of Excellence.”

Like our designation training, the Fiduciary Focus Toolkit™ is rooted in the Prudent Practices.  Learn how the toolkit helps advisors implement a prudent fiduciary process at the Software Presentation, Wednesday, April 25. A lot has changed with the toolkit since last year! 

Network and Build Your Net Worth

Over 700 financial specialists will meet at the Hilton San Diego Bayfront Hotel to learn from industry experts and connect with like-minded professionals. This year’s Conference gives you the perfect opportunity to meet new people, reconnect with former colleagues and old friends, as well as share success stories with one another. 

We are proud to host the Women in Finance networking event at Conference for the third year. The women who attend Conference use this opportunity to share their unique challenges, make connections and celebrate successes. 
Petco Park, often referred to as the nicest ballpark in baseball, provides the backdrop to our Welcome Reception on opening night.  Even if you’re not a baseball fan, you will appreciate the gorgeous view of the San Diego skyline just past the outfield wall.  

Extend your education vacation a few days with colleagues and old friends. You can head back to Petco Park on Friday to watch the Padres take on the New York Mets. Or spend Saturday learning how to hang ten at some of the best beaches for surfing on the California coast.   

There is so much to experience at this year’s Fi360 Conference. Come for the educational sessions and wealth of fiduciary knowledge.  Stay for the beautiful San Diego weather. It is the City with Sol after all.

Register for the Fi360 Conference.  

Meeting a Global Standard of Fiduciary Excellence

Posted by Michelle Muller, Business Development Consultant on April 15, 2018

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Meeting a Global Standard of Fiduciary Excellence

As a member of the Fi360 sales team, I am privileged to speak with a variety of advisors. A good number of those conversations are centered around the DOL fiduciary rule and fiduciary responsibility. Over time, I have found these conversations usually fall into one of two categories:

Nervous/Not Prepared           Overconfident/Prepared

What is expected of me?       I got this!

Many advisors I speak to are nervous regarding the DOL fiduciary rule. There is hesitation and some uneasiness that comes from simply not knowing what is required of them and thus they question their process. Even when their current process incorporates fiduciary best practices, they feel ill-prepared. That is unsettling for any professional, but especially when you are the trusted advisor for someone’s financial future. 

I also speak to advisors who feel completely unaffected by the rule. “I’ve been acting as a fiduciary for years,” they tell me. While it’s great to feel confident, there is no harm in taking a few moments to double check your process to ensure you are meeting all the requirements expected of you.

Let’s Start with the Prudent Practices®

In 1999, Fi360 began educating financial professionals on a standard set of Prudent Practices®, and a few years later had them published as the first handbook dedicated to establishing a Global Standard of Fiduciary Excellence. The Prudent Practices are highly regarded in the financial industry and have even been used in litigation at the Supreme Court to prove a breach in fiduciary obligation. 

The Practices, supported by various case law such as ERISA, UPMIFA and UPIA, build a framework for a prudent investment process, while the underlying criteria to each practice provide further details that support the practice.


Altogether, the Handbook details 21 practices that represent the minimum fiduciary process required by law, each with at least two underlying criteria. 

The fiduciary movement is gaining momentum with end investors, who are more likely than ever to ask their advisor about their fiduciary responsibilities. The pressure is on! 

The Power of Self-Assessment 

Assessments are typically conducted to raise awareness of a fiduciary issue, or to identify potential shortfalls that may occur within an investment decision-making process. 

Assessing one’s own work can be difficult, but it is crucial in providing actionable information on opportunities for improvement and to verify you are adhering to a Global Fiduciary Standard of Excellence. 

  • Are you familiar with all the laws?
  • Is your conduct ethical?
  • Are you documenting properly and presetting your clients’ true and accurate information?
  • Are you applying a good due diligence process?

Fi360 has a great resource, the Self-Assessment for Fiduciary Excellence (SAFE). The SAFE is a simple and effective tool to quickly establish compliance with fiduciary practices. Not only does the SAFE verify adherence to a prudent practice, but it also enables fiduciaries to prioritize and measure progress, and better assure clients are well served. 

How Can Fi360 Help Bridge the Gap

So, you’ve taken the SAFE. Now what? 

Well, if you answered “no” or “I don’t know” to any question, this may indicate that a potential breach, omission, or shortfall could occur within your investment decision-making process.

Adopting the Fi360 Prudent Practices into your own investment processes can mitigate compliance risk, improve efficiency and effectiveness, and distinguish you as a fiduciary specialist.

Accredited Investment Fiduciary® (AIF®) Designation training is rooted in Fi360’s Prudent Practices, which are substantiated by case law. Only AIF® Designees have been certified specifically for their ability to follow a fiduciary process with their clients’ best interests at heart.

In an industry that relies primarily on referrals from satisfied clients, it’s your reputation and your ability to demonstrate your commitment to your clients that will help you stand out and win more business. 

Best practices for fund replacements to keep you in compliance

Posted by Dave Palascak, Vice President, Product Management on March 23, 2018

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When replacing a poorly performing investment in a fiduciary account, follow these best practices to ensure fiduciary compliance.

We will use a 401(k) plan in our review below, but these best practices apply for any fiduciary account such as an IRA, Defined Benefit Plan, Trust account, Foundation/Endowment and many others.

Document why the investment is being replaced

Before the replacement process even starts, you should consult the plan’s Investment Policy Statement (IPS) and review how the investment stacks up against the watch list parameters.  How severe are the shortfalls?  How long have they persisted?  Document this analysis in your plan monitoring reviews.

Don’t have an IPS?  Get one ASAP! The IPS is the blueprint which ensures proper management of the plan.  Without one, you will have a much harder time documenting and justifying why changes are or are not being made.(Practices 2.6, 3.3 and 4.1)

Identify a short list of investments that merit further research

Your IPS should contain the search criteria that are used to identify potential investments for the plan.  These criteria are typically the same as the watch list criteria but depending on the platform you are using and the asset class you are looking for, you may need to refine this further to arrive at a manageable set of results.  

Many advisors use the Fi360 Fiduciary Score® as a starting point for their criteria, but any documented and prudent set of criteria that include elements such as expenses, performance, risk, composition, style and operations will do.  The key is that you have a documented, repeatable and prudent process that you can justify if it were ever to be called into question in a court of law.

Once you have applied your search criteria, you will typically want to have a short list of investments (5-15) that merit further quantitative or qualitative review.  So, if needed, tighten your search criteria to get your results down to a more manageable list.

Cut the short list down to the finalists

At this stage, you are conducting a more detailed analysis of the investments on the short list.  This may be done via Investment Factsheets, Investment Comparisons or qualitative research such as analyst reviews or direct conversations with the investment managers.  Document this analysis and use it to cut your short list down to the finalists.  

If you’re serving in a 3(38) discretionary role, you will take this all the way down to the investment to be used.  If you’re in a 3(21) role, we recommend including two to four alternatives in your plan monitoring review so that you can discuss the options with the investment committee or other authorized individual(s) who will make the final decision.

Make the replacement; and do it across all your plans!

In many cases, the investment being replaced will exist in more than one plan.  We recommend applying this research and resulting recommendations to any plan that holds the investment.  If you’re in a 3(38) role, this is more straightforward as you have discretion to enforce the change.  If you’re in a 3(21) role, the committee retains the discretion on the investment to select and the timing for the replacement, but it will make your practice far more efficient if you can get them to agree on a consistent course of action.  

If you’re using a variety of different recordkeepers with different available investments, this can make the process a little more difficult to streamline as you will either need to ensure all your possible replacements are available on each recordkeeper or have different replacement scenarios for different recordkeepers.  For this reason, among many others, the more you can reasonably limit your recordkeepers, the more efficient and consistent your practice can be.

Rinse and repeat

Now that the investment has been replaced, the process starts all over again.  Continue to monitor the investments quarterly against your IPS and follow the steps above when considering any replacement.  Like good design, people know a good fiduciary process when they see it. Stick to the plan and you will be sure to succeed. 

Fi360 Urges DOL and SEC to Come Together on Fiduciary Rule

Posted by on March 16, 2018

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Fi360, the leading fiduciary education, training, and technology company in the U.S., said today that the U.S. Department of Labor should continue its support of an updated rule that holds investment fiduciaries accountable for their retirement advice.

“Fi360 has always supported a strong fiduciary standard for financial services professionals,” said Blaine Aikin, AIFA®, CFA, CFP®, Executive Chairman.  “The Fifth Circuit decision has only extended the uncertainty and ambiguity with regard to compliance and liability concerns, as well as investor protection under the DOL’s fiduciary rule.  We urge the SEC to continue to work closely with the DOL in drafting a standard that requires advisors to act in the best interest of the client without regard to their own financial interests.”

“Market forces have proven that the professionals closest to the client establish the strongest and most sustainable relationships,” Mr. Aikin added. “Advisors utilizing a prudent process firmly grounded in fiduciary principles, along with their clients, will both benefit when policymakers and the courts recognize this important relationship and align with the marketplace.”

Since its founding in 1999, Fi360’s vision has always been to have all investors’ wealth and retirement accounts managed with a fiduciary standard of care. Fi360 will continue to work toward that vision regardless of changes in regulation.

Stay tuned for a deeper dive on the Fifth Circuit Court of Appeals’ actions and the regulatory impact on the industry next week.

Don’t Miss National Fiduciary Day on March 22, 2018

Posted by Ryan Lynch on March 01, 2018

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The second annual National Fiduciary Day celebration is fast-approaching and we want you to be a part of it.

Nearly one year ago, on March 23, 2017, 60 advisors from 13-states converged on three beloved U.S. cities to unpack the prudent investment practices required of millions of investment stewards and the financial professionals who serve them.

This is the story of the AIF® Designation training on the inaugural National Fiduciary Day.

New York City

The City That Never Sleeps kicked off the festivities with a jam-packed agenda led by Mario Giganti, president and CIO of Cornerstone Capital Advisors. Mario, having served as an adjunct instructor with Fi360 for nearly 15 years, relied on his deep-rooted experience as a fiduciary practitioner to engage his colleagues. Lectures were kept lively with anecdotes marrying concept and practical application that sparked vigorous dialogue. As a result, the attendees surveyed unanimously agreed that they would recommend the AIF® Training to others.


An hour removed from their counterparts in NYC, the Chicago constituents were finishing up a protein-packed breakfast to fuel up for an unforgettable class with the incomparable Keith Loveland. As an attorney, author, artist, teacher, expert witness, and compliance officer, Keith (he goes by Sunny) imparted well-hewn wisdom to a class hungry for knowledge that would keep them ahead of the DOL’s Fiduciary Rule. Such was his impact that in the exit-survey, one student dubbed him “…one of the finest instructors it has been my pleasure to observe.”

San Francisco

Not one to miss the party, San Francisco joined in the celebration of National Fiduciary Day as the morning fog lifted from the storied bay. There, Rich Lynch, a co-founder of Fi360, resounded the canon of fiduciary wisdom begun earlier that morning by Mario and Sunny. Nestled, perhaps metaphorically, just outside the Financial District, the relatively intimate class of Californians (and one Illinoisan) soaked up the fiduciary practices that were about to break through the regulatory flood gates (taking effect on June 9, 2017).

The Movement Grows

Due to popular demand, we have added Miami as a fourth location for National Fiduciary Day 2018. Learn and grow with us in a city convenient to you to join over 10,000 advisors who have earned the AIF® designation since 2002.

Secure your spot today before classes fill up, and download our course outline to get a peek at what you'll learn.

Happy National Fiduciary Day!

Do bad index funds exist?

Posted by Mike Limbacher, AIF®, Product Manager on February 21, 2018

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Do bad index funds exist?

Over the past several months, I’ve spoken to several advisors interested in using the new Fiduciary Focus Toolkit™ in their practice. During my conversations, index fund due diligence and monitoring comes up frequently. Several advisors I have spoken to erroneously believe that by simply investing in index funds they can forgo any ongoing monitoring of client investments. This approach is faulty for several reasons, but let’s first examine a more basic question: Do bad index funds exist?  Without question the answer is, yes.

Data as of 12.31.17

For the period ending Dec. 31, 2017, Morningstar identified 3,110 open-ended mutual funds and ETFs as index funds.  Of that group 2,319 received an Fi360 Fiduciary Score®, an evaluation that includes both indexed and not-indexed funds. Of that group, 402 funds, or 17.3 percent, were in the bottom quartile of their peer group. From a fiduciary perspective, we would classify those index funds as poor choices for an investment account and suggest that better options in those funds’ respective peer groups are available. 

Let’s look at some performance numbers for the 1-, 3- and 5-year returns of index funds that received an Fi360 Fiduciary Score.  24.4 percent, 19.6 percent and 19.2 percent of all index funds scored fell into the bottom quartile of their overall peer group respectively. Now, a fiduciary evaluation does not demand the best overall performance in a fund’s peer group, however you had better be prepared to explain to a client why a fund remains in their investment mix when it ranks in the bottom quartile.
Finally, let’s examine the expense ratio, a metric where the index fund should have an advantage.  Amazingly there are laggards, just over 8.1 percent of index funds were in the bottom quartile. Again, the lowest expense ratio isn’t required, but when the prospect of a low expense ratio is almost expected by index fund investments, a thorough evaluation and documentation process must be conducted if the index fund has an expense ratio in the bottom quartile of its respective peer group.

Regardless of performance, the investments in a fiduciary account must receive a consistent and repeatable evaluation. A cornerstone of a prudent fiduciary process is ensuring that the investment performance of a client account is compared against appropriate index, peer group and investment policy statement objectives.1 Choosing a sort of “set it and forget it” approach by investing in index funds simply does not guarantee prudence. 

1Practice 4.1 of the Prudent Practices for Investment Advisors 

America Saves Week - How to Sell and Deliver a Financial Wellness Program

Posted by Ryan Lynch, AIF®, PPC®, Program Manager on February 13, 2018

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America Saves Week - How to Sell and Deliver a Financial Wellness Program

Financial wellness. Financial literacy. Retirement readiness. These loosely-defined buzzwords have been cropping up across the world wide web in recent years. Whatever the term, more holistic services that were once reserved for private wealth clients have morphed, gained scalability and flowed downstream to participants in retirement plans. In a profession where differentiation is crucial, leveraging a financial wellness program can help you stand out.

Defining Financial Wellness

Because there is no standard definition of financial wellness, you’re in the driver’s seat – or at least riding shotgun – in defining such a program. Elements can include basic budgeting, debt management, college savings, buying a house, and healthcare savings, not to mention, retirement itself. At Fi360, we define financial wellness as the process of understanding and improving employees’ financial lives so they may reach short- and long-term financial and life goals. A rather daunting undertaking, but one that you don’t need to shoulder alone (more on that in the Delivering Financial Wellness section).


The impetus for this growing movement are the myriad reasons that people don’t save for retirement, starting with not having anything left after all daily life requires. A financial wellness program aims to address this excuse – valid as it may be – to make saving a realistic notion.


Selling Financial Wellness

In a 2016 survey and interview of recordkeepers, financial wellness providers and DC specialist advisors – a joint venture of Fi360 and Hartford Funds – it was noted that money is the biggest source of stress for Americans, beating out work, health, the economy and family responsibilities. Not surprisingly, that burden takes its toll on employees’ productivity. In fact, 37 percent of employees report spending at least three hours each week thinking about, or dealing with, personal finances. The stress results in diminished productivity and higher rates of absenteeism. In PwC's 2017 survey, the bottom line impact for a hypothetical company of 10,000 employees facing similar levels of financial stress amounted to $3.3 million of wasted wages. Beyond the day-to-day productivity drain, employees with inadequate long-term savings often delay retirement, reducing openings for fresh, lower-cost talent.


Despite the urgent need for a solution to this problem, less than 1 in 5 plan sponsors had a financial wellness program in place as of 2016. Advisors surveyed by Fi360 and Hartford Funds believe that in five years, over half will adopt such a program. 


According to the 82 DC specialist advisors surveyed, employers offer financial wellness programs to:

  • Reduce workplace stress and absenteeism to increase productivity
  • Minimize medical costs related to older workers who do not retire
  • Provide an inexpensive benefit that employees appreciate
  • Get more credit for – and engagement in – all the benefit programs they offer


If employees need financial wellness and employers want it, why doesn’t every employer offer it? The biggest barrier to delivering such a program has been and remains who foots the bill. As we’ll explore in the next section, there are price points to fit a spectrum of budgets.

Delivering Financial Wellness

In identifying a provider – be it a recordkeeper or third party – avoid those who narrowly define financial wellness in terms of retirement readiness alone. A program should address a spectrum of financial topics that can benefit employees of all ages and varied income levels. Similarly, look to partner with a provider that recognizes the trend toward personalized content and live, one-on-one delivery. 

Returning to the challenge of who pays, recordkeepers have a clear edge over third parties because the cost of the program is typically bundled with other services. Third parties overwhelmingly charge explicit fees that are usually billed to employers rather than participants. If cost is a major hurdle, a recordkeeper may be the only viable option. However, third-party providers can be a resource to advisors seeking new retirement plan clients. Because they are largely reliant on advisors as intermediaries of their services, third-party providers have a vested interest in helping advisors win new business. As a result, they can provide both sales and marketing support. Across providers, the five delivery options – from least to most customized – are as follows:

  1. Off-the-shelf print materials and online tools that focus on retirement readiness (e.g. online retirement-readiness calculator)
  2. Online dynamic content, like webinars and videos, that is tailored to the user’s age, demographics, etc.
  3. Live 1:1 discussion with a professional with content tailored to the user’s age, demographics, etc.
  4. Live 1:1 + online dynamic content that delivers personalized financial wellness in-person and online
  5. Fully customizable, where each plan sponsor receives a financial wellness program to meet their unique needs

Clearly, costs increase with greater customization. However, a cookie-cutter program is not likely to excite plan sponsors or participants. Therefore, it’s imperative to strike the right balance of cost and customization. Finally, and importantly, the success of the program must be measured to justify its ongoing existence in your service offering. This is a step that can be easily neglected, but goes a long way in reinforcing the benefits of the program. Take note of what sold your client on the program in the first place, and deliver metrics that justify those reasons on a regular basis. For example, according to PwC’s survey, employees have reported that their financial wellness program has helped them:

  • Get spending under control
  • Prepare for retirement
  • Pay off debt
  • Save more for major goals
  • Better manage investments/asset allocation
  • Better manage healthcare expenses/save for future healthcare expenses


Take Action

If you want to gauge your clients’ interest in financial wellness, now is a great time to act. The week of Feb. 26 – March 3 is America Saves Week. The Consumer Federation of America provides free sample content for blogs, emails, newsletters and more to leverage in your communications. The content is ready-made for a mini-marketing campaign that you can deliver as a value-add to clients. Participation is free, and you can promote your involvement through social media and your company website. 


Though America Saves Week is focused primarily on reaching savings goals, saving itself is a common thread within any wellness program. If you’re looking to gauge interest in an ongoing financial wellness program, be sure to track email open rates and social media engagement.


To review and start using the material, please visit

Q4 2017 Top Quartile Report

Posted by John Faustino, AIFA®, PPC®, Chief Product and Strategy Officer on February 08, 2018

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Q4 2017 Top Quartile Report

The latest Fi360 Top Quartile Report is now available for download! This quarter, over 78,000 investments were scored and 17 percent achieved the highest mark of a zero score, passing the scrutiny of nine rigorous filters. Investment selection and monitoring is an important fiduciary responsibility, and the Fi360 Fiduciary Score® has been designed to help the marketplace understand if funds are performing well from a fiduciary perspective.

Recent years have witnessed significant growth in CITs. As of Dec. 31, 2017, just over 30 percent, or 1,658 of 5,423, CITs in Morningstar’s database have less than three years of history. With target date CITs, the trend of new issuances has been even stronger. 790 of the 2,014 target date CITs in Morningstar’s universe have less than three years of history; a whopping 39 percent! As 2018 starts, there’s no sign of this trend slowing down. 30 CITs show-up in Morningstar’s CIT database with inception dates of Jan. 1-3, 2018; with 24 of those target-date offerings. One of the challenges created by these new issuances is delays in ratings/rankings availability (none of the CITs with less than three years of history receive an Fi360 Fiduciary Score®). We’re exploring solutions to facilitate advisor due-diligence of new share classes added to existing funds.

Advisors use the Fi360 Fiduciary Score® to cull down their investment lists; asset managers use the scores to improve their investments and market results. Since 2003, the Fi360 Asset Manager Ranking Report has scored asset managers based on the percentage of their individual investments that received a top Fi360 Fiduciary Score®. Within this new report, we’ll bring more unique information for you to consider about asset managers landing in the top two quartiles.

Helping enable you to profitably implement prudent fiduciary practices is our passion. We will continue to monitor our score criteria and methodology - looking for ways to raise the bar.

Q4 2017 snapshot of the numbers

Interested in seeing the full Q4 2017 Top Quartile Report? Fill out this form. 

The Case for Regulating Titles in Financial Services

Posted by Ben Aikin, AIF®, VP, Learning & Development on February 07, 2018

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The Case for Regulating Titles in Financial Services

The Securities Exchange Act of 1934 specifies that when a broker is “providing personalized investment advice about securities to a retail customer,” that broker is subject to the same “best interest” standard of conduct defined in the Investment Advisers Act of 1940. Regardless of any other considerations of title or registration, when one provides advice, they become a fiduciary and will be held to that standard.

Thus, in the ongoing debate over fiduciary regulation, the focus is generally on how “advice” is defined and how to judge whether the best interest of the client is being served. As those lines get pushed and pulled in various directions, the industry reacts accordingly, adjusting business practices, the services they offer and the types of clients they serve. 

That debate has important consequences to investors on the quality, nature and availability of advice. It is less clear whether investors recognize those distinctions. Many investors assume that the “advice” they are receiving is personalized and in their own best interests. Financial advice is often equated to legal or medical advice they would receive from their lawyer or doctor, while the term “financial advisor” has become a fairly generic descriptor for anyone in a retail client-facing position. 

Try putting yourselves in the shoes of a potential investor who is trying to figure out how to get started with investing. Do an internet search for “financial advice near me.” Look at the first result. Is it immediately clear how that firm or person is registered? Can you tell if they are acting as a fiduciary? Probably not. But their website probably does imply that they can help you make the best decision on what to do with your money. It might even use the word “advice.” Unless you know better, it might never occur to you to ask those questions about what type of “advisor” they are and if the advice they are providing is in your best interests or not. That doesn’t mean the advisor isn’t trustworthy, but the reality of what is expected of the advisor might not match the expectations for the investor. 

One potential solution to that problem is to more closely regulate the titles used by brokers and advisors. The idea seems to be gaining some momentum. Included in a largely de-regulatory push put forward by the Chair of the House Financial Services Committee Jeb Hensarling (R-TX), is a proposal to simplify the titles used by brokers, dealers and advisors. Similarly, as the SEC considers its next move in fiduciary regulation, a comment letter from the CFA Institute advocates for subjecting anyone who uses the word “advisor/adviser” in their title to registration under the Advisers Act and the fiduciary standard that comes with it. The thought behind such policies is that if faced with a choice between sales and advice, the market would self-sort accordingly, there would be less blurring of lines when it comes to their services, and less disagreement about the standards of conduct within each tier.  

Behavioral Finance: How Participants Make Decisions

Posted by on December 14, 2017

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Behavioral finance research shows most 401(k) participants are not active decision-makers.  In fact, most participants are dominated by five key behavioral traits: inertia, procrastination, choice overload, endorsement and framing.

This week, we hosted Dr. Greg Kasten of Unified Trust for a webinar discussion that explains these behaviors and how appropriate strategies can be enacted to allow for participant success despite these behaviors. You can view a recording of that presentation in our webinar archive

We ran out of time before being able to answer all of the questions that were submitted during the call, but Dr. Kasten was generous enough to provide follow up answers to your questions:

Q: Can you expound on the goal process at enrollment? Are you saying something like a risk/return questionnaire at enrollment?

A: No we are really not talking about a risk and return questionnaire that the participant must fill out. Some may choose to do that and of course we let them. But most are overwhelmed with filling out risk questionnaires and we handle it ahead of time. And, of course, a risk questionnaire tells you nothing about replacing a paycheck. We handle risk by finding the fully funded solution for the participant with the least amount of risk. We’re talking about determining a goal for all participants ahead of time, solving for the solution and presenting the answer in the enrollment.

Q: You mentioned choice overload, do you have a view on how many assets classes vs. funds should be available?

A: The simplest choice is to simply not have to opt out of the program. A fund menu may have 15 or 20 investment choices. But the idea of the QDIA managed account solution is that the answer has been determined and the only choice the participant has to make is to not opt out of the program.

Q: What do you suggest to be a good income replacement ratio and does your answer include government entitlements?

A: There can be a range of replacement ratios. Most people generally believe 70% to 80% is adequate. We use 70% unless the plan sponsor wants a different number, or the participant wants a different number. Less than 5% want a different number. The amount does include their estimated Social Security benefit.

Q3 Top Quartile Report - Special Edition

Posted by Robin Green on November 10, 2017

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Q3 Top Quartile Report - Special Edition

This quarter, over 66,000 investments were scored and 17 percent achieved the highest mark of a zero score, passing the scrutiny of nine rigorous filters. Investment selection and monitoring is an important fiduciary responsibility, and the Fi360 Fiduciary Score® has been designed to help the marketplace understand if funds are performing well from a fiduciary perspective.

We are pleased to see a diverse set of asset managers with investments in the top two quartiles of the Fi360 Fiduciary Score®. These firms are consistently scoring well in 11 categories; two categories are “eliminators”, and nine others may generate points. Like golf, earning fewer points is the goal! Firms who rank in the top two quartiles adhere to meaningful fiduciary standards.
In addition to overall asset manager rankings, in this quarterly report we are looking closer at fund families with R share classes focused on the retirement plan market. While we score all mutual funds, for this special report we added a section with the top 25 Defined Contribution Investment Only (DCIO) providers based on assets in R shares. We’ll provide this focused view of R shares on an annual basis.

A snapshot of this quarters numbers is included below. Be sure to check out the full Top Quartile Report for all of the most recent rankings. See you next quarter! 

Client Memo: Fiduciary Rule Update

Posted by on November 06, 2017

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On Thursday, Nov. 2, the Office of Management and Budget (OMB) posted a submission from the Department of Labor (DOL) on its website that would delay the compliance deadline for certain prohibited transaction exemptions under the DOL’s fiduciary rule from Jan. 1, 2018, to July 1, 2019. OMB is required to review economically significant rules that federal agencies propose for public comment.

The three exemptions that would be delayed from full implementation under the fiduciary rule, other than the Impartial Conduct Standards, are various disclosure and other requirements for the Best Interest Contract Exemption (BICE); the class exemption for principal transactions, and inclusion of variable and indexed annuity transactions under BICE. Given the Trump Administration’s executive order mandating a thorough review of the rule, we believe it likely that OMB will expedite its review and approve the DOL’s request within a few weeks. The DOL, in turn, is then expected to quickly adopt the compliance extension. Of course, DOL must take final action by the end of the year to avoid implementation of the full rule. 

As you are probably aware, major elements of the DOL fiduciary rule have been applicable to retirement advice since June 9, 2017. Advisors who meet the greatly expanded definition of an ERISA 3(21) fiduciary that went into effect on June 9 must meet the Department’s Impartial Conduct Standards when providing conflicted investment advice, meaning receipt of commissions or other variable compensation. The Impartial Conduct Standards require fiduciary advisors and their firms to act in the clients’ best interests, charge no more than reasonable compensation and avoid misleading statements.

For example, since June 9 the only requirements necessary to meet the BICE safe harbor are the Impartial Conduct Standards. However, without action by the Department, the contract requirement, fiduciary warranty and other written disclosures under BICE would have gone into effect Jan. 1.

Following formal approval of the extension by the DOL, the agency is expected to proceed with its review of changes to the fiduciary rule. The Senate is likely to confirm Preston Rutledge as the new assistant secretary for the Employee Benefits Security Administration soon, which we believe will expedite staff review over the next 18 months. The EBSA, which is part of the DOL and oversees regulation of employee benefit plans, is also expected to coordinate any rule changes with the Securities and Exchange Commission. Two legal challenges to the rule remain pending, which could change the dynamics described above if one or both courts agree with industry plaintiffs.
We will continue to update you as these events unfold.

Download a PDF version of this Client Memo.

Answering Your Questions on Fees, Services, and a Prudent Process for IRA Rollovers

Posted by Fi360 Team on September 20, 2017

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On Tuesday of this week, we conducted our quarterly Coaching Call for Designees on the topic of Fees, Services, and a Prudent Process for IRA Rollovers. 

During the presentation, Robin Green, Chuck Hammond, and Duane Thompson looked at the changing environment for the IRA rollover market and what it means for advisors who are offering those services. For active AIF®, AIFA, and PPC designees who were not able to attend, a replay is available in the Designee Portal. 

There were a number of questions that our panelists were not able to get to before the conclusion of the webinar, which are are happy to address in the following Q&A. Please also note that the data and worksheets referenced during the webinar and in the Q&A below come from the IRA Rollover Fee & Service Evaluator, available in our book store

Stay tuned for an announcement of our next Coaching Call, which is an exclusive benefit for active Fi360 designees, tentatively slated to take place in December. 

* * * * *

Q: Are the fees shown in your data for the rollover itself, or annual management of the account after the rollover? 
A: We asked advisors to provide their advisory fees as both the “up front” fee and their trail revenue.  Both statistics are presented in the IRA.

Q: Is the advisor or his RIA firm the Portfolio Manager or do they hand off? 
A: This is specifically the revenue advisors receive for the rollover.  We did not ask about the process for moving the purchase from sales to ongoing maintenance.  We asked advisors to specifically disclose their compensation for rollover services – both “up front” fee and ongoing trail revenue that the advisor received for the transaction.

COMMENT: Fee analysis (costs) is absolutely essential and splitting compensation and costs does remain a consideration of considerable confusion. 
Response: We agree.  The time, expertise, risk and cost of conducting rollovers was not in scope of this study. 

Q: Do your totals include the broker dealer expenses and/or investment costs to the client? 
A: We asked advisors to exclude all other expenses and only tell us about their advisory fees for the rollover. 

Q: If you are the adviser on a 401k plan and a participant wants to roll over an IRA or old 401k into their current plan, what type of analysis is required?
A: The worksheet and best practice steps in the IRA Fee Reasonability Evaluator is applicable for money in motion recommendations.  If you make a recommendation of any type, you are a fiduciary.  This includes a recommendation to keep money where it is, move it to another qualified plan, roll it to an IRA or even cash it out. The IRA Fee Reasonability Evaluator has steps to help advisors consider elements of the current state to the proposed state.

Q: You mentioned advisors using flat fees, is that a one time fee for assisting with the rollover or is that an ongoing fee for investment management? Is that fee charged in addition to investment management once the rollover has taken place?  
A: Advisors presented their fees for the rollover as both an “up-front” fee and ongoing trail revenue.  In our data, we see only 22% of advisors collect a one-time, upfront fee.

Q: Are these advisors only getting paid if the rollover comes to them or regardless of where it goes?
A: We didn’t specifically ask this question to advisors.  However, we did learn that 22% of advisors only assess a one-time, up-front fee.  This arrangement could suggest they collect a fee regardless of where the money is placed.

5 Factors To Consider Before Adding Newer Investments To Fiduciary Accounts

Posted by John Faustino, Chief Product & Strategy Officer on September 08, 2017

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5 Factors To Consider Before Adding Newer Investments To Fiduciary Accounts

Article originally appeared in 401(k) Specialist magazine.

When selecting investments for fiduciary accounts, it’s critical to use prudent selection criteria. Some of the most widely used criteria, including those in Fi360’s Fiduciary Score, require three years of live history before they are calculated.

That track record gives those responsible for selection confidence in the investment manager’s stability and ability to execute.

While the three-year history is used as a gating factor for many, there may be instances where it’s prudent to select newer investments for fiduciary accounts. Waiting for three-years of history should not be a hard rule, but rather a guiding principle for evaluating investments with readily available characteristics.

When a new investment is available that offers benefits unique relative to those already on the market, it may immediately be a prudent investment selection for fiduciary accounts.

Some examples include:

  • an offering which is new solely in terms of pricing structure, such as a new mutual fund class or a mutual fund strategy being applied through a different vehicle type (such as a collective investment trust) with the same manager, but a lower expense ratio
  • an innovative new offering, such as novel ‘in retirement income’ or environmental/social/governance (ESG) fund

Ignoring those investments with less than three years can significantly restrict your selection universe.

In fact, as of August 31, 2017, over 21 percent of the U.S. mutual fund share-classes covered by Morningstar have less than three years of history.

Further, in the target date arena where there’s been a lot of repricing and product innovation lately, it’s even more pronounced; with over 33 percent (870 of 2,578) having less than three years of history.

Factors which should be considered in determining whether a new investment warrants consideration for a fiduciary account include:

  1. uniqueness and strength of benefits relative other, readily available investments
  2. alignment of any unique benefits with the goals and needs of the specific account for which it’s being considered
  3. availability of alternative prudent selection criteria robust enough to make a prudent evaluation
  4. experience and skill of the individual or team, and expected successors, evaluating the alternative criteria
  5. persistence in the availability of alternative criteria to facilitate ongoing monitoring

To prepare for the potential of selecting investments that may require alternative evaluation criteria, we recommend including language in your investment policy statements (IPS’s) Investment Selection language to account for that possibility.

Below are examples of investment selection language we use in the IPSs available within Fi360’s Fiduciary Focus Toolkit software:

Each investment shall be managed by a Prudent Expert.  When selecting a new investment, the Investment Manager will evaluate the possible alternatives against the due diligence criteria set forth in INVESTMENT SELECTION/MONITORING CRITERIA APPENDIX of this IPS.  

When warranted due to unique potential benefits relative to other available investments, options for which the due diligence criteria set forth in INVESTMENT SELECTION/MONITORING APPENDIX of this IPS are not available may be considered.  In those instances, alternative prudent selection criteria to those set forth in INVESTMENT SELECTION/MONITORING CRITERIA APPENDIX of this IPS will be used to evaluate the appropriateness of each investment.  After any selection of investments for which alternative prudent selection criteria were used, those alternative criteria will be added to INVESTMENT SELECTION/MONITORING CRITERIA APPENDIX of this IPS.

Sometimes it’s prudent to lead by researching and evaluating innovative investment options before they develop three years of history. Doing so with a focus on your duty of loyalty and a fiduciary standard of care will help you Implement these decisions profitably (for your clients and yourself).

Answers To Your 'The HSA Opportunity for Retirement Advisors' Questions

Posted by on August 31, 2017

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Guest presenter Pat Jarrett of HealthSavings Administrators was kind enough to answer the leftover questions for this follow up blog post.  

If you weren’t on the webinar, make sure you check out the recording

Q: Are HSA accounts subject to ERISA? 

A: No. HSAs are not generally subject to ERISA unless the employer is aggressive in their involvement. Typically, ERISA is avoided by making the program voluntary, not restricting employees from opening an HSA outside of the employer selected vendor and by not mandating specific investment choices. The other red flag is compensation - if the employer receives direct or indirect compensation (i.e. a discount on a related service) then the HSA may be subject to ERISA.

Q: Do you typically see advisors working with HSA holders in personal brokerage accounts or in a fund lineup like a 401k plan?         

A: Mostly in a lineup similar to the 401k plan.

Q: Are you able to fund HSAs for beneficiary of your adult children (grandkids/great-grandkids)?  Similar to 529?               

A: Not likely. You can contribute to ANYONE's HSA, but they must meet the eligibility requirements in order have an HSA (See IRS Publication 969, Page 3 for details).

Q: Can parents contribute to the HSA of an adult child?

A: Yes, but the children (assuming they are eligible to open and fund the HSA) will receive the tax benefits. (IRS Notice 2004-2, Q&A 18)

Q: As a K-1 pass-through taxpayer, filing by 04/15 for the preceding tax year, if my spouse drains her FSA by 12/31, can I not do an HSA in the next tax year by 04/15 for the preceding year since her FSA was zero in December of the preceding year?              

A: Her plan year runs to 12/31/16. The balance in the account does not change the period for which you were covered by the FSA. This means you had no eligible months in 2016. If her plan year had ended on 11/30/16, then you would not have been covered by the FSA for December and you could invoke the last month rule.

Q: Can you expand a bit on how HSA dollars can be used to pay LTC insurance premiums. The premium max is age related (e.g. for those 61-70 it's $3,900), right? And, is it the case that LTC premiums are "qualified medical expenses" and how does that "work" in practice?          

A: You are correct, the amount of HSA dollars that can be used is based on age banding.  Below are the amounts for 2017. For more details see 1040 Schedule A Instructions, Page A-2, left hand column.

Attained Age Before Close of Taxable Year

2017 Limit

40 or less 


More than 40 but not more than 50


More than 50 but not more than 60


More than 60 but not more than 70


More than 70



Q: What is the tax ramification of spending the proceeds of HSA after age 65 if not for medical expenses?         

A: You will pay no penalty, but you will pay your prevailing Federal and State income tax rate. Remember, if you have receipts for past medical expenses paid out-of-pocket, you can withdraw that amount from your HSA tax free.

Q: Do firms allow advisors to be added as broker of record on these accounts?

A: Yes. 

Q: Are there HSA products that advisors can sell and be compensated for?         

A: Yes. HealthSavings provides an open architecture product and some fund family lineups where the advisor can be compensated. Some advisors charge a fee per account, others add a fee to their charges for overseeing the 401k, while a third group adds a wrap fee of 10 to 50 bps on the investment balance.

Q: How do we get our Broker Dealer to allow HSA to be sold?  We have zero contracts with HSA products.

A: Have your BD contact us, or, provide their contact info an we will reach out to them. We can register the firm and put together a fund lineup for you. Our system allows us to track the advisor and report enrollments and assets back to the BD. Any fees are distributed through the BD on a quarterly basis.

Q: How long can you shoebox receipts for?

A: There are no time limits. You can hold your receipts for an indefinite period.

Q: I have heard elsewhere that there is no fiduciary responsibility for advising on HSA accounts at all.  

A: The DOL is fairly clear on that, mentioning HSAs specifically.

Q: Without getting into the weeds, how difficult is it for an employer to establish a Section 125 cafeteria plan if they don't have one already?              

A: It is relatively simple. You can find simple plans on the internet for a few hundred dollars. I have also heard of local attorneys setting them up for similar amounts.

Raising the Bar with the Fi360 Fiduciary Score

Posted by Robin Green on August 18, 2017

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Raising the Bar with the Fi360 Fiduciary Score

This quarter, nearly 73,000 investments were scored using the Fi360 Fiduciary Score® and only 16 percent achieved the highest mark of a zero score, passing the scrutiny of nine rigorous filters.

In January 2017, economists affiliated with the Center for Financial Planning & Investment (CFPI) at California State University Northridge conducted an independent analysis and confirmed the top Fi360 Fiduciary Score® groups (“green” and “light green”) consistently provide better results than the other averages and categories in several dimensions. At the request of a curious advisor, G. Michael Phillips, Ph.D. at CFPI, recently took a second look to see if fee scores alone would predict future relative performance as well as the Fi360 score.

Results of that analysis showed investments performing in the bottom quartile (“red”) of Fi360’s score had about 100 bps lower performance than the "non-red” investments - even after accounting for fees. Further, the investments that were not assigned an Fi360 score (because data points were not available or the investment was too new) generally performed about 100 bps worse than the “red” investments - again after accounting for fee differences.

Advisors use the Fi360 Fiduciary Score® to cull down their investment lists; asset managers use the scores to improve their investments and market results. Since 2003, the Fi360 Asset Manager Ranking Report has scored asset managers based on the percentage of their individual investments which received a top Fi360 Fiduciary Score®. Within this new report, we’ll bring more unique information for you to consider about asset managers landing in the top two quartiles.

Congratulations to asset managers who had investments land in the top half on the Fi360 Fiduciary Score®. Our team at Fi360 is excited about the results of this analysis, and we think you will be, too. Using a prudent process for investment selection and monitoring is an important fiduciary responsibility. Helping enable you to address this, and other fiduciary responsibilities, is our passion. We will continue to monitor our score criteria and methodology - looking for ways to raise the bar. 

Q2 By the Numbers

Q2 Top Quartile Report By The Numbers Graphic

Interested in seeing the full Q2 2017 Top Quartile Report? Fill out this form. 

Are annual investment reviews enough?

Posted by Dave Palascak, AIF®, CFA on August 17, 2017

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I have spoken to many home office supervisory personnel and practicing advisors over the past year about how often investment reviews and monitoring reports need to be produced. What frequency is appropriate from a fiduciary standpoint and what is practical from an operational standpoint? Is it acceptable to depart from fiduciary norms based upon practical circumstances?
Did you know that the duty to monitor a retirement plan or client account is one of the most overlooked fiduciary obligations?  
Fiduciary breaches that occur during monitoring are frequently traced back to inadequate preparation earlier in the investment process. For example, a poorly written investment policy statement undermines effective monitoring by being vague about when, how, and by whom monitoring will be conducted. 
Errors of omission (not doing what is prudent or prescribed) are more common than errors of commission (doing something that is prohibited by law, regulation, or governing documents). Establishing and following clear, concise and practical policies and procedures for monitoring (such as the frequency of investment reviews) reduce compliance risks and help ensure that clients’ best interests are served.  
Getting to the question at hand – Are annual investment reviews enough? – let’s first examine the fiduciary requirement for investment monitoring frequency.    
Practice 4.1 of the Prudent Practices Handbook1 states, “Periodic reports compare investment performance to an appropriate index, peer group and investment policy statement objectives.”
If you review the handbook in detail, you will find three specific tasks embedded in this Practice;
1. The advisor must generally review the investments at least quarterly against their index, peer group and IPS watch list criteria as a basis for formulating ongoing advice.
2. The advisor must summarize and document this quarterly review so it can be distributed to and considered by the client in some fashion.
3. The advisor must generally conduct a personalized review with the client at least annually to help ensure that the client fully understands the information presented and the advice that has been rendered and any actions that have been taken.
So, how does this match what advisors are doing in practice today?  
From my experience, most advisors with smaller retirement plans and individual clients are performing the third task. Unfortunately, given the revenue generated from those clients and the expenses incurred with doing tasks one and two quarterly, many advisors only review the investments and produce documentation annually when they meet with their client.   
Given the Practices and the legal substantiation from which they were derived, we believe this process is ripe for a fiduciary lawsuit.2
Here’s how we see advisors and their firms dealing with this operational challenge when working with smaller clients.  
1. Reduce the amount of time it takes to perform the investment reviews and document any suggested actions. To the maximum extent possible:
a. Adopt a consistent IPS watch list process and apply it across your entire client base, making adjustments only when special facts and circumstances require; 
b. Craft one set of investment commentary for each investment and apply it across all share classes of that investment and for all clients who own it, unless unique factors associated with certain share classes or clients require different commentary;
c. Recommend and execute trades to replace investments consistently for all clients whose facts and circumstances conform to criteria that make replacement advisable; 
d. Use a consistent and manageable set of investments that promote operational efficiency as well as portfolio effectiveness, taking into account such factors as recordkeeper capabilities and priorities and constraints imposed by your clients.
2. Reduce the amount of time it takes to deliver the investment review to the client.
a. Use online client meetings and interactive reports to quickly summarize the review focusing on areas that need action.
b. Meet with your smaller clients annually, but email them (or post to a client vault) a monitoring report quarterly.
As you begin to take steps toward this methodology, the process of conducting and documenting quarterly investment reviews will become significantly more efficient allowing you to do it consistently for every client.
The Fi360 Fiduciary Focus Toolkit was built specifically to help advisors profitably implement proven fiduciary processes in their practice. Check it out! My team would love to hear about your experiences and challenges with quarterly investment reviews. Direct feedback from advisors allows us to make our software better for your business.
1Center for Fiduciary Studies and Fi360 (2013). Prudent Practices for Investment Advisors. Retrieved from 
2Prudent Practice for Investment Advisors – Practice 4.1 Legal Substantiation
Employee Retirement Income Security Act of 1974 [ERISA]
§3(38); §402(c)(3); §404(a); §405(c)(2)(A)(iii)
Case Law
Leigh v. Engle, 727 F.2d 113 , 4 E.B.C. 2702(7th Cir. 1984);
Atwood v. Burlington Indus. Equity, Inc., 18 E.B.C. 2009
(M.D.N.C. 1994)
Interpretive Bulletin 75-8, 29 C.F.R. §2509.75-8 (FR17);
Interpretive Bulletin 08-2, 29 C.F.R. §2509.08-2
Investment Advisers Act of 1940
Case Law
SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180 (1963)
Study on Investment Advisers and Broker-Dealers (SEC Staff,
January 21, 2011); Compliance Alert (June, 2007)
Uniform Prudent Investor Act [UPIA]
§2(a);§2(c); §9(a)
Uniform Prudent Management
of Institutional Funds Act [UPMIFA]
§3(b); §3(e); §5(a)
Uniform Management of Public Employee
Retirement Systems Act [UMPERSA]
§6(a); §6 (b)(1-3); §6(d); §6 Comments; §8(b)

Fi360 Fiduciary Talk 51: Regulatory Interplay

Posted by on July 17, 2017

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Blaine Aikin, AIFA®, CFA, CFP®, Executive Chairman of Fi360
Duane Thompson, AIFA®, Senior Policy Analyst at Fi360

The SEC is now firmly in the conversation and Nevada just became the first state to grow tired of waiting on federal regulators to implement broader protections for investors. In this discussion, Blaine and Duane talk about the effects each of these efforts has on each other and the overall momentum for fiduciary regulation.  

Fi360 Fiduciary Talk 50: SEC Enters Fiduciary Rule Discussion

Posted by on July 17, 2017

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Blaine Aikin, AIFA®, CFA, CFP®, Executive Chairman of Fi360
Duane Thompson, AIFA®, Senior Policy Analyst at Fi360

SEC Chairman Jay Clayton grabbed headlines when he announced that the Commission would seek to “engage constructively” with the DOL as each agency pursued standards of conduct for advisors. This raises questions about how the two agencies will work together, what it might mean for the fiduciary standard, and how Congress might also factor into the discussion. 


Fi360 Fiduciary Talk 49: Moving Forward with Impartial Conduct Standards

Posted by on July 17, 2017

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Blaine Aikin, AIFA®, CFA, CFP®, Executive Chairman of Fi360
Duane Thompson, AIFA®, Senior Policy Analyst at Fi360

Even during this period of non-enforcement, advisors are still expected to make good-faith efforts to get in compliance with Impartial Conduct Standards. 

Fi360 Fiduciary Talk 48: Health Savings Accounts in the Fiduciary Process

Posted by Fi360 on May 15, 2017

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Blaine Aikin, AIFA®, CFA, CFP®, Executive Chairman of Fi360
Duane Thompson, AIFA®, Senior Policy Analyst at Fi360

While the direction of health care is nearly impossible to predict, the rise in health savings accounts appears to be inevitable. And under the DOL fiduciary rule, advice on these accounts will be considered a fiduciary act. In this episode, Blaine and Duane discuss HSAs and what advisors need to know when considering these accounts for their clients.

The June 9 Fiduciary Deadline and Key Issues for Broker-Dealers

Posted by Fred Reish on May 09, 2017

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The new—and very broad—definition of fiduciary advice will apply on June 9. That means that investment recommendations to ERISA plans, participants or IRAs will be fiduciary advice. Broker-dealers and their advisors will, in essence, be co-fiduciaries for providing that advice.

As a result, broker-dealers need to develop internal policies, procedures, training and supervision as quickly as possible in order to be in compliance by June 9. The areas of focus should be:

  • Fiduciary education for home office management, supervisory, and sales and marketing personnel. As explained below, some of the fiduciary responsibilities will need to be satisfied by the broker-dealer, rather than the advisors.
  • Fiduciary training for advisors. The best interest standard of care requires that advisors engage in a prudent process to develop recommendations for plans, participants or IRA owners. That process should take into account the needs and circumstances of the investor, as well as generally accepted investment principles and prevailing investment industry standards. Advisors will need to understand and apply those concepts. As a result, they need training on the basics of the requirements for the best interest standard of care.
  • Reasonable compensation for broker-dealers and for advisors. Broker-dealers need to determine the amounts of reasonable compensation that can be paid to themselves and to their advisors for the services associated with each investment category (for example, mutual funds, variable annuities, individual securities). The reasonable compensation limitations need to be communicated to advisors and then appropriately paid and supervised. Broker-dealers will need data about industry pricing in order to establish their reasonable compensation limitations.
  • Selection of investments. Recommendations of investments to ERISA retirement plans and participants’ accounts are governed by ERISA’s prudent man rule and duty of loyalty. It is well-settled that the prudent man rule requires that advisors must engage in the same prudent process as is familiar with retirement investing practices. Similarly, the best interest standard of care imposes the prudent man rule (and its processes) on advice to IRAs. Compliance with those requirements should be documented. Broker-dealers should consider using well-regarded providers of databases and software for those purposes.

The new fiduciary definition and the Best Interest Contract Exemption (BICE) impose the fiduciary standard on both broker-dealers and their advisors. In that sense, broker-dealers and their advisors are “co-fiduciaries.” Because of that arrangement, broker-dealers need to decide which of the fiduciary and BICE requirements will be handled at the entity level and which will be delegated to the advisors. For example, for the recommendation of mutual funds to IRAs, some broker-dealers are managing their fiduciary responsibility by specifying which fund families can be recommended to IRA owners. On the other hand, other broker-dealers will not limit the number of fund families that can be used by advisors, but will instead require that advisors use pre-approved software for the prudent selection of mutual funds and for the appropriate asset allocation for the IRA owner. Generally speaking, the prudence, or best interest, standard requires that broker-dealers and advisors more rigorously vet the expense ratios of mutual funds and the quality of the mutual fund management. Consequently, broker-dealers need to have procedures and practices in place to satisfy those heightened standards.

With regard to the compensation received by broker-dealers and advisors as a result of their investment recommendations, the new rules require that the compensation be reasonable as compared to the services rendered. In other words, the standard commission, or other compensation, attributable to a particular product may or may not properly reflect the value of the services provided by the broker-dealer and the advisor. And, to make matters worse, the burden of proof of reasonableness will be on the broker-dealer. (This is because a prohibited transaction exemption is considered to be an exception to a general rule. As a legal matter, in those cases, the burden of proof shifts to the person claiming the exception, that is, the broker-dealer.) As a result, broker-dealers need benchmarking data for each of their categories of investment services or products. Examples of different services and products include recommendations of mutual funds, discretionary investment management services, referrals to third-party asset managers, individual variable annuities and fixed-rate annuities. Those are just examples; there are other categories that need to be considered.

This article covers some of the more important changes that apply on June 9. Because of that deadline, broker-dealers and RIAs need to immediately focus on these issues. 

Filling the Void in Guaranteed Retirement Income

Posted by Fi360 on March 31, 2017

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Earlier this week, we hosted a webinar to discuss the factors that have contributed to a need for guaranteed income strategies in retirement planning, the strategies and products that have emerged to fill this need, and what due diligence factors fiduciaries should consider when evaluating guaranteed income solutions. A recording of that webinar is now available:

Download Webinar Recording and Slides Now!

We had a number of questions submitted during the webinar that we were unable to answer live. Here is a Q&A to address those questions:

Q: I am still very concerned that we continue to allow participant loans, in-service distributions, etc. that end up depleting retirement savings. As an industry, we need to go back to the fact that these are retirement accounts and put restrictions on access. Can you comment?        

A: In general, we favor making loans and other distributions more challenging for participants to access; same goes for brokerage windows. Features that could potentially harm savings rates or cause excess market risk should require several hurdles before participants are granted access. The EBRI statistics make clear that most participants do not save as early and as much as they should and do not make wise choices about in-service withdrawals, taking loans, and taking money out altogether when they change jobs.

Q: Advisors and plan sponsors need to know their participant base. Are they highly paid, well educated, and know how to manage their 401k? Then a lifetime income may not be as attractive. If employees are educated as to portfolio design, they can have a great deal of confidence about an income stream from their portfolio.                               

A: This is certainly true for some. Unfortunately, many participants are not financially savvy, are not disciplined in handling the assets of their plan, and do not have or rely upon a professional advisor to help them do the right things. Participants need to be profiled to best assess the appropriate plan design for each specific group. 

However, longevity risk is very real, increases rapidly with age (especially after 65), and is rising with medical advances. Guaranteed income options are likely to make sense for many. Even the highly paid and well-educated may find comfort in hedging some longevity risk, especially in light of medical advances that are leading to longer life.

Q: I feel like the SS confidence statistics are skewed by widespread rumors (since 2010-ish?) that SS is going 'bankrupt' and we may not have SS in 20, 30, 40 years. Everyone has been conditioned to be pessimistic about SS without having any real substance to back it up. Just my two cents!

A: Good comments, thank you. Agreed that we've been conditioned to be pessimistic about SS.  If it helps plan participants focus on saving more, perhaps that's not a bad thing in the end.       

Q: If inflation is at 3 percent per year, the purchasing power of the income stream out of the annuity is down 50 percent after 24 years. How do you counter this?       

A: Great question. Riders for inflation protection may be added to QLACs. The cost of those riders should be weighed against the potential benefit.

Q: Please comment on conflict of interest with advisors rolling 401(k) plan assets into IRAs, where they will be managed at a higher fee. There’s an advantage for the broker to get those rollover fees versus putting a lifetime-income option within a plan

A: You are correct on this point. ERISA plan fiduciaries are obligated to act in the sole interest of participants and beneficiaries (or their best interest if the Best Interest Contract Exemption comes into play under the new DOL Fiduciary Rule). The relevant plan fiduciaries (typically the plan sponsor and the advisor) must evaluate alternatives based on the facts and circumstances (such as participant demographics) in establishing an appropriate plan design. The advisor must also evaluate the relative advantages and disadvantages of a rollover in formulating their advice. The DOL Fiduciary Rule would provide greater enforceability of these obligations.

Q: With recordkeepers, mostly insurance carrier providers offer these options, but they are proprietary options versus allowing other provider options be listed on their recordkeeping platforms. Do you see this changing?           

A: At one point, target date fund purchases were largely restricted by recordkeeping platforms, but they've opened-up (significantly since the DOL's 2013 guidance on addressing fiduciary responsibilities with TDFs). We expect a similar market opening with insurance/retirement income offerings driven by client demand and regulatory encouragement.

Q: Any feel as to when the pricing will come down. They all seem to charge 1bps.              

A: Similar to cycles experienced with other offerings, we expect the increase in demand, especially from plan sponsors, as evidenced in the MetLife study referenced in our webinar), will create scale, innovation, and competition that will drive prices down. One asset manager with whom we spoke in gathering our research has contemplated purchases from multiple insurers, creating competition that is expect to lower prices within their offering.

Q: Aren't the internal costs in annuities a concern?          

A: Yes, costs are a concern. Some retirement income providers speak to those costs as rationale for using other means (besides annuities) to supply retirement income.

That final question provides a nice segue to our upcoming webinar that will feature multiple asset managers discussing perspectives on annuities versus other retirement income solutions.

If you have any additional questions, please direct them to

Fi360 Fiduciary Talk 47: Filling the void in guaranteed retirement income

Posted by Fi360 on March 17, 2017

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As new guaranteed income solutions crop up in the market, regulators appear to be on board with making them more accessible via 401(k) plans. In this episode, Blaine and Duane discuss the trends driving the guaranteed income market and what regulators have said in terms of making them available to participants, including as QDIAs.

Fi360 Fiduciary Talk 46: Fiduciary duties of elected officials

Posted by Fi360 on March 08, 2017

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When the government engages in rulemaking, as in the case of the DOL’s “fiduciary” rule, their duty is to develop policies that are in the bests interests of the public. Does that equate to a fiduciary duty akin to the one expected for investment advisors? In this episode, Blaine makes the argument that it does and discusses with Duane the sources of those fiduciary duties.

Fi360 and American Funds Establish Integration Relationship
Integration allows advisors to access client data from within the Fi360 Toolkit

Posted by Fi360 on February 16, 2017

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The Fi360 Toolkit is now integrated with American Funds recordkeeping business. The integration allows advisors to access client data in their Fi360 Toolkit, further enabling them to streamline their business processes.

"We are pleased to partner with American Funds, which is our largest record-keeper integration to date", said Fi360 CEO William Mueller. "Providing direct access to client data from within Toolkit allows our customers to spend less time on manual processes and more time with their clients, a goal that both our companies share."

The Fi360 Toolkit web-based software provides research, analytical and reporting services for all client types, including high net worth individuals and families' endowments, trusts, plan sponsors, etc. Whether you're selecting new funds, monitoring an existing line up, or building client-friendly reports, the Fi360 Toolkit can help optimize and solidify your investment management process so you can spend more time winning new business.

The integration will now allow Fi360 Toolkit customers to perform the following functions:

  • Access critical client data such as account information, balances, positions and history
  • Leverage client data to cut the time it takes to add and update client investments for review, flag investments on a watch list, and review and comment on watch list investments

Learn more about Fi360's Toolkit integrations.

Fi360 Fiduciary Talk 45: Fiduciary Rule scores victory in Texas

Posted by Fi360 on February 10, 2017

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Even with a delay possibly forthcoming via the President’s executive order, the DOL’s “Fiduciary” Rule won an important victory when it was upheld in a Texas court decision. In this episode, Blaine and Duane discuss the latest developments in the ongoing battle over the DOL Conflict of Interest rule, what happens next, and what advisors should do now.

Fi360 Declares March 23 National Fiduciary Day

Posted by Fi360 on February 09, 2017

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Fi360 Declares March 23 National Fiduciary Day

2017 will mark two significant milestones in Fi360’s history of certifying advisors. We are on the precipice of having 10,000 people who actively hold one of our professional designations (AIF, AIFA, and PPC). And in October, it will be the 15th anniversary of our very first designation training program.

That’s a remarkable climb from where we first started, when few understood what it means to be a fiduciary and fewer still were taking the necessary steps to act like one.  

It is with that history in mind that we introduce National Fiduciary Day on March 23. For the first time ever we will host simultaneous AIF training courses in New York, Chicago and San Francisco.

The purpose of the event is to bring attention to the thousands of professionals across the country who have taken the initiative to learn more about the fiduciary process, how it is applied to the benefit of the investors they serve, and who have promised to uphold the standard that our designations signify.

Even with the current uncertainty over the future of the DOL fiduciary rule and financial regulation, the tide has clearly turned to an era where investors expect the advice they receive to be conflict-free and in their best interests. Fees must be clear and reasonable for the level of service being provide. And the decision-making process must be defined and documented. No one is more prepared to deliver that standard of care than those who hold a designation with Fi360.

For 15 years, Fi360’s AIF, AIFA and PPC designees have been acting at that level of care because those are core tenets of the methodology instructed in Fi360’s training courses and foundational to the conduct standard required for all designees. And over the next 15 years and beyond, Fi360 designees will continue to be regarded as leaders in the fiduciary movement.

So please consider joining us on National Fiduciary Day. There is no better time than now to take that next step and become an AIF designee.

Fi360 Fiduciary Talk 44: DOL Releases Second Set of FAQs

Posted by Fi360 on February 02, 2017

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In this episode, Blaine and Duane discuss the release of a second set of FAQs from the DOL on its Conflicts of Interest Rule. The new FAQs cover a number of scenarios, with a particular focus on activities that would not be considered fiduciary recommendations under the new definition.

Fi360 Fiduciary Talk 43: Titles used by advisers can trigger fiduciary status

Posted by Fi360 on January 12, 2017

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An overlooked aspect of the DOL’s fiduciary rule is that it introduces a “holding out” fiduciary status, where titles that imply fiduciary status will hold the advisor to that standard. Even with the uncertainty around the fiduciary rule, this trend appears likely to continue, as even opponents of the rule have demonstrated support for regulating titles that cause confusion with the investing public.

The AIF, is it a marketing tool?

Posted by on December 19, 2016

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Fi360's director, J. Richard Lynch, AIF® was a guest on the 401k Study Group Radio show with Chuck Hammond discussing what the AIF® is and how the advisors should be using it.

PRI Policy Brief Re: Updated Impact Analysis of November Elections on DOL Fiduciary Rule

Posted by fi360 AIFA Designee, Jason C. Roberts, Esq. on November 23, 2016

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Article Credit: Jason C. Roberts, Esq., AIFA®, Chief Executive Officer - Pension Resource Institute
Published on

Immediately following the November 8th election, PRI released a Policy Brief describing potential impacts to the Department of Labor (DOL) Fiduciary Rule. This second brief contains updated information, as the situation and our understanding, continues to evolve. 

Legislative Action 

The opportunity to overturn this specific Rule through the Congressional Review Act (CRA) is not available. Congress used this streamlined legislative process earlier this year and the resolution was vetoed by President Obama. The same procedure may not be repeated in the next Congress.

Executive Action

The Rule can be suspended by the Trump Administration immediately after inauguration day, January 20th, by exercising the President’s emergency authority to place a hold on new rules that are not yet “applicable.” Even though the DOL Rule was effective in June 2016, the new Administration can use its emergency rulemaking authority to push back the actual compliance deadlines of April 10th and January 1st on the basis that Financial Institutions need more time to comply. This delay can be accomplished on an expedited basis by the President, even if there is not a DOL secretary in place. 

Judicial Action

If the implementation dates for the DOL Fiduciary Rule are delayed by Presidential directive, that could allow the courts time for additional review before the Rule is applicable. Alternatively, the Trump-appointed DOL officials and Department of Justice could elect to discontinue defending the cases that are now pending. However, it would be difficult for the new Administration to simply ignore the Rule, given its high profile. Even if the new Administration attempted that action, it seems likely that the Rule’s supporters would be willing to ask the courts to require the new Administration to move forward with implementation. Read More.

Congratulations to the fi360 Article Competition winner!

Posted by fi360 on November 03, 2016

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Fi360 is pleased to announce that Chris Karam of Sheridan Road Financial is the winner of the fi360 Article Competition!

Chris’s article is titled Optimizing Fixed Income Allocations in Defined Contribution Plans: A Plan Sponsor Guide to the Changing Fixed Income Landscape.

Chris’s article looks at why and how plan sponsors should be expanding their fixed income offerings to improve diversification and help address the income needs of an aging work force. The article was chosen because it sheds light on an issue many plan fiduciaries and their retirement plan advisors are facing, cites trends and research in building its case, and offers practical guidance that advisors can use.

Chris is the Chief Investment Officer for Sheridan Road Financial and is based in Chicago. He specializes in portfolio management for high net worth families and trustees of employer sponsored retirement plans.

Congratulations, Chris!

fi360 Fiduciary Talk 39: What the Election Means for Advisors and the Fiduciary Standard

Posted by fi360 on November 01, 2016

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With the 2016 election just days away, Blaine chats with Duane about what a Clinton or Trump administration would mean for advisors, including what’s on their respective campaign platforms and turnover at the regulatory agencies. In addition, they take a look at the implications of the Congressional elections.


The Importance of Using Prudent Practices in Today’s Lawsuit-filled Environment

Posted by Carlos Panksep on October 27, 2016

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Litigation risk is rising for retirement plan fiduciaries. A few large law firms have become particularly adept at finding flaws in the fiduciary practices of plan sponsors and their financial service providers. These firms have been successful in scoring some multi-million dollar wins through favorable rulings or negotiated settlements.   

Encouraged by these early victories, more litigators are coming on to the scene to ferret out plan deficiencies and pursue prosecution. Large corporate and university retirement plans, in particular, are currently in the crosshairs.

Moreover, the Best Interest Contract Exemption (BICE) established under the Department of Labor’s new Conflict of Interest Rule provides additional access to the courts for potential fiduciary breaches in ERISA plans and IRAs. As the regulatory environment and investment marketplace continue to evolve, it can be difficult for plan fiduciaries to keep pace with developments in professional best practices. Initial conformity is not enough, as complacency can lead to missed opportunities to serve investors better and expose plan fiduciaries to regulatory and  litigation risks.

Failure to follow fiduciary best practices has become a recurring theme in recent court cases. But what exactly constitutes a “best practice?” The Centre for Fiduciary Excellence (CEFEX) assesses hundreds of plan sponsors, advisors and other financial serve providers each year to verify conformity to practices that are substantiated in law, regulation and generally accepted investment theories. Specifically, CEFEX assesses conformity to more than 20 multi-part practices that are detailed in the “Prudent Practices” handbooks published by fi360. Separate handbooks cover practices for stewards (e.g., plan sponsors, foundations and endowments and trustees), advisors and investment managers.

In each of the fi360 handbooks the practices are presented as part of a recommended four-step decision-making process for investment fiduciaries, as summarized below:

1) Start by organizing your approach to managing the plan. Take time to fully comprehend the law, governing documents and other guiding sources for proper conduct.

2) Formalize your approach by adopting an effective investment policy statement and establishing proper portfolio diversification.

3) Implement your changes by putting all of the planning, organizing and formalizing that was involved in the initial stages into practice, especially with respect to conducting sound due diligence on investment managers and other service providers.

4) Finally, monitor how well the plan and processes that have been put in place are working, and make adjustments as needed to serve investor’s best interests. This includes responding to changes in economic or market conditions, benchmarking the quality and pricing of services to the plan, and addressing any circumstances that may materially impact how the plan should be managed.

Fiduciary obligations are not particularly onerous, but they are frequently misunderstood or overlooked. Staying current on best fiduciary practices and embedding them in the standard operating procedures of all plan fiduciaries is the best way to mitigate regulatory and litigation risks, as well as to serve the best interests of plan participants and beneficiaries.

Don’t delay in arming yourself with the knowledge and best practices of a true fiduciary. As the number of lawsuits continues to grow, a little preparation with reasonable ongoing attention can go a long way to keep the regulators and litigators at bay.

DOL Rule Change Forces Due Diligence Process Makeover. Cut the RFP Burden by 75% with Three Key Questions.

Posted by fi360 AIFA Designee, Al Otto on October 19, 2016

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Article Credit: Al Otto®, Co-Founder & CEO Veriphy
Published on

For retirement plan sponsors, the risks of choosing the wrong investment advisor or consultant just became a lot greater.

Spurred by new U.S. Department of Labor guidelines, fiduciaries of plans of all sizes are scrambling to evaluate qualified retirement plan investment advisors/consultants using the request for proposal (“RFP”) solicitation method. Typically, the process involves a large number of subjective questions and a small set of objective data.

However, under the new regime, which redefines the meaning of “fiduciary” as it relates to investment consultants/advisors [§3(21)] and the RFP method will likely be considered a fiduciary act. That means the mere inclusion of irrelevant questions may demonstrate a lack of knowledge and arouse suspicions regarding evaluator competency. An inability to provide objective reasons as to why a particular consultant/advisor was chosen may raise similar questions regarding credibility and the assessment process.

With that in mind, the issue becomes: how should one score a purely subjective set of questions?

Even more important, the DOL shift heightens the risk of being adversely impacted by conflict of interest issues, which are often inquired about but seldom researched or scored in other than perfunctory terms. The conflicts identified in many recent fiduciary breach lawsuits offer only a taste of the potential fallout from ignoring this issue. In my own engagements with clients, I have come across numerous RFPs that led to the selection of conflicted advisors, representing potentially serious liabilities that plan sponsors may have to deal with in future.

In fact, it is astounding how often conflicts of interest are overlooked in the RFP process, especially given the extent to which they influence the Employee Retirement Income Security Act of 1974 (“ERISA”) plan governance and oversight framework. Those who oversee the RFP process without affording sufficient weight to this important issue do so at their peril.

Certainly, the typical RFP process is overwhelming and poorly understood by many of the fiduciaries taking part. That said, perhaps the best place to start is with the identification of conflicts, specifically those prohibited by ERISA. If an investment provider or its affiliates are conflicted based on their structure or method of compensation, they can and should be eliminated from contention at the outset of the search.

Plan fiduciaries can and should ask three key questions that will go some way toward identifying conflict of interest issues, helping to significantly reduce the confusion and complexity associated with the RFP process:

1.   Will the adviser/consultant firm unequivocally serve as an ERISA fiduciary to the retirement plan and attest to that in writing?

2.   If desired by the Plan Committee, will the adviser/consultant serve as a discretionary §3(38) investment manager or named investment fiduciary to the plan?

3.   Will the adviser/consultant serve the plan without any conflicts of interest or as a level fee fiduciary, as defined by the DOL’s best interest contract exemption, and will they put it in writing?

These three questions can serve to eliminate the vast majority of fiduciary committee mistakes associated with hiring an investment consultant/advisor, and can assist plan fiduciaries in determining whether the advisor or the advisor’s firm has thought through the requirements of being an ERISA fiduciary to a qualified retirement plan.

The first question above is aimed at clarifying definitional differences between ERISA and SEC rules regarding the fiduciary duty of loyalty as it pertains to conflicts of interest. It also eliminates the need to navigate through the “seller’s exception,” as detailed in the new DOL regulation.

Under current securities laws, advisors are required to provide complete and full disclosure of conflicts of interest. A lack of disclosure, rather than a conflict per se, creates an issue for the advisor. Once the investment advisor or consultant has disclosed the conflict, it has satisfied its duty of loyalty, at least from a securities regulation perspective. According to Robert Plaze, former SEC Deputy Director of Investment Management, “disclosure and client consent will always satisfy the advisors duty of loyalty. Clients can consent to conflicts – not just some conflicts.[1]

The rules are very different for ERISA plans, however. ERISA §406(b) prohibits fiduciaries from using plan assets for their own benefit in any way and from acting in any capacity that is adverse to the interests of the plan. In other words, if a fiduciary stands to gain from a decision involving plan assets when the fiduciary plays a role in the decision, it is prohibited. Disclosing conflicts of interest does not absolve a fiduciary in any way, shape or form. In fact, engaging the services of an investment advisor/consultant with such conflicts may, in effect, be akin to posting a sign over a fiduciary’s head that says, “I’m the dummy!”

Simply put, a sponsor that is a fiduciary to a qualified retirement plan must know if it is working with an investment advisor/consultant that has conflicts of interest. Under current requirements, there is virtually no excuse for not being aware of this issue. Indeed, plan fiduciaries will likely have acknowledged this fact when they signed the investment firm’s agreement for services.

One excellent starting point for identifying the existence of conflicts of interest is the Form ADV Part 2, which is among the documents that registered investment advisors are required to make publicly available based on SEC disclosure requirements[2]. Searching through the filing for the word “conflict” will go some way toward gaining an understanding of the conflicts that a proper due diligence process is designed to reveal.

If a plan is working with a non-discretionary ERISA §3(21) investment fiduciary–that is, the advisor/consultant is receiving compensation for its investment advice and recommendations–and the advisor/consultant or its affiliates have conflicts of interest[3] – then it may be necessary to call upon an independent third party to review and approve their recommendations.

In fact, this happens quite often. However, it typically occurs without the tacit understanding of the plan's investment committee. In essence, when the latter confirms a recommendation involving a conflicted investment fiduciary, it becomes the independent third-party, which means the advisor/consultant is not engaging in a prohibited transaction. Of course, the committee and the plan sponsor are now at risk, as they tend to be selected by the plaintiffs, because they generally have the deeper pocket.

The irony of the above is that the advisor/consultant needs the plan committee’s recommendation in order to be approved, while the committee generally hires the advisor/consultant because they do not have the requisite knowledge or expertise to make appropriate investment decisions. In a legal dispute, this would likely be characterized as a “bad fact.”

Not Allowed in the Kitchen vs. Lousy Chef

This leads to question 2, which is quick way to assess the organizational structure of investment advisors/consultants–and their affiliates–and their ability to operate solely in the best interest of plan participants, as required under ERISA.

Those who have served on a plan committee in recent years are likely familiar with the two types of fiduciary designations bantered about in the sales process or in marketing materials: non-discretionary ERISA §3(21) investment advisors and discretionary ERISA §3(38) investment managers.

Broadly speaking, there are three ways that a person or entity becomes a fiduciary with respect to investment matters:

1.   They are designated as a named fiduciary or trustee in the plan document.

2.   They are indirectly delegated with discretion or responsibility over plan assets.

3.   They render investment advice to a fiduciary and are being paid a fee for that service.

A “§3(21) advisor” becomes a fiduciary because it is receiving compensation for providing investment advice to the plan, as detailed in the third item above. The §3(38) designation is different: the investment firm is a fiduciary because it has been granted discretion over investment matters for the plan or a portion of it, as detailed in item 2. It is important to understand the distinction.

A conflict of interest would prevent a firm from serving as a “§3(38) investment manager,” because this would be a prohibited transaction under ERISA §406(b). There is no exception in §408 that allows a party with discretion–but with conflicts of interest–to have their recommendations approved. They are simply not allowed in the kitchen, so to speak.

In reality, there are only two reasons why an investment firm would answer “no” to the key question about whether it would serve as a discretionary §3(38) investment manager or named investment fiduciary to the plan:

a)   The firm or one of its affiliates has conflicts of interest and they are prohibited by law from serving in the role; or

b)   The firm is not confident of its investment management abilities–that is, it doesn’t trust or won’t eat its own cooking.

Either way, plan sponsors would be wise to avoid firms that respond negatively to such a query.

Trust but Verify

The third key question, which addresses the issue of whether an advisor/consultant is willing to serve without any conflicts of interest or as a level fee fiduciary, is the final step in the due diligence process. If the answer is “yes,” then it makes sense to get it in writing from a principal or officer, along with explicit details about the compensation structure of the firm and its affiliates.

For most plan sponsors, the best strategy is to break down the RFP process into two phases. First, seek answers from the larger universe of investment advisor/consultants regarding the three key questions about conflicts of interest. Aside from mitigating the risk of having to backtrack or even restart the process later on, their responses will significantly narrow the field of candidates to research on a more in-depth basis.

Finally, once a decision is made to move forward, make sure that the prospective advisor/consultant truly understands the relevant issues and is competent. If not, the damage to the plan–and the sponsor–could prove to be more than reputational.

View Original Blog Post »

How to Manage Your Company’s Security Policy

Posted by Wes Stillman on October 13, 2016

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Editor’s Note: Today’s blog post is a guest post from Wes Stillman, who is CEO and founder of RightSize Solutions.  Wes also recently guest presented a webinar titled Cybersecurity: What Advisors Need to Know about Protecting Data. A recording of the webinar can be accessed here.

*   *   *   *   *

The biggest stumbling block for registered investment advisors when it comes to guarding against cybersecurity breaches is not technology-based, it’s a people problem. The right technology is critical, but RIA leaders face a bigger challenge in fostering a cybersecurity-sensitive culture in a way that resonates throughout all levels of their firms and is much more than a simple policy handout.

How can your firm protect itself from the growing number of cyber threats? It starts with exercising some online common sense. Here a few consideration to evaluate within your company’s security practices and processes:

  • Take an inventory of all existing policies, software and hardware your firm utilizes. Where are your weak points? An ever-increasing number of advisor solutions are cloud-based, which is great for accessibility, but think about who is accessing your client information, and where exactly that information resides. Consider the business partnerships and data exchanges your company executes on a daily basis. In today’s interconnected business environment, our data supply chains create many access points to your customers’ data. Make sure you are doing your part to protect these connections.
  • Make sure your employees realize the critical role they play in making a meaningful impact to improving security, and that they are equally capable of causing huge issues. Firms should train associates to recognize red flags such as emails that ask for personal or credit card information, requests for immediate action regarding unfamiliar situations, or emails that include suspicious attachments. And by the way, managers are not exempt. Management typically has more responsibility for company information and administrative privileges, which makes them even more vulnerable.
  • Institute the use of a centrally-managed password manager solution. Using strong and different passwords is crucial to preventing breaches, and limits damage in the event of one. Remember that human behavior is inevitable, and if you require complex and unique passwords, employees will write them down, or worse, use one password for everything. Instead, offer a password vault to encourage safe behavior. RoboForm has a free solution that will allow you to generate complex unique passwords for all your online activities. These days, passwords are quickly becoming just a part of confirming identity. Multifactor authentication goes beyond a simple password. It provides a double check to confirm identity. Having a combination of a password and a personal identifier (something you know, and something you have) is quickly becoming the norm.
  • Establish and enforce a firm-wide Bring Your Own Device (BYOD) policy that clearly defines what is and is not acceptable usage. Mobile email is the most common process that employees want to access on their personal devices. Make sure there are specific rules that enumerate the policies that should be in place for receiving work emails on personal devices. These should also include policies for remote access that enforce utilization of VPNs to increase security. Further, consider a cloud based solution that will allow secure access from anywhere. Also, make sure company devices are encrypted and up to date with latest software.
  • Make sure that you have the right contingency plans and backup procedures in place for when disasters do happen.  The right technology is critical, but RIA leaders can face a bigger challenge in fostering a cybersecurity-sensitive culture in a way that resonates throughout all levels of their firms. Management needs to keep cybersecurity at the forefront by continually asking themselves, “Where’s the data?” Even if information is safe when stored, and safe in transmission, the firm may still be at risk if its data is being used on unprotected, unsecured devices.  Also, think about all of the levels of security at your company. Clearly layout who has access to what and control administrative privileges accordingly (both with internal staff and outsourced vendors). For example, by limiting the ability to install drivers and execute applications can help control what gets onto your systems and prevent attacks like ransomware.

Ultimately, cybersecurity is a critical aspect of your firm’s success, business health, and keeping clients’ personal information safe. Firms that do not stay aware and are not proactive in this area run the risk of becoming the victim of a multitude of threats to their firm’s technology and data. For more insight, our recently published ‘Managing Your Company's Security Policy’ whitepaper offers 10 actionable tips that your firm can immediately put in place and benefit from. These tips range in terms of effort, cost, and function and are all accessible solutions that can provide the backbone of a secure organization.

Wes Stillman is CEO and founder of RightSize Solutions, providing IT Management Services for the wealth management community and very first provider of outsourced technology management and Cloud-based cybersecurity solutions to RIAs. Wes can be reached at

fi360 Fiduciary Talk 37: A Fiduciary Angle to Business Continuity?

Posted by on September 09, 2016

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As a fiduciary, should all advisors have emergency plans to deal with the unexpected? Blaine and Duane discuss recent state and SEC actions on business continuity rules and the case being made by the SEC to tie the rule to fiduciary duties.

fi360 Fiduciary Talk 36: Changes to the SEC Liquidity Rules for Money Market Funds

Posted by fi360 on September 09, 2016

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Duane and Blaine discuss the SEC's liquidity rules for money market funds and what the rule means for advisors.

Cybersecurity: 6 Steps to Build Your Fiduciary Readiness

Posted by fi360 on August 25, 2016

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How prepared is your practice for a cyberattack? Is cybersecurity important to your practice or is it an after thought? Do you view cybersecurity as part of your fiduciary duties?

Wes Stillman, Founder and President of Rightsize Solutions, recently co-presented in an fi360 webinar stating that nearly 1.8 million data records are breached every day* and financial services firms are not immune from such attacks. Securing and protecting your business data is increasingly important in your role as a fiduciary.

While laws and regulations are yet to answer whether cybersecurity is a fiduciary duty, you should have a well-planned approach to managing cyber threats.

The SEC has a growing interest in cybersecurity and since 2014, has conducted a series of examinations to assess cybersecurity risks and preparedness in the securities industry. As a result, they issued Risk Alerts concentrated on six different areas of cybersecurity including governance and risk assessments, access rights and controls, data loss prevention, vendor management, training, and incident response.

Here are six steps you can take to build your fiduciary readiness around cybersecurity:

  1. Build your awareness of cybersecurity issues and management principles
  2. Assess cyber risks: prioritize and scale attention accordingly
  3. Establish due diligence criteria for vendor selection and monitoring
  4. Document a management plan and decision-making processes
  5. Stay current on regulatory and marketplace developments
  6. Recognize the obligation to be reasonable, not infallible. Follow industry norms and do business with reputable firms.

For more information on the above steps, visit the resources provided below.

Protecting your business data is important to your practice and to your responsibility as a fiduciary. Don’t get caught off guard, prepare yourself and your practice now to manage cyber threats..


fi360 Fiduciary Talk 34: Target Date Funds and How They Are Used in QDIAs

Posted by fi360 on August 16, 2016

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Blaine and Duane discuss the rapid growth of TDFs as QDIAs, how advisors should consider whether TDFs make sense for their client, and how to compare TDF products.

fi360 Fiduciary Talk 35: The Impact of DOL’s Fiduciary Rule on Suitability Requirements

Posted by fi360 on August 04, 2016

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Blaine and Duane discuss how the DOL's final fiduciary rule impacts advisors who have been operating under suitability requirements associated with insurance and securities laws.

fi360 Fiduciary Talk 33: Collective Investment Trusts Capturing Assets and Attention

Posted by fi360 on July 28, 2016

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Collective Investment Trusts (CITs) have been capturing lots of attention and assets lately. CITs offer retirement plan fiduciaries an attractive, generally lower-cost, alternative to mutual funds. CITs have also caught the attention of regulators and litigators. Plan fiduciaries and investment fiduciary advisors need to be well versed in CITs and how to evaluate them. In this podcast, fi360 Executive Chairman Blaine Aikin and Chief Product & Strategy Officer John Faustino discuss how CITs work, trends relating to CITs that will be important for investment fiduciaries to follow, and how to think about them when conducting due diligence.

2nd Quarter 2016 Markets in Review

Posted by Matthew Wolniewicz, Chief Revenue Officer, fi360 Inc. on July 25, 2016

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United States equities ended the second quarter with modest gains despite weakening economic data and the increased volatility. This volatility was caused by the June 23rd Brexit vote. The immediate fall-out from the vote was nasty. For the following two days, we saw massive spikes in volatility and a large drawdown in global markets. However, the markets bounced-back and rallied the final week of the quarter. As a result, many asset classes finished close to their pre-Brexit level. The full impact of the vote to leave will not be fully known for years. But it is important to note that the UK accounts for just 4% of global GDP and .09% of the world population.

The S&P 500 gained 2.46% in the second quarter and is up 3.85% YTD, while the Dow Jones Industrial Average was up 2.07% in the quarter and is +4.31% YTD. The tech heavy Nasdaq Composite was down .056% for the quarter and is -3.29% YTD. Small-cap companies (Russell 2000 was up 3.79% in the quarter) outperformed large and mid-cap, and value outperformed growth.

Energy was the top performing sector in the quarter finishing up 11.6%, driven by crude oil prices rising 19.2% during the quarter, and natural gas increasing 31.0%. With a flight to safety during the quarter, telecommunications ended up 7.1% and utilities rose 6.8%. However, information technology fell 2.8% and consumer discretionary lost 0.9%. Over a rolling 12 month period, utilities are up 31.5%, followed by telecommunications at +25.1% and consumer staples up 18.7%.

Fixed income in the United States was positive across all asset classes. The Federal Reserve Bank left rates unchanged during its June meeting, which was not much of a surprise given the unemployment data and the Brexit vote. The Barclays US Aggregate Index rose 2.21% for the quarter, municipal bonds were +2.6%, corporate bonds rose 3.6% and high-yield corporate bonds gained 5.5%.

International markets were negative overall for the second quarter as the MSCI EAFE fell 1.46% and is down 4.42% YTD. However, emerging markets continued their strong performance for the year and the MSCI Emerging Market Index was up .66% in the quarter and +6.41% YTD. Surprisingly, the MSCI Europe Index rose 1.2% for the quarter (in local currency) but remains down 3.7% YTD.

In the international fixed income markets, the Barclays Global Aggregate was up 2.9% in the quarter and 9.0% YTD. However, the balance of the year should be interesting. For the first time in history Germany’s benchmark 10-year note actually entered negative yield and ended the quarter at -0.13%.

View the full fi360 Fund Family Rankings Report.

Continuity and Succession Planning: Because bad things happen to good advisories

Posted by Robin Green, Ann Schleck & Co. Head of Research on July 15, 2016

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How would your practice and clients fare if your business was disrupted by a hurricane, a cyber-attack, or an act of war or terror?  What if your main server and backup server failed? What if a big chunk of your leadership team died in a plane crash?

As Ann Schleck & Co. helps advisors assess business wins and losses, we repeatedly hear about risks from the less dramatic, but also far more common events, such as the retirement of senior advisors, data security breaches, and businesses being acquired.

Therefore, it’s a great practice to have a documented continuity and succession plan in place. Yet, many advisors don’t. In fact, our data indicates that only 34% of DC specialist advisors had succession plans in 2015. This number is up from the 26% of DC specialist who had succession plans in place in 2009, leaving 66% of practices exposed.

These figures may change quickly because the SEC has proposed a new rule that requires advisors to have a written plan, policies and procedures to address:

  • maintenance of systems and protection of data
  • prearranged alternative physical locations
  • communication plans
  • review of third-party service providers
  • transition plan in the event the adviser is unable to continue providing advisory services

Under the SEC proposal, advisors would be permitted to tailor the details of their continuity and transition plans based upon the complexity of their operations and the risks related to their business models and activities. The proposal is published on the SEC website and in the Federal Register.

Help us help you

Please take a moment to complete our 2016 Practice Management Benchmarking Study. This brief survey includes questions about the contents of business continuity plans, along with the usual fee and service benchmarking questions. This survey will allow us to better understand market trends and to use them to help you strengthen and differentiate your business.    

Collective investment trusts rise in popularity as attractive alternatives to mutual funds

Posted by Blaine F. Aikin on July 06, 2016

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Fiduciaries need to be well versed in these low-cost investment vehicles and how to assess them

“Today may be the enemy of your tomorrow”.  The opening line of Dr. Henry Cloud’s book, Necessary Endings, serves as a cautional Collective investment trusts have been capturing lots of attention and assets lately. CITs offer retirement-plan fiduciaries an attractive, generally lower-cost alternative to mutual funds. Assets invested in these vehicles have grown from about $900 billion in 2008 to over $1.5 trillion at the end of 2014, according to Pensions & Investments data.

The low-cost dimension of CITs has also caught the attention of famed litigator Jerry Schlichter, of Schlichter Bogard & Denton. Mr. Schlichter has made quite an impact on the retirement marketplace by holding fiduciaries accountable for being highly cost-conscious and diligent in choosing the most appropriate investments and service providers on behalf of plan participants.

At the end of last year, the Schlichter law firm filed suit in the case of Bell et al. versus Anthem Inc., alleging in part that lower-cost CITs should have been selected for Anthem's 401(k) plan instead of “identical” higher cost mutual funds. The complaint alleges other fiduciary breaches as well, some of which appear to be CIT-related.


Plan fiduciaries and investment fiduciary advisers need to be well versed in CITs and how to evaluate them. To overlook these investment vehicles in circumstances where they are available and may be appropriate, risks at least criticism, if not recourse from plan participants.

CITs are comparable but not identical to mutual funds. They, like mutual funds, involve pooled investments that can be managed actively or passively in most asset classes. Daily valuations are available for both vehicles with transparency regarding the holdings, and they are accessible with low or no minimums (although these features have only recently become true for CITs). Both qualify as acceptable qualified default investment alternatives under the Pension Protection Act of 2006 and can be used as the underlying vehicles in target-date funds.

Differences between CITs and mutual funds fall principally in the areas of availability for different account types, regulation, governance and administrative matters. The biggest difference is that CITs are only available to qualified plans, not individual investors. They are issued and managed by banks and trust companies with oversight by the Office of the Controller of the Currency and state regulators, versus the SEC in the case of mutual funds.

The different legal and regulatory regimes for CITs versus mutual funds provide certain cost advantages for CITs, but pose potential drawbacks. While daily valuations are the norm, they are not required for CITs. Mutual funds have more standardized and extensive reporting and disclosure requirements.


The process of analyzing the internal investment and administrative expenses for CITs and mutual funds is pretty much the same, but fiduciaries must be alert to potential external costs specific to CITs. Operational differences may result in higher expenses for record-keeping services and for reporting of data and performance reports.

The following are important criteria to be considered from an investment selection perspective:

  • Minimum track record, with at least three years of history suggested.
  • Stability of the organization and tenure of managers.
  • Assets in the investment (particularly important in regard to anti-dilution measures).
  • Alignment and consistency of the portfolio composition to the desired asset class allocation.
  • Style consistency with desired peer group representation in the portfolio.
  • Expense ratios and fees relative to peers.
  • Absolute and risk-adjusted performance relative to peers.
  • In the case of target-date funds, alignment of the glide path to participant characteristics.


Service factors, such as participant education, may also come into play in the due-diligence process. The fiduciary must reasonably determine that these services are of sufficient value to participants to justify any added cost involved.

Blaine F. Aikin is executive chairman of fi360 Inc.

fi360 Fiduciary Talk 32: Reverse Churning and How the DOL Addresses the Problem Under the New Fiduciary Rule

Posted by fi360 on June 30, 2016

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Sales and advisory organizations are fundamentally different. That is the premise of the Labor Department's new conflict-of-interest rule. They have different priorities, which shape the culture and practices that exist in each. Consequently, they must be regulated differently and should be distinguishable to the public.


fi360 Fiduciary Talk 31: DOL Rule from a Sales vs. Advisory Cultural Perspective

Posted by fi360 on June 27, 2016

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Sales and advisory organizations are fundamentally different. That is the premise of the Labor Department's new conflict-of-interest rule. They have different priorities, which shape the culture and practices that exist in each. Consequently, they must be regulated differently and should be distinguishable to the public..


Under new fiduciary rule, DOL has reason to pay attention to reverse churning

Posted by fi360 on June 24, 2016

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Another reminder of the need to become well-versed on the fiduciary rule's conditions for rollover advice

By my count, the Department of Labor's 1,000-plus page fiduciary rule makes only one obscure reference to “reverse churning.” But this subtle reference belies the issue's importance. The SEC and Finra have had this regulatory matter on their radar for years. Now, under the new fiduciary rule, the DOL has reason to pay attention to the problem — and it's clear they will.

As the term suggests, reverse churning is the opposite of excessive trading in a brokerage account. Both are illegal practices designed to pad an unethical adviser's wallet. In a nutshell, reverse churning occurs when an adviser places client assets in an advisory account, charges an ongoing management fee, and gets paid for doing little or nothing thereafter.

The first occurrences of reverse churning came to light around 2005, when the SEC adopted an exemption permitting brokers to accept fee-based compensation. In a subsequent sweep of fee-based brokerage accounts by Finra, it found not only widespread absence of trading activity, but also double-dipping, in which brokers charged commissions for investment products that were subsequently placed in the fee-based accounts.

The Financial Planning Association successfully sued the SEC over this exemption for “fee-in-lieu-of-commissions” accounts, ending (in 2007) the ability of brokers to offer fee-based accounts without registering as fiduciary investment advisers. Nevertheless, reverse churning is still a concern.

Double-dipping by dually-registered advisers or providing fee-based accounts with little activity and few ongoing services provided by a fiduciary adviser can result in unreasonable compensation, which is a breach of the fiduciary duty of loyalty.

(More: The DOL fiduciary rule covered from every angle)

In recent years, the SEC has made reverse churning an examination priority. Just this past March the SEC fined three AIG-owned broker-dealers for, among other things, failing to monitor wrap-fee accounts on a quarterly basis to prevent reverse churning. The firms had compliance policies in place for that purpose, but on at least two occasions SEC examiners found the firms did not conduct their “inactive account review” on a timely basis.

Up until now, reverse churning has not been an issue for the DOL. Under ERISA, variable compensation represents a prohibited transaction for a fiduciary investment adviser and the only prohibited transaction exemptions (PTEs) to allow variable compensation were limited in scope.

But the new rule changes all of that, and the DOL can foresee a potential problem. For decades, brokers have been able to avoid fiduciary accountability due to a definitional loophole under the old rule which requires that advice be regular and the primary source of decision-making in order to trigger fiduciary status. That loophole has now been closed, laying the groundwork for brokerage accounts to be converted into fee-based advisory accounts as brokers seek to adapt to the new DOL rule.

The new rule favors level compensation to better align the interests of the client and adviser, but allows variable compensation under the new Best Interest Contract Exemption (BICE) to help mitigate the rule's impact on the broker-dealer business model. BICE is a new PTE that makes it possible, but painful, for brokers to continue to receive variable compensation if they acknowledge fiduciary status and follow a number of specific requirements to protect investor interests.

The onerous requirements of BICE are expected to prompt brokers-turned-advisers to shift from variable to level compensation arrangements. That's generally a good thing for investors if they receive services that justify the fees and if brokers don't seize the opportunity to create a double-dipping windfall simply by changing compensation arrangements for existing clients.

(Related read: The 2 sides of DOL fiduciary rule's BICE advisers must understand)

The DOL is rightfully most concerned about the possibility of reverse churning in IRAs. According to the Department, choosing to take a distribution or rollover assets from a 401(k) plan to an IRA is one of the most important financial decisions that a worker will make in his or her lifetime. For that reason, the DOL decided to extend its regulatory reach under the new rule to include advice on rollovers and on the assets held in IRAs.

Rollovers can present compensation conflicts for both brokers-turned-advisers and for advisers whose fees are level but whose compensation would increase when assets are rolled into an IRA.

The transition from variable to level compensation for existing clients creates the clear potential for double-dipping. IRA clients of brokers could have been paying commissions and 12b-1 fees for years. If the investments in the IRA are largely static and require little oversight, it may be better for the client if the assets stay where they are rather than shifting to a higher cost level-fee arrangement.

This would require the broker-turned-adviser to enter into a BICE arrangement with the client. To do otherwise would result in reverse churning. It is incumbent on the adviser to diligently assess what is best for the client and recommend the appropriate course of action. The DOL will want to see documentation of the decision-making process if they suspect reverse churning may be involved.

The conflict for a level-fee adviser is associated exclusively with the rollover recommendation, not with the form of compensation post-rollover. An increase in an adviser's compensation as a result of a rollover recommendation would constitute conflicted advice and give rise to a prohibited transaction, notwithstanding the fact that a level fee would be charged afterward. Recognizing that conflicts are minimized under level-fee arrangements, the DOL created a streamlined version of BICE to address this situation.

In order to meet the conditions of this streamlined BICE, also known as the level-to-level exemption, the adviser must document the reasons why the rollover is in the best interest of the client. The adviser also must describe the services that will be provided for the fee, in addition to other requirements.

The lessons here for fiduciary investment advisers seeking to comply with the rule and avoid reverse churning are straightforward. Advisers need to become well-versed on the conditions established in the DOL rule for rollover advice. They should conduct a thorough and objective assessment of the options available to investors seeking rollover advice and carefully document the basis for their decision-making, especially in regard to a recommendation to switch a client from a brokerage to an advisory account. And they must monitor any account for which they receive an ongoing management fee.

The DOL fiduciary rule may put a significant dent in the rollover business of some brokers and advisers. However, a prudent and well-documented recommendation should comport well with the rule and help assure that clients' best interests are served.

fi360 Fiduciary Talk 30: An interview with Sheri Fitts, President at Shoe Fitts Marketing

Posted by fi360 on June 17, 2016

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An interview with Sheri Fitts, President at Shoe Fitts Marketing, who was a speaker at INSIGHTS 2016. We spoke with Sheri about her conference session, Your Brand, Your Business, Your Bottomline.


fi360 Fiduciary Talk 29: An interview with Scott Reed, CEO at Hardy Reed

Posted by fi360 on June 10, 2016

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An interview with Scott Reed, CEO at Hardy Reed, who was a speaker at INSIGHTS 2016. We spoke with Scott about his conference session, Devil or Angel: Is There Profit in Working with Non-Profits?


fi360 Fiduciary Talk 28: An interview with Gary Sutherland, CEO of NAPLIA, and Paul Smith, SVP of NAPLIA, who were speakers at INSIGHTS 2016

Posted by fi360 on June 01, 2016

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An interview with Gary Sutherland, CEO of NAPLIA, and Paul Smith, SVP of NAPLIA, who were speakers at INSIGHTS 2016. We spoke with Gary and Paul about their conference session, What You Need to Know About Cybersecurity.


Choosing default investment alternatives for 401(k)s requires close due diligence

Posted by fi360 on May 27, 2016

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By Blaine F. Aikin

Maximizing the potential for positive participant outcomes, and minimizing regulatory and litigation risks, requires close analysis of QDIAs

Target date funds are the runaway top choice to serve as the default option for 401(k) plans. According to the Plan Sponsor Council of America, over 80% of all 401(k) plans elect to use a Qualified Default Investment Alternative (QDIA) and over 75% of plans electing a QDIA use TDFs.

Brightscope reports that plan assets invested in TDFs already exceed $1.1 trillion ($700 billion as of 2014 invested in TDFs using mutual funds, $400 billion invested in collective investment trusts and pooled managed accounts) and are likely to hit $2 trillion by 2020.

But successfully gathering assets doesn't necessarily mean that a TDF is the right choice for every plan's QDIA. It certainly doesn't mean that TDFs are well-suited for every plan participant.

TDFs have become so ubiquitous and so heavily marketed that plan sponsors and their advisers often skip right past the essential question of which of three available QDIA options is most appropriate for the plan participants.

Instead, the plan fiduciaries assume a TDF is appropriate and move directly to decide which type of TDF (off-the-shelf or custom) and which TDF provider to use. The quick and overwhelming popular choice ends up being an off-the-shelf solution from one of the top three TDF providers — Fidelity, Vanguard, or T Rowe Price.

Plan fiduciaries should not act hastily in choosing a QDIA. The Pension Protection Act of 2006 created a safe harbor for plan sponsors to avoid fiduciary liability for placing plan participants who fail to specify how their contributions are to be invested in any of three pre-diversified alternatives. The three approved QDIAs are TDFs, a diversified product or portfolio with a target level of risk that is appropriate for the participants overall (such as a balanced fund), or a managed account customized to account for certain participant characteristics. The safe harbor protects the plan sponsor from liability associated with losses that may occur in the QDIA.

Safe-harbor protection is conditional on the fulfillment of certain conditions. While not explicitly stated in the rule, it stands to reason that plan fiduciaries should carefully consider how well-suited each of the three QDIA options is to serve the best interests of the participant pool as a whole and choose accordingly.

There are two due-diligence best practices associated with QDIAs. First, choosing the right type of QDIA. Second, choosing the right provider for the type of QDIA selected. Unfortunately, there is not currently a generally accepted set of protocols for either of these decision processes.

Due diligence on what type of QDIA to offer hinges on understanding why a person saving for retirement should choose each type of QDIA. It seems to me that the three types of QDIAs roughly align to three different client profiles. TDFs align most closely with what I will refer to as a “liquidity” profile. A diversified portfolio or balanced fund would fit a more date-independent “legacy” profile. The third profile (the one associated with managed accounts) would fall between liquidity and legacy. It is most appropriate for someone concerned with dealing with longevity risk – trying to prevent the risk of running out of income during retirement – a “longevity” profile.

I tend to agree with commentators like Ron Surz who argue that the term TDF should be restricted to what are now known as “to” TDF products. This would provide certainty in terminology that defines a TDF as having the heaviest concentration of risky assets 10 or more years before retirement and the most conservative allocation at the expected date of retirement. TDFs are well-suited for companies that have low employee turnover, a plan design that encourages maximum participation and saving (automatic enrollment, high employer match, participant education, etc.), and employees that are likely to be strong savers and stay with the company until retirement. The typical participant is liquidity-driven with a specific retirement date and income objective in mind.

The legacy profile is at the other end of the spectrum. The typical participant is not particularly retirement-income focused: she may be young, career-mobile, have other financial objectives that overshadow thinking about retirement income, and is likely to view the 401(k) plan as a wealth-accumulation vehicle. Conversely, this profile could include older, highly-compensated employees who have accumulated significant wealth and are thinking more in terms of estate planning, philanthropic objectives or leaving a family wealth legacy. They do not expect to need to rely on these assets for retirement income. A more static balanced or multi-asset class QDIA that is not tethered to a specific retirement date would be well-suited for this profile.

Finally, the longevity profile is harder to define but is most common. Participants are generally dependent on their 401(k) for retirement income, uncertain about when they will be able to retire, and not confident that their savings will provide sufficient income without taking some level of investment risk both before and after retirement. Ideally, the longevity profile would benefit from more tailored solutions because the financial needs and planning objectives of the participant pool are likely to be quite diverse. Managed accounts may be the most appropriate QDIA choice in this case.

From a fiduciary-process standpoint, plan fiduciaries should be able to demonstrate that they have considered all QDIA types and aligned their selection to the appropriate overall participant profile. Having done that, they can then more confidently proceed to perform due diligence on the products and service providers that can best deliver the chosen type of QDIA. Maximizing the potential for positive participant outcomes, and minimizing regulatory and litigation risks, depends on fulfilling both forms of due diligence.

fi360 Fiduciary Talk 22: An interview with Mike Phillips, Chief Scientist & CEO at MacroRisk Analytics, who was a speaker at INSIGHTS 2016

Posted by fi360 on May 25, 2016

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An interview with Mike Phillips, Chief Scientist & CEO at MacroRisk Analytics, who was a speaker at INSIGHTS 2016. We spoke with Mike about his conference session, Portfolio Optimization Strategy: Matching Models with Time Horizons.


Q&A on the DOL's Fiduciary Rule: Is this covered?

Posted by Duane Thompson on May 18, 2016

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A few weeks ago, we presented webinars covering the DOL’s recently released fiduciary rule. A recording of that webinar is now available. During that webinar we received over 80 questions. We were not able to answer all of those during the one hour session, but we have compiled and answered them here. The questions are categorized, and we will do separate blog posts to address all of the questions within a given category. These questions are not comprehensive of the rule, they only address the questions that were submitted. Think of them as an addendum to the webinar. For a more comprehensive view of the rule, we recommend you view the recording, as well as download our Executive Summary and Client Memo documents.

In our seventh Q&A blog post from the webinar, we are answering questions around certain activities and if/how they are considered fiduciary under the rule. Please note: the views expressed herein are strictly informational, do not represent an official position of fi360 on regulatory or legislative matters, and should not be relied upon as legal, compliance or investment advice.              

Q: As a fee-only advisor (AIF® Designee) who has been using index funds and acknowledges fiduciary status openly, is there any real impact to me? It doesn't seem there is, outside of extra documentation of recommendations.

A: Fee-only advisors may be subject to BICE, particularly in connection with rollover advice to prospective clients.  As such, they should carefully review how the Department of Labor (DOL) defines ‘level fees.’  If their compensation increases as the result of recommending a rollover, the DOL provides a streamlined ‘level fee’ exemption under BICE. In this context, the RIA has a conflict of interest that must be managed.  

Q: HSAs are covered under the new Rule.  Are Coverdell IRAs also covered?

A: Investment advice to Coverdells is also covered by the new Rule. BICE is available for both accounts if the fiduciary advisor wants to receive variable compensation.

Q: If the SEC comes out with a uniform fiduciary standard, will it trump the DOL ruling? What is the future for taxable accounts and fiduciary advice?

A: We can only speculate what will be in the SEC’s proposed rule, but it cannot ‘trump’ the DOL rule with regard to tax-favored accounts.  Yes, the SEC can set its own rules for both types of accounts, but a more lenient fiduciary standard will not lower the bar set by the DOL for ERISA and IRA advice.  From a practical standpoint, the argument for scale makes sense by applying the higher (DOL) standard to all accounts even if the SEC adopts a lower standard.  However, hold-outs for any kind of loophole reducing liability in taxable accounts are very likely to argue against harmonization of DOL and SEC rules.

Q: Will a bank teller’s referral of a client to an advisor, and receiving a bonus for doing so, be considered a fiduciary act?

A: The final Rule generally applies to investment advice to ERISA plans, participants, and IRAs, not general referrals for investment advice.  If the teller’s referral is provided in a retirement context, such as a referral to an in-house advisor to manage the banking customer’s retirement account, then the teller may very well meet the definition of a fiduciary. 

Q: Under the rule will all retirement investment advisors be ERISA 3(21) fiduciaries with some operating under the BIC exemption?

A: The new definition is very broad.  It will be difficult to avoid fiduciary status for most retirement advisors.  It is still unclear how many firms will use the BIC Exemption.  They are still analyzing the operational costs of the safe harbor.

fi360 Fiduciary Talk 26: An interview with Mary Kathryn Campion, President at Champion Capital Research, who was a speaker at INSIGHTS 2016

Posted by fi360 on May 18, 2016

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An interview with Mary Kathryn Campion, President at Champion Capital Research, who was a speaker at INSIGHTS 2016. We spoke with Mary Kathryn about her conference session, Organize 'TMI' and Improve Portfolio Risk Management.

1st Quarter 2016 Markets in Review

Posted by Matthew Wolniewicz, Chief Revenue Officer, fi360 Inc. on May 17, 2016

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During the first quarter of 2016, domestic equity markets were essentially flat while the bond markets produced positive returns.  However, as was the case during 2015, volatility was the name of the game during the first quarter.  The year began with the Dow Jones falling nearly 1,000 points during the first week of the year – its worst start in history.  Global markets sold off on fears of China’s outlook and a devaluation of the renminbi, oil prices, and the broader global economy.  On February 11th, with the S&P 500 down over 10% YTD the fear was “bear market” territory and it would have been hard to foresee one of the biggest rallies since the 2008 financial crises was about to occur.  Global markets performance had been much the same with the MSCI Emerging Markets index down about 14% before the rally.  In barely a month the S&P rebounded to finish the quarter up 1.3% on a total-return basis, roughly the same return as in 2015. Fixed income was a stronger performer in the quarter, as you would expect during a volatile period and with increased buying demand due to rates in the global bond market being below zero, the Barclays Aggregate Bond Index finished up 3.03% for the first quarter.

What drove the rally?  In the first few weeks of February there was a sell-off of global banks. The pressure eased due to actions by the Federal Reserve Bank (“Fed”) and the European Central Bank (“ECB”). The Fed lowered its median expectation for rate hikes during 2016 from 4 to 2, with a resulting target rate of 0.9% vs an expected 1.4%.  In March, the ECB delivered a plan to expand its bond purchases to include non-financial debt to support the recovery.  They announced plans to purchase $20B EUR a month and buy non-financial investment grade corporate bonds, while also allowing banks that increase non-mortgage lending to be able to borrow at negative rates.  It is interesting to note the international markets held their gains despite another terrorist attack in Europe (Belgium) on March 22nd and that Brazil was the world’s top performing market with +27% return in the quarter.

From a Morningstar sector perspective, telecommunications (+7.5% for the quarter, and +11.85% over the trailing 12 months) and real estate (+5.1% quarter, and +2.1 trailing) were the best performing while financial services (-6.1% quarter, -4.3 trailing) and health care (-5.9% quarter, -6.48% trailing) were the worst.

View the full fi360 Fund Family Rankings Report.

7 Actions to Demonstrate Compliance Following the DOL Fiduciary Rule:

Posted by Blaine F. Aikin, Executive Chairman, fi360 Inc. on May 17, 2016

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These moves will help structure your firm to meet the Department of Labor's conflict-of-interest regulations.

Sales and advisory organizations are fundamentally different. That is the premise of the Labor Department's new conflict-of-interest rule. They have different priorities, which shape the culture and practices that exist in each. Consequently, they must be regulated differently and should be distinguishable to the public.

Advisory firms (whether in law, medicine or financial services) must be structured to optimize client outcomes, even as they seek to operate profitably. Sales organizations are structured to maximize profitability, even as they seek to produce positive customer outcomes. The priorities of these businesses are reversed. Advice is inherently a fiduciary function, sales is not.

You'll Need Evidence
The conflict-of-interest rule is intended to help make sure professional advisers operate their businesses to optimize client outcomes: They must deliver objective, competent advice by design. If your actions as an adviser are ever brought into question, you will need to be able to show evidence of well-defined, consistently applied decision-making processes that are grounded in fiduciary principles and deeply ingrained in the culture of your business.

The final rule makes concessions to allow firms and their representatives who have operated in a sales environment to adapt more readily to fiduciary obligations. It does so through the introduction of the “best interest contract exemption,” or BICE. It is the new prohibited transaction exemption that allows advisers to receive variable compensation for products they recommend, so long as they accept fiduciary accountability and follow certain procedures to help assure clients' best interests are served.

There are three things you need to know to truly understand the BICE and the overall rule. First, variable-compensation structures provide incentives for advisers to compromise clients' best interests in favor of their own. Second, advisers who receive variable (conflicted) compensation must implement extra investor protection measures by entering into a BICE arrangement with clients. And third, all retirement advisers — regardless of how they are compensated — must meet fiduciary duties of loyalty, prudence and care.

Bice as Blueprint for All
While reliance upon the BICE is only required for advisers who intend to take compensation in the form of commissions or transaction fees, the procedures de¬lineated for the exemption reflect best practices that all advisers should routinely follow. Essentially, the BICE provides a blueprint for the structure investment advisers should have in place to demonstrate compliance with ERISA fiduciary obligations. These seven actions align with what the BICE and the rule generally require.

  1. Tell your client you are a fiduciary adviser. This must be accomplished by a formal contract in most circumstances under the BICE, but you can otherwise acknowledge your fiduciary status in your engagement agreement with the client or in regular account documentation.
  2. Make sure you and the client are on the same page with respect to what you will do for them. Present in no uncertain terms, in writing, the scope of the services to be rendered. This engagement agreement should define the services to be provided, as well as those which are to be specifically excluded.
  3. Implement “impartial conduct standards.” This is a defined concept in the DOL rule. These standards are formal obligations to serve clients' best interests, to charge only reasonable compensation and to avoid misleading statements. These standards should be reflected in each advisory firm's compliance manual.
  4. Have policies and procedures in place that are designed to prevent violations of the impartial conduct standards. Exceptional due diligence processes for the selection and monitoring of products and service providers are absolutely essential.
  5. Avoid all sales incentives and any form of inducement that may compromise the quality or objectivity of your advice.
  6. Disclose all compensation, conflicts, and fees and expenses relating to the client relationship and the advice you render.
  7. Set up a protocol that will subject your firm's decision-making processes to scrutiny.

Also set up a peer-review process within your firm or with other colleagues you respect to evaluate client cases.

fi360 helps investment professionals ensure they are in compliance with it's Accredited Investment Fiduciary® training program. AIF® training empowers investment professionals with the fiduciary knowledge, understanding, and tools they need to serve their clients' best interests while successfully growing their business. Join the other 10,000 financial service professionals who rely on fi360’s fiduciary training to help them meet their fiduciary obligation.

fi360 Fiduciary Talk 25: An interview with Eric Roberge, President at Beyond Your Hammock, who was a speaker at INSIGHTS 2016

Posted by fi360 on May 11, 2016

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An interview with Eric Roberge, President at Beyond Your Hammock, who was a speaker at INSIGHTS 2016. We spoke with Eric about her conference session, Engaging Millennials - The Rubik's Cube of Financial Planning.


fi360 Fiduciary Talk 24: An interview with David Bromelkamp, President/CEO at Allodium, who was a speaker at INSIGHTS 2016

Posted by fi360 on May 11, 2016

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An interview with David Bromelkamp, President/CEO at Allodium, who was a speaker at INSIGHTS 2016. We spoke with David about his conference session, Fiduciary Investment Management for Trusts: How to Use Questions to Help Trustees.


fi360 Fiduciary Talk 23: An interview with Brian Edelman, CEO at Finanical Computer Inc, who was a speaker at INSIGHTS 2016.

Posted by fi360 on May 11, 2016

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An interview with Brian Edelman, CEO at Finanical Computer Inc, who was a speaker at INSIGHTS 2016. We spoke with Brian about his conference session, What You Need to Know About Cybersecurity.


Q&A on the DOL's Fiduciary Rule: BICE & PTEs

Posted by Duane Thompson on May 10, 2016

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A few weeks ago, we presented webinars covering the DOL’s recently released fiduciary rule. A recording of that webinar is now available. During that webinar we received over 80 questions. We were not able to answer all of those during the one hour session, but we have compiled and answered them here. The questions are categorized, and we will do separate blog posts to address all of the questions within a given category. These questions are not comprehensive of the rule, they only address the questions that were submitted. Think of them as an addendum to the webinar. For a more comprehensive view of the rule, we recommend you view the recording, as well as download our Executive Summary and Client Memo documents.

In our sixth Q&A blog post from the webinar, we are answering questions about BICE and other Prohibited Transaction Exemptions. Please note: the views expressed herein are strictly informational, do not represent an official position of fi360 on regulatory or legislative matters, and should not be relied upon as legal, compliance or investment advice.                                                             

Q: Can you summarize the purpose of the Seller's Exemption?

A: The purpose is to exempt from the fiduciary definition arms-length transactions in which the investment advice is incidental to the sale and the plan fiduciary has a degree of financial sophistication.  The carve-out is available to transactions with plans sponsored by banks, insurance companies, BDs and RIAs.  It is also available for incidental advice to plans with more than $50 million in assets.  Among other things, the seller is also are required to disclaim fiduciary status and disclose that it is not providing impartial advice.

Q: If a new person is enrolled in an existing SIMPLE IRA or 403b after the rule is implemented, is BICE required for the new person that comes into the plan?

A: Partial compliance with BICE is required after Apr. 20, 2017, and full compliance after Jan. 1, 2018 if the advisor to the participant (not the plan) takes variable compensation for his advice.  However, certain 403(b) plans are not subject to the Rule.  Check with your compliance professional or attorney for details.

Q: With respect to the contract requirements for IRAs and non-ERISA plans under BICE, what content requirements are there?  Or, are we creating the content of the contract as we go along?

A: The contract requirements generally include written acknowledgement of fiduciary status, agreeing to adhere to the Impartial Conduct Standards, and affirming that statements on compensation and other conflicts will not be misleading.  Other disclosures such as how the client pays for services can be included in the agreement or a separate disclosure.   The Level Fee Exemption under BICE does not require a contract.  You should discuss these and other specific requirements with your attorney. 

Q: Just to clarify the carve-out for Investment Education using an asset allocation model.  If specific funds are being used within the core menu of investment options available, will this be deemed education?

A: Specific use of funds will be deemed “education” and not “advice” if certain conditions are followed.  These include, among others, oversight by a plan fiduciary independent from the person who developed or markets the investment option and asset allocation model.  In addition, all other investment options with similar risk and returns characteristics must be identified.

Q: What does BICE mean?

A: Best Interest Contract Exemption.  BICE (sometimes called the BIC Exemption), provides a safe harbor for brokers receiving commissions or third-party compensation in providing investment advice.  However, they must meet fiduciary conditions set out by the DOL.

Q: What type of swap are you referring?

A: The DOL rule provides a carve-out from the fiduciary definition for advice provided to a plan by a person who is a swap dealer, security-based swap dealer, or a swap clearing firm who meets certain conditions.

Q: What are your comments on the exemption for state-sponsored retirement accounts for small business employees such as California's Safe Accounts?

A: The DOL is working on a rule that would exempt the States and employers from ERISA’s fiduciary requirements.

Q: Which prohibited transactions occur most often?

A: In recent years, class-action suits under ERISA have alleged self-dealing by plan fiduciaries through revenue-sharing arrangements with service providers that are used to offset the cost of other corporate services provided by the TPA or record keeper.

Q: For the sellers carve-out, is providing a disclaimer in marketing materials and/or account opening documents that the firm is not a fiduciary sufficient?

A: No.  The seller must “fairly inform” the plan sponsor that the seller is not undertaking to provide impartial advice or doing so in a fiduciary capacity.  It doesn’t sound like burying something in a brochure would satisfy the disclosure requirement.  There are several other conditions that apply.

Q: Under BICE, what is the means through which a broker is to communicate to the DOL when they are operating under BICE on a particular relationship?

A: The broker has no obligation to notify the DOL.  However, her firm must notify the DOL the first time it intends to rely on BICE.  Ongoing notification of each transaction is not required.

Q: How does BICE dovetail - or not - with the eligible investment advice provisions of the Pension Protection Act of 2006?

A: BICE dovetails with the PPA safe harbor only in the context that robo-advisors must use the PPA safe harbor and meet those conditions if the robo firm or an affiliate accepts variable compensation in connection with the advice arrangement.  The Level-Fee Exemption is available to level-fee robos.

Q&A on the DOL Rule: Compensation

Posted by Duane Thompson on May 06, 2016

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Two weeks ago, we presented webinars covering the DOL’s recently released fiduciary rule. A recording of that webinar is now available. During that webinar we received over 80 questions. We were not able to answer all of those during the one hour session, but we have compiled and answered them here. The questions are categorized, and we will do separate blog posts to address all of the questions within a given category. These questions are not comprehensive of the rule, they only address the questions that were submitted. Think of them as an addendum to the webinar. For a more comprehensive view of the rule, we recommend you view the recording, as well as download our Executive Summary and Client Memo documents.

In our fifth Q&A blog post from the webinar, we are looking at technical questions around compensation requirements under the rule. Please note: the views expressed herein are strictly informational, do not represent an official position of fi360 on regulatory or legislative matters, and should not be relied upon as legal, compliance or investment advice.                                  

Q. Are funds with 12b-1 fees able to be utilized by an independent registered investment adviser (RIA) who doesn't receive them for ERISA plans and IRAs?  If so, must an ERISA account be established for purposes of crediting the 12b-1 fees to such account to defray plan expenses so the broker-dealer (BD) doesn't get paid this?

A. It depends on how you define ‘independent.’  A truly ‘independent’ RIA – one that is not affiliated with a BD -- would generally not be eligible to accept 12b-1 fees

Your second question suggests the RIA is affiliated with a broker-dealer (BD).  In that case, the firm and broker can certainly accept 12b-1 fees for taxable accounts as they always have.  However, with regard to an ERISA account or IRA, they will need to avoid third-party compensation through a rebate unless the BD decides to use the Best Interest Contract Exemption (BICE).

Q. How does the new DOL Rule impact hourly, fee-only advisors who do not accept ongoing fees for AUM?

A. It doesn’t matter whether you charge by the hour or AUM.  As long as the fee does not vary with the particular investment recommended, and the fee reflects the fair market value for the services provided, hourly compensation is OK.

Q. Must platform providers keep revenue on investments level or is it sufficient that the compensation to the advisor be level?

A. There is no level-fee requirement for platform providers who are not fiduciaries.    However, compensation for any ERISA service provider must be reasonable.  They also may need to rely on a prohibited transaction exemption for receipt of commission or other third-party compensation.

Q. How will split-commission arrangements between securities and insurance brokers be affected under the Rule? 

A. In general, service providers’ compensation must be disclosed under Rule 408(b)(2), which would presumably include information on split-commission arrangements.  If these same brokers were deemed fiduciaries under the new Rule, other disclosures would be required including a duty to act in the client’s best interest.

Q. Is sharing advisor revenue with IARs based on new business that they bring in and maintain (clients are not charged beyond standard fee) considered a sales incentive under the Rule?

A. This is what most attorneys would call a facts and circumstances issue that requires a more detailed legal analysis of your compensation arrangements.  That said, since the IAR you describe receives variable compensation, and has a financial incentive to recommend his firm to prospective clients, he would be subject to the SEC’s solicitor’s rule and most likely BICE in rollover situations.

Q. Level compensation--is that by client or by the entire book of business?

A. The Level-Fee Exemption, as described by the DOL, is available “if the only fee or compensation received by the [firm, advisor or affiliate] in connection with the advisory or investment management services is a “level fee.”  [Emphasis added.]  The DOL goes on to say that the Exemption “focuses on the discrete recommendation that requires an exemption.”  This suggests that a firm may be dually registered as a broker-dealer, but that if it receives commissions “beyond the Level Fee in connection with investment management or advisory services…to the plan or IRA, [the firm] will not be able to rely on these streamlined conditions.”

Q. How are referrals/solicitation agreements between RIAs affected by the DOL Rule?

A. The DOL Rule may come into play in at least one situation based on the above scenario.  Receipt of referral payments may make the RIA ineligible for the Level Fee Exemption.  The DOL has not addressed this particular situation, so you would need to check with counsel or contact the Department for guidance.

Q. I have some retail accounts that pay 12b-1 fees.  Will I need to get a BIC contract signed in order to keep these accounts, or are they fine as is?

A. You do not need BICE for taxable accounts that are paying 12b-1 fees.  Nor is BICE needed for ongoing revenue streams from retirement accounts after the new Rule goes into effect  after Apr. 20, 2017.  However, if you provide advice on these ERISA or IRA accounts after Apr. 20 (and receive a commission, trails, 12b-1 fees, etc.) you will need to rely on BICE.

Q. Did the DOL clarify what "disclose fees and compensation" means?  Is that dollar amount, percentage or other?

A. If you’re referring to the BIC Exemption, it leaves the form of disclosure up to the firm.  Specific disclosure of costs, fees, and compensation, including 3rd party payments, can be described in dollar amounts, percentages, formulas “or other means reasonably designed to present materially accurate disclosure of their scope, magnitude, and nature in sufficient detail to permit the Retirement Investor to make an informed judgment about the costs of the transaction…”

fi360 Fiduciary Talk 22: The DOL’s Multi-Year Study on Retirement Saving

Posted by fi360 on May 05, 2016

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Podcast: Talk 22 - The DOL’s Multi-Year Study on Retirement Saving


Q&A on the DOL Rule: Product Impact

Posted by Duane Thompson on May 03, 2016

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Two weeks ago, we presented webinars covering the DOL’s recently released fiduciary rule. A recording of that webinar is now available. During that webinar we received over 80 questions. We were not able to answer all of those during the one hour session, but we have compiled and answered them here. The questions are categorized, and we will do separate blog posts to address all of the questions within a given category. These questions are not comprehensive of the rule, they only address the questions that were submitted. Think of them as an addendum to the webinar. For a more comprehensive view of the rule, we recommend you view the recording, as well as download our Executive Summary and Client Memo documents

In our fourth Q&A blog post from the webinar, we are looking at questions having to do with the impact of the rule on various products. Please note: the views expressed herein are strictly informational, do not represent an official position of fi360 on regulatory or legislative matters, and should not be relied upon as legal, compliance or investment advice. 

Q: Are group annuities (whether they are registered or unregistered) covered under 84-24 or would they need to comply with BICE? 

A: A group annuity transaction to a plan involving fixed annuities – generally immediate or deferred annuity contracts – would be covered under revised PTE 84-24, effective April 10, 2017. 

Q: Any specific mention of liquid alternatives, specifically? Is increased scrutiny applied based on an asset class/type, or will strategy, track record, and risk management be considered in the best interest decision of ERISA and non-ERISA accounts?

A: The final rule does not provide much detail on specific products since the proposed definition of an “Asset” was removed from BICE.  Any product can theoretically be sold through a plan’s brokerage window or to an IRA as long as it meets ERISA’s prudence standard.  That said, rest assured that regulators – including the SEC and FINRA – will pay special attention to recommendations to purchase higher-risk products, including liquid alts, non-traded REITS, and other illiquid and hard-to-value products.

Q: Will the new ruling cause agents who sell equity-indexed annuities to get the Series 65 (IAR) license?

A: No.  A federal court overturned an SEC rule in 2010 that would have required regulation of equity-indexed annuities as a security.  Insurance producers selling EIAs will not be required to register as investment advisers because of the DOL rule. 

Q: Any specific mention of Liquid Alternatives, specifically? Is increased scrutiny applied based on an asset class/type, or will strategy, track record, and risk management be considered in the 'best-interest' decision/discussion of ERISA and non-ERISA accounts?

A: Restriction on products under BICE completely removed.  Subject only to best interest standard.  However principal transactions standard (selling from inventory) has significant product restrictions.

fi360 Fiduciary Talk 21: fi360 Executive Chair Blaine Aikin interviews OWLshares co-founder and CEO Ben Webster.

Posted by fi360 on May 02, 2016

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Podcast: Talk 21 - fi360 Executive Chair Blaine Aikin interviews OWLshares co-founder and CEO Ben Webster. OWLshares is the first brand of exchange traded funds (ETFs) that focus on impact and environmental, social & governance (ESG) metrics.


fi360 Fiduciary Talk 20: An interview with Dr. Rui Yao of the University of Missour

Posted by fi360 on May 02, 2016

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Podcast: Talk 20 - Interview with Dr. Rui Yao, Associate Professor at Department of Personal Financial Planning at the University of Missouri, who was a speaker at INSIGHTS 2016. We spoke with Dr. Yao about her conference session titled, To retire or not to retire? - Does market performance provide an answer?



fi360 Fiduciary Talk 19: Executive Summary of the DOL’s Fiduciary Rule

Posted by fi360 on May 02, 2016

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Blaine Aikin and Duane Thompson provide an overview of the DOL’s fiduciary rule, including what’s in the rule, how it impacts advisors, and the implementation timeline.


Follow up Q&A from our DOL rule webinars: Plan Sponsor Responsibilities

Posted by Duane Thompson on April 29, 2016

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Two weeks ago, we presented webinars covering the DOL’s recently released fiduciary rule. A recording of that webinar is now available. During that webinar we received over 80 questions. We were not able to answer all of those during the one hour session, but we have compiled and answered them here. The questions are categorized, and we will do separate blog posts to address all of the questions within a given category. These questions are not comprehensive of the rule, they only address the questions that were submitted. Think of them as an addendum to the webinar. For a more comprehensive view of the rule, we recommend you view the recording, as well as download our Executive Summary and Client Memo documents.

In our third Q&A blog post from the webinar, we are tackling those questions that have to do with how plan sponsors are affected by the new rule. Please note: the views expressed herein are strictly informational, do not represent an official position of fi360 on regulatory or legislative matters, and should not be relied upon as legal, compliance or investment advice. 

Q: Considering the existing 408(b)(2) disclosure requirement of the cost of services to plan sponsors, what does fi360 say about the plan sponsor’s liability with respect to the BIC and the platform carve-outs?
A: The plan sponsor, as the named ERISA fiduciary, has ultimate responsibility to ensure that fees are reasonable and services necessary in order to operate the plan.  Rule 408(b)(2) is intended to make it easier to meet a plan sponsor’s fiduciary duty of care by requiring services providers to proactively disclose that information. 

Similarly, the new Fiduciary Rule is intended to make it easier for the plan sponsor to identify who is a ‘real’ fiduciary and who is not.  The new disclaimers about fiduciary status and not providing impartial advice by platform providers may help, but nothing changes in terms of the plan sponsor’s ultimate fiduciary responsibility.  In theory, if the plan sponsor desires to delegate some of its fiduciary responsibility, then the fiduciary disclaimers by the platform provider might prompt the plan sponsor to select a 3(21) or 3(38) fiduciary adviser for assistance. 

Service providers to small plans – those under $50 million in assets – do not have the carve-out available for incidental investment advice associated with platforms or counterparty transactions.  Instead, they will have to rely on BICE and be required to act as fiduciaries.

Q:  If a retirement plan sponsor allows an advisor to give plan participants investment advice, does the plan sponsor have fiduciary liability for that advice under the Rule? 
A: Only to the extent that they must monitor their performance.   However, to a large extent plan sponsors are shielded from fiduciary liability as long as they follow a prudent process in selecting and monitoring the advisor’s activities.  However, the Rule does permit in-house employees of the plan sponsor, under certain conditions, to provide advice without being deemed to be an ERISA fiduciary.

Q: As a plan sponsor/fiduciary, how can I continue to tolerate a BICE/Seller Exemption allowing for conflicted comp arrangements? Aren't I obligated to mitigate conflicts (Practice S-1.3)? This seems to give advisors a free pass but Plan Sponsors are put in a catch-22 if they continue such an arrangement.
A: As long as the firm that relies on BICE complies with the conditions of the exemption for conflicted compensation arrangements, the firm can do business in that way.  But you are correct.  A plan sponsor committing a prohibited transaction without specific relief would get into big trouble.

Q: What are the top things sponsors need to do in light of the DOL’s final rule?
A: Sponsors should, at a minimum, review the materials available to employers on the DOL’s website, at and other updates on the new Rule.  Secondly, they should designate an appropriate staff person to take a fiduciary training course or hire a fiduciary advisor to provide them with an objective overview of the plan sponsor’s responsibilities.

Q: Can you please speak to how this rule will apply or if it does apply to plan sponsors of state universities, hospitals and ACOs which have matching employer contributions to their 403b or 401k plans which are typically non-ERISA plans.
A: Certain 403(b) plans – typically non-profits, education and governmental plans, are not subject to ERISA’s fiduciary standard or the DOL Rule.  We’re not aware of any 401(k) plans that are not ERISA plans.

Follow up Q&A from our DOL rule webinars: Plan Services

Posted by Duane Thompson on April 27, 2016

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Two weeks ago, we presented two webinars on consecutive days covering the DOL’s recently released fiduciary rule. A recording of that webinar is now available. During that webinar we received over 80 questions. We were not able to answer all of those during the one hour session, but we have compiled and answered them here. The questions are categorized, and we will do separate blog posts during the week to address all of the questions within a given category. These questions are not comprehensive of the rule, they only address the questions that were submitted. Think of them as an addendum to the webinar. For a more comprehensive view of the rule, we recommend you view the recording, as well as download our Executive Summary and Client Memo documents.

In our second Q&A blog post from the webinar, we are tackling each question that has to do with offering plan services under the new rule. Please note: the views expressed herein are strictly informational, do not represent an official position of fi360 on regulatory or legislative matters, and should not be relied upon as legal, compliance or investment advice. 

Q: Can a commission-based "broker" collect 12b-1 fees from a plan under the education exemption, i.e., it’s possible for brokers to restructure their service offering?
A: Unless the broker or his firm is already a fiduciary to the plan, it’s possible that he could accept 12b-1 fees under the education exemption.  However, his compensation would have to be reasonable.  In addition, he would have to stay within the boundaries of the carve-out by engaging only in non-fiduciary communications (i.e., purely education and not investment advice). 

Q: If you are a fiduciary to a plan and get paid a level fee, and then are paid a separate flat fee in helping the plan sponsor move to a new platform provider, can you do so under the new Rule?
A: The Rule probably does not apply to the situation you describe.  You are already an ERISA fiduciary, so nothing changes in that regard.  Consistent with ERISA requirements, your compensation must be reasonable. 

Q: As a 401(k) advisor, can an RIA be a plan as well as participant advisor? Not so for commissioned-based or BD rep? 
A: Many RIAs have advised both plans and participants for many years under existing regulation.   Commission-based brokers could advise plans previously as non-fiduciaries under other exemptions.  And under the DOL’s 2011 fiduciary advisor rule they could advise participants.  Both RIAs and BD reps can advise plans and participants under the new Rule, but brokers in particular may be subject to a fiduciary standard once the Rule goes into effect. 

Q: Are you basically saying that all advisors to small plans under $50 million in assets are fiduciaries?
A: Yes.  There is no ‘incidental advice’ carve-out available for small plans as there is for platform providers and sellers of investment products to larger plans.  The DOL considers the small plan sponsors to be “retail” investors, treated just like individual plan participants and IRA account holders.

Q: Where does a brokerage account in which individual stocks are traded fall in the scope of the new rule? Would BICE need to be in place to cover this account?
A: If the brokerage account is a taxable account, it is not covered by the Rule.  Nor are self-directed trades by the retirement investor in any kind of account.  However, a broker receiving variable compensation for advising a participant trading individual securities in a brokerage window of an ERISA plan may be subject to BICE.  A brokerage account inside an IRA would clearly be subject to BICE.

Q: If an RIA is providing managed investment models as a 3(38) under a 401(k) plan, can an IAR of that RIA acting as a consultant to the Plan and receiving an advisory fee from the plan -- without any cross-sharing fees -- be acceptable under current rules as well as the new regulation?
A: As far as the DOL is concerned, the RIA and IAR are part of the same entity.  It sounds like any potential problems that might arise would involve questions around disclosures, supervision of the IAR by its firm, and whether the IAR’s advisory fee is reasonable in light of the other services provided to the plan.  You would need to consult with counsel regarding the specific facts involved.

Q: Just to confirm for ERISA plans, the broker suitability standard is no longer an option?
A: It is not an option if the broker meets the definition of a fiduciary.  The DOL’s Impartial Conduct Standards include a suitability requirement based on ERISA’s longstanding prudent investor standard but it is generally tougher than the broker suitability standard because DOL’s rule requires brokers to also adhere to a best-interest standard.  This standard has been incorporated into existing PTEs and the new BIC and Principal Trading Exemptions.

Q: So advice to participants of small plans (under $50MM) is exempt from the fiduciary definition or covered under the DOL rule? What happens to participants over $50MM?
A: Advice for compensation to participants is generally subject to the fiduciary definition no matter the size of the plan.  You may be confusing the fact that brokers who wish to receive commissions for their investment advice (they are already fiduciaries), can rely on BICE and avoid a prohibited transaction when providing investment advice to small plans.

Q: What will be the impact on plans that allow outside brokerage accounts held at wirehouse firms?
A: If you mean 401(k)-type plans that have brokerage windows, investment recommendations are subject to the same fiduciary standard as designated investment alternatives. 

The one impact to consider is that in the context of an investor education seminar for plan participants, it is unlikely that the firm’s advisor would be able to use any individual securities from the brokerage window in an asset allocation model or interactive investment materials – only the designated investment alternatives in the plan – and only under certain conditions.

Q: How would SEP IRA, SIMPLE IRA, individual (k) plans used traditionally by small business owners work under BICE?
A: An exemption from the definition of fiduciary under the Rule is not available for investment advice provided to ERISA plans and IRAs with less than $50 million in assets.  However, the BIC Exemption would be available for firms receiving commissions or other third-party compensation to these plans.

Follow up Q&A from our DOL rule webinars: Rollovers and IRAs

Posted by Duane Thompson on April 25, 2016

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Two weeks ago, we presented two webinars on consecutive days covering the DOL’s recently released fiduciary rule. A recording of that webinar is now available. During that webinar we received over 80 questions. We were not able to answer all of those during the one hour session, but we have compiled and answered them here. The questions are categorized, and we will do separate blog posts during the week to address all of the questions within a given category. These questions are not comprehensive of the rule, they only address the questions that were submitted. Think of them as an addendum to the webinar. For a more comprehensive view of the rule, we recommend you view the recording, as well as download our Executive Summary and Client Memo documents.

In our first Q&A blog post from the webinar, we are tackling each question that had to do with rollovers and IRAs. Not surprisingly, as it represents the biggest change for most advisors, this is the topic with the most number of questions submitted.  Also note: the views expressed herein are strictly informational, do not represent an official position of fi360 on regulatory or legislative matters, and should not be relied upon as legal, compliance or investment advice. 

Q: Would the definition of ‘investment advice’ include a rollover from previous 401(k) to current 401(k)?
A: Yes, any rollover between an ERISA participant’s account to another ERISA plan, or similarly IRA-to-IRA, would be covered.

Q: Does the rollover rule apply to participants terminating employment and requesting advice from a financial advisor or mutual fund call center on rolling their 401k assets into an IRA?
A: Yes.  The new definition of investment advice includes rollovers, transfers and distributions from a plan as well as IRA-to-IRA rollovers.

Q: For firms with discretionary advisory programs, will it be possible to use the best interest contract exemption for the limited purpose of the rollover transaction, and then operate under a level fee advisory agreement once the assets have rolled over?
A: If the firm does not charge variable fees with respect to the participant’s account, then it may be able to use the streamline Level Fee Exemption instead of BICE.  Part of the answer depends on whether the firm already held discretion over the participant’s assets in the plan.  If it did, then BICE would be unavailable.  It also appears that the Level Fee Exemption would be unavailable if the firm held discretion.  Additional clarification may be needed from the Department on this point.

Assuming the firm did not hold discretion of the participant’s assets prior to the rollover, it should be able to use its discretionary advisory program to manage the new account.

Q: How can a level fee plan fiduciary advisor accept a participant’s rollover and manage the IRA rollover assets with a level fee? BIC?
A: There are at least three scenarios in play.  First, if it is the participant’s decision to roll over, and he or she has received no rollover advice, the fiduciary advisor has no conflict of interest.  Some experts also suggest educational advice describing the various options available would not constitute “investment advice.”  However, as a best practice, the fiduciary advisor should confirm in writing that it was solely the participant’s decision. 

Second, if the participant is a new client, then the advisor can rely on the Level Fee Exemption in providing rollover advice.

Third, if the participant is an existing client and the advisor’s compensation will not change as a result of the recommendation to roll over, then there is no conflict of interest and no need to rely on a PTE.  However, given the heightened interest by all regulators in rollover advice, as a best practice it is advisable to document why the rollover was in the best interest of the client. 

Q: If an RIA that does not provide services to the ERISA plan is handling a large rollover for a client, does the RIA need to justify and document the reasonability of the advice?  If so, does the RIA depend on the 404(a)(5) disclosure from the employer's plan?
A: Yes to both questions. 

Whether you are affiliated with an RIA or another regulated entity, the new Rule requires the advisor to justify and document the basis for the recommendation.  The DOL is particularly concerned about rollover advice to a plan participant under the Level Fee Exemption.  If the recommendation is to rollover from the plan to an IRA, the level fee advisor must document why the recommendation was in the best interest of the investor.  Documentation must include consideration of: 1) the alternatives to a rollover, including leaving the money in the current plan, if allowed; 2) comparing fees and expenses associated with the plan and the IRA; 3) whether the plan sponsor pays some or all of the plan’s administrative expenses; and the different levels of services and investments available under each option.

The 404(a)(5) disclosure from the current employer’s plan provides a significant amount of information on investment costs for each designated investment alternative.  The advisor is not required to rely on 404(a)(5), but the form should be a useful ‘yardstick’ in comparing investment expenses with an IRA.

Q: Will rollover analysis be required for any IRA rollover advice? 
A: If you are paid compensation and recommend a course of action, then you will likely be required to conduct a more extensive analysis than was required by regulators in the past.  An advisor under the Level Fee Exemption is required to undertake a fairly detailed analysis of the pros and cons of a rollover to an IRA from a plan.   

An advisor providing rollover advice under BICE would be subject to the Impartial Conduct Standards that requires adherence to the Prudent Investor Standard.  In a nutshell, the advice must reflect “the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use…”  As a best practice, it is advisable to follow and document the same rollover analysis required under the Level Fee Exemption.

Q: Because BICE is not available to advisors with discretion does that mean that advisors who are fiduciaries on a retirement plan cannot recommend a rollover to an IRA and use BICE to avoid the prohibited transaction issue due to uneven compensation?
A: You said it.  Advisors holding discretion over the participant’s account cannot rely on BICE in recommending a rollover. Consult with your compliance or legal professional for details.

Q: If a participant is in a plan that pays an expense ratio on the funds of 140 basis points, and the firm in turn shares 75 basis points with the broker, is the fee that the broker can charge once rolled into an IRA limited to 140bp or 75bp? 
A: Since you included a broker in the scenario, the assumption is that variable compensation is involved.  BICE does not require the same compensation to be paid after the rollover since its purpose is to provide a safe harbor for commissions.  However, the conditions for using BICE require the firm and advisor to, among other things, charge only reasonable compensation for services and product transactions, to act  in the best interests of the client “and without regard to the financial or other interests” of the firm and advisor. 

Q: Do the regulators give any credence to the service a client receives? Surely they can stay in the lower-cost 401k with limited options, or call a toll-free number for advice.  But there is no distribution or income planning.
A: With regard to rollover advice, the DOL exemption for the Level Fee Exemption requires a comparison between different rollover options that includes an analysis of the different levels of services and investments as well as costs.  The advisor must provide a rationale for why her final recommendation was in the best interest of the client.

BICE does not appear to require the same in-depth analysis of rollover advice, although the firm and advisor are fiduciaries.  Among other things, they must disclose the services provided and describe how the investor will pay.  In addition, the firm cannot charge excessive compensation.

Q: Will the number of rollovers increase, decrease, or be unaffected by the BICE?
A: The debate has only begun on this question.  Counter to current thinking, one industry report suggests that financial advisors will continue to have significant influence over clients’ decisions, and that the rollover trend will continue unabated.  Others think the application of the new fiduciary definition to rollover advice will have a chilling effect.

Q: Would general education about rollover options (leave assets in the account, cash out, roll to new plan or IRA) in marketing materials, in person or on the phone -- with referral to third parties for actual advice -- be considered advice under the Rule?
A: The answer to the first part of your question is straightforward.  No, general education on the rollover options, without the kind of communication that might result in “steering” the participant to a certain action, would not be advice.  However, the second part about referrals for advice raises a red flag.  If the person giving the educational advice is also paid for their referrals, then she could be giving investment advice under the Rule.

Q: What is understood about grandfathering of existing IRAs, particularly rollovers?
A: The DOL discusses grandfathering in the preamble to the new Rule.  In general, all transactions executed prior to Apr. 10, 2017, will be grandfathered, meaning ongoing revenue streams for transactions that were executed for reasonable compensation.  Any new advice or contributions to those products after that date will generally be subject to the final Rule.

Q: If an advisor is a fiduciary to a 401(k) plan, and the plan sponsor hires a new participant, what would the guidelines be if the advisor helped the new participant roll an old 401(k) balance into a rollover IRA?

A: The conditions you describe would be no different than for any other rollover, except that in the case of moving from one ERISA plan to another (or to an IRA), the advisor’s due diligence should include assessing plan costs paid directly by the plan sponsor as a corporate entity; not just by the plan.  Granted these instances are rare, but that is the kind of documentation that the DOL, FINRA or SEC would want to see.

Q: When you talk about the level-to-level exemption, does that mean the fee charged on the rollover IRA must be the same as that charged to the 401(k) plan?  Or does that mean that the fee on the IRA, although higher than on the 401(k), is level?
A: If the advisor’s compensation remains level after a rollover by an existing client, then she would not need the Level Fee Exemption.  If her compensation increases as a result of the rollover (such as the addition of new assets from a new client), but otherwise charges a level fee for her advice, then she would likely need to rely on the Exemption.  Otherwise the increase in her compensation would be a prohibited transaction.

Keep in mind that the advisor’s compensation isn’t the only factor to consider in developing a recommendation.  For example, assume the advisor’s compensation remains the same before and after the rollover, but the other investment expenses for the client increase, such as fund expense ratios, transaction costs, etc.  The advisor would need to document why the account change is in the client’s best interest.

Q: Assume a total plan cost to the participant is 1% and advisor to the plan receives 50 basis points of that amount.  Also assume the advisor recommends a rollover that results in 1.5% total expenses but the advisor continues to receive only 50 basis points.  Does that fall under streamlined Level Fee Exemption?
A: No.  If the advisor charges a level fee and his compensation does not increase as a result of the rollover, he does not need to rely on the Level Fee Exemption.  That’s because no prohibited transaction occurred.  However, he is a fiduciary under ERISA and required to act in the best interest of the client no matter how he is paid.  As such, unless the advisor can document why the higher costs were in the client’s best interest (such as the addition of new advisory services that weren’t available previously), then the advice may be imprudent.

Q: Can tiered AUM fee schedules qualify for the Level-fee Exemption on rollovers?
A: The preamble of the Rule does not directly address tiered fees, such as a discount based on the amount of assets under management.  The Rule’s definition of a level fee under the exemption is “a fee or compensation that is provided on the basis of a fixed percentage of the value of the assets, or a set fee that does not vary with the particular investment recommended…” As a best practice, it is advisable to disclose to the client your full AUM fee structure so that they are aware of the other options.

Q: If an existing client changes a fund within the portfolio either via a recommendation or on their own, are they now subject to BICE even though they were grandfathered?
A: If the advisor made the recommendation to switch out funds after BICE is in effect, then the grandfather exemption no longer applies.  If the transaction was self-directed by the participant, then the advisor is not responsible.  However, as a best practice documentation is always advisable, particularly if the transaction by the client was made counter to your recommendation.

Q: The relationship between advice to 401(k) plans and rollovers by individual participants is quite different.  Typically, fees are lower for participants in plans than for individuals with IRA accounts.  Is this not level to level?
A: No.  If the rollover recommendation results in more compensation to the advisor, it is not level-to-level advice.

Q: When is it appropriate per DOL that the duty to monitor be limited?
A: The DOL leaves it up to the advisor and retail investor client to determine the scope of engagement, including monitoring.  However, if the engagement does not include monitoring, the DOL indicates that the advisor’s recommendations should not include recommendations that require ongoing monitoring services. From the preamble to the rule, this is particularly a concern with respect to investments that possess unusual complexity and risk, and that are likely to require further guidance to protect investors' interests. 

fi360 Fiduciary Talk 18: Interview with Fred Reish

Posted by fi360 on April 21, 2016

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Blaine Aikin interviews ERISA attorney Fred Reish of the Drinker Biddle law firm on the DOL’s fiduciary rule. Recorded at fi360’s INSIGHTS 2016 conference


fi360 Fiduciary Talk 17: Interview with Eugene Maloney

Posted by fi360 on April 21, 2016

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Blaine Aikin interviews Gene Maloney of Federated Investors on the DOL’s fiduciary rule and the current fiduciary landscape. Recorded at fi360’s INSIGHTS 2016 conference.


Tweaks to final DOL fiduciary rule help ease implementation without sacrificing core principles

Posted by Blaine F. Aikin, fi360 Chief Executive Chairman on April 14, 2016

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April 6, 2016 was a transformational day in the history of financial services regulation. After more than five years in the making, the DOL's fiduciary rule was released.

The basic framework of the 2015 proposal remains intact even though the DOL made some important concessions to improve the rule's workability for securities-licensed personnel who will have to adapt to becoming fiduciaries for the first time. The changes made also help the DOL demonstrate that it has been responsive to concerns expressed by the brokerage and insurance industries and their advocates in Congress.

The final rule sweeps away the essentially unenforceable five-part test for determining fiduciary status. The new definition closes the giant loophole created by the original 1975 requirements that advice be regular and the primary source of decision-making in order for fiduciary status to apply — these provisions are gone.

As a result, virtually everyone who provides investment advice for compensation in the retirement space will be fiduciaries — a big change for securities-licensed representatives who have escaped fiduciary accountability under the old definition.

Opponents and others concerned with the DOL's proposed eight-month deadline for implementing compliance requirements can breathe a little easier, as the compliance deadline has been extended. It's now 12 months (April 10, 2017) for most of the rule's requirements and 18 months (January 1, 2018) for the major provisions of the Best Interest Contract Exemption (BIC Exemption or BICE).

At 1,023 pages, the collected documentation released by the DOL for the rule rivals "War and Peace" in scale (1,225 pages in the original edition of the novel). And while the DOL's tome isn't a literary masterpiece, it certainly is an impressive body of work. The heft of the final rule comes from a wealth of commentary that explains and provides context for the rule's provisions and the changes that were made.

While the adopted definition of fiduciary remains largely as proposed, the rule now clarifies the kinds of recommendations that would be considered investment advice, and therefore entail fiduciary accountability.

Two types of investment advice are specified in the rule. The first involves recommendations regarding the advisability of acquiring, holding, disposing of, or exchanging, securities or other investment property. This type also includes recommendations about how to invest after a rollover, transfer or distribution is made from a plan or IRA.

The second type of advice involves recommendations pertaining to the management of securities or other investment property. These include recommendations on investment policies or strategies, portfolio composition, the selection of investment managers or advisers, and even types of investment accounts such as selecting between brokerage and advisory accounts. This type also addresses rollovers — whether to rollover, in what amount, in what form, and to what destination.

Most of the carve-outs from the definition of fiduciary that were in the 2015 proposal have been retained and renamed “non-fiduciary communications.” These relate to activities that historically have not been fiduciary in nature and won't be under the final rule. They include counter-party transactions (sales relationships), platform provider services, swap transactions, recommendations by employees of plan sponsors, and investment education.

The proposed carve-out for investment education came under fire for prohibiting specific plan investment options from being named in asset allocation models or interactive investment materials. The DOL has eased that restriction somewhat by allowing their use subject to oversight by a plan fiduciary who is independent of the service provider. However, direct references to specific investment options are still barred for IRAs unless the adviser is a fiduciary.

The proposed carve-out for appraisals has been removed from the final rule. In its commentary, the DOL explained that it views services to value non-traded and hard-to-price assets as being critical to the due diligence work of fiduciaries. As such, the DOL believes that people who provide appraisal services should be held to a fiduciary standard. For that reason, these services didn't fit the “non-fiduciary communications” category and have been removed from the rule. The DOL indicated it may undertake a separate rule-making for appraisals in the future (and it sounds like they almost certainly will).

The most closely watched provision in the rule was the Best Interest Contract Exemption (BICE). Elimination of major disclosures and data disclosures such as 1, 5 and 10-year expense projections for investment products from BICE was a big concession.

In addition, the three-way contract between firm, individual adviser and retirement investor was reduced to the more conventional agreement between firm and client. More interestingly, the contractual component of BICE was eliminated for advice to plans and plan participants, who are already covered by a private right of action (to sue for ERISA breaches). The contract requirement remains for IRAs and non-ERISA accounts.

When a BICE must be signed also has been clarified. Recommendations can be suggested prior to execution of the contract. However, transactions can only be executed after the contract is signed.

The ability to sell a limited range of products, generally proprietary, remains available under BICE. Most of the conditions from the 2015 proposal are also in the final rule.

Of major interest to RIAs is the streamlined exemption within BICE for level-fee rollover advice. Retirement advisers who charge a level fee for both the advice they provide to plans and advice they provide to IRA clients have generally been prevented from suggesting an IRA rollover for fear of triggering a prohibited transaction. This is because most advisers charge a higher fee on assets in an IRA than they do for plan assets. Under the proposed rule, BICE could have been used to navigate this situation, but fi360 and other organizations suggested a streamlined solution which the DOL adopted.

Level-fee advisers can take advantage of a new safe harbor by providing written acknowledgement of fiduciary status, following impartial-conduct standards, and documenting why the final recommendation was in the best interest of the client.

One of the big surprises in the final rule was the inclusion of equity-indexed annuities under BICE. It had appeared that indexed annuities would continue to be covered under existing Prohibited Transaction Exemption 84-24, since in the 2015 proposal the DOL only moved variable annuities to BICE. Fixed annuities remain under PTE 84-24, which was itself strengthened.

It was also somewhat surprising that the DOL completely removed its restricted menu of investment products available under BICE. Previously only traditional investments such as bank deposits, CDs, mutual funds, exchange-traded REITS and ETFs were eligible.

Now, any product is available. Importantly, investment selection remains subject to ERISA's tough prudence standard. This added flexibility for advisers to exercise professional judgment but retained strong fiduciary principles with clear recourse available to investors if fiduciary breaches occur.

Finally, the DOL indicated that an adviser's monitoring responsibilities can be specifically limited in a client engagement. However, the DOL also made clear that it would be very difficult for a fiduciary adviser to justify not monitoring a recommended course of action that is risky or volatile.

It's been a long wait between the DOL's comment period on the rule, and the momentous industry impact now driven home by the final rule's release. The DOL has proven to be good on its word. It made significant changes to address practical impediments to implementing the rule, without sacrificing core fiduciary principles.

fi360 Fiduciary Talk 16: The Political Climate and the Presidential Politics from a Fiduciary Perspective and the Regulators

Posted by fi360 on March 11, 2016

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Executive Chairman Blaine Aikin and Senior Policy Analyst Duane Thompson talks about the political climate and the presidential politics from a fiduciary perspective and the regulators.


Document Your Best Intentions

Posted by Ryan Lynch, AIF®, Client Success Expert on March 08, 2016

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Document Your Best Intentions
Ryan Lynch, AIF®, Client Success Expert

In 11/22/63, Stephen King’s hero, Jake Epping, is a high school teacher turned time-traveler.  Having been shown a tear in the fabric of spacetime by Al, proprietor of the eponymous local diner, Jake stumbles back to September 9, 1958.  After a brief tour of his home town of yesteryear, Al launches into the “rulebook” on time travel to prepare Jake for his mission: save President Kennedy at all costs.  Through the ensuing “test” trips, Jake learns that some events he alters – with the best of intentions – lead to unintended and unsavory outcomes in the present day. 

In 2012, breach of fiduciary duty was cited as the top complaint in FINRA arbitration cases.  In the major court cases we have seen over the past decade, breaches occur because of a failure to act (or act prudently), rather than a failure to achieve a certain outcome.  In Tussey v. ABB, the defendant was found liable, among other sins, for failure to monitor recordkeeping fees and negotiate for rebates.  Again, in Nolte v. Cigna, excessive fees resulted in an eight figure settlement.  In both cases, a process that included the monitoring of fees (Practice 4.4 of the Prudent Practices) could have protected the defendants from litigation.

Boasting to prospects about one’s process is one thing, but documenting it is quite another.  As we teach in the AIF® Training, documentation prevents “Monday morning quarterbacking”.  What if a poorly-performing manager is replaced by a promising one who ends up liquidating the fund six months later?  What if I miss the boat on the international equities boom?   Chances are if a disaster strikes due to circumstances beyond one’s control, a breach of fiduciary duty did not occur.  However, the documentation to back up your decision will make that next quarterly review go much more smoothly, and quell any bad blood before it has a chance to boil.

Stephen King contends that even with the advantage of foreknowledge, we can never be certain of how our decisions will impact the future.  Despite our best intentions, mistakes will be made and we may need to weather an occasional storm.  However, a documented process is the rudder that will keep the ship on course.  That way, when a favorite fund manager is implicated in a scandal or the next recession hits, we can point to a well-documented, consistent, and yes, prudent process.  It may be the only thing that we can truly control in this business.

This Business is Personal

Posted by Robin Green, Ann Schleck & Company on March 02, 2016

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How The Best Relationship Managers Help Personalize the Retirement Plan Industry

I’m endlessly curious about the retirement plan industry and, fortunately, spend my time talking with the market about what works and where there is pain.  The industry leaders I meet with are passionate about their work with retirement plans because it is personal.   Each individual is personally saving for retirement.  And because we are in the industry, our actions impact our brothers, sisters, neighbors and communities. 

Recently my team conducted research with 11 leading plan providers who responded to 50 impactful questions about relationship management.  Business leaders spoke candidly about what concerns them and where they see change coming.  Relationship manager conversations uncovered what they need to best serve clients, what motivates them, and what keeps them at their firm.  From this insight — and our experience working in the industry — we’ve prepared a profile of what Relationship Managers need to be effective and make the business more personal. 

As an advisor, a plan sponsor or a plan provider, review whether or not your relationship manager has autonomy and influence, internal support, and advanced technology.  The best relationship managers have ample resources in all three categories.    


  • A well-defined client experience that ensures the best of the firm is consistently delivered to all clients – but enough flexibility to let the relationship manager bring insights in a targeted, meaningful way for each plan sponsor  
  • A concise reporting package to quickly communicate where the plan sponsor is today and what they need to do to improve their metrics
  • Influence on when and how education, marketing and operational communications are delivered to their plan sponsor and participant clients
  • Access to regulatory, fiduciary and relevant industry trend information to enhance their knowledge and added value at each client interaction
  • A deep understanding of plan profitability and pricing for each plan sponsor along with quick, clear responses from leadership on pricing and service changes
  • Testimonials, case studies and “real-life” materials to bring meaningful insights to plan sponsors


  • Responsive, back-office teams who deliver operational excellence, communicate effectively and have defined solutions to common plan sponsor challenges
  • Reasonable case-loads that let them focus on strategic business planning and relationship-building tasks
  • Tools and training on how to partner with specialist advisors – including support from a dedicated Consultant Relations team
  • Collaboration and support from marketing and communications – including a relationship management enablement team lead in marketing responsible for helping RMs be the “face of the brand”
  • Influence on major brand, marketing, research and client – facing initiatives
  • Administrative support (e.g., meeting schedules, travel, material prep)
  • News-feed control to help ensure the right information gets through to them and their clients


  • On-demand tools and dashboards to quickly identify how changes, trends and ideas personally impact the RMs book of business and each plan sponsor and their employees
  • Plan sponsor websites that present customized dashboards to show sponsors the information they want to see first
  • CRM systems that accept plan-by-plan, preferences for information delivery
  • RM access to single sign-on, mobile CRM and internal systems to help them be more responsive and productive
  • Innovative technology to share information during client meetings (e.g., iPad, webcast, video-conferencing)

Plan sponsors and advisors are focused on managing the fiduciary requirements for retirement plans and delivering the best possible retirement solutions for plan participants. Retirement plan providers are making investments to help protect plan sponsors, understand their needs and drive better retirement outcomes for plan participants. We all rely on relationship managers to personalize the experience for plan sponsors, plan participants and various other retirement plan service partners.  Relationship managers are the face of the brand, but their role is bigger than the company brand; they serve as ambassadors for the financial services industry. Their integrity and dedication sets a high bar for every other arm of financial services to follow. 

I’m consistently surprised and impressed by how passionately retirement plan industry people are – at every level of the business. But it makes sense and I’m passionate, too.  I am a participant in my companies retirement plan.  I am on the investment committee.  My colleagues and their families are impacted by our actions.  And this business is personal.

fi360 Fiduciary Talk 15: SEC Retirement Targeted Industry Reviews and Examinations Initiative

Posted by fi360 on February 24, 2016

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fi360 Fiduciary Talk 15: SEC Retirement Targeted Industry Reviews and Examinations Initiative

fi360's Executive Chairman Blaine Aikin and fi360's Senior Policy Analyst Duane Thompson review SEC Retirement Targeted Industry Reviews and Examinations Initiative


fi360 Fiduciary Talk 14: Class Action Lawsuits Against Fiduciary and 401(k) Plans

Posted by on February 24, 2016

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Class Action Lawsuits Against Fiduciary and 401(k) Plans

fi360's Senior Policy Analyst Duane Thompson and fi360's Executive Chairman Blaine Aikin looks at the recent wave of class action lawsuits against fiduciary and 401(k) plans.

Not just the DOL: Retirement plan advisers must prepare for increased SEC scrutiny

Posted by Blaine Aikin, fi360 Executive Chairman on February 22, 2016

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Not just the DOL: Retirement plan advisers must prepare for increased SEC scrutiny

SEC now digging into rollover advice, other aspects of conflicts relating to retirement accounts

It's not just the Department of Labor that's out to strengthen protections for retirement savers. The SEC's Office of Compliance Inspections and Examinations (OCIE) is taking a deep dive into the practices of retirement advisers, as well.

As was true in 2015, OCIE has placed “examining matters of importance to retail investors, including investors saving for retirement” at the top of its list of exam priorities for this year. In June 2015, OCIE's approach to the retirement marketplace became much more explicit when it launched a multi-year targeted examination program called the Retirement-Targeted Industry Reviews and Examinations Initiative, or ReTIRE for short. The program announcement declared that “OCIE, through the National Examination Program (NEP), will conduct examinations of SEC-registered investment advisers and broker-dealers (collectively, registrants) under the ReTIRE initiative that will focus on certain higher risk areas of registrants' sales, investment and oversight processes, with particular emphasis on select areas where retail investors saving for retirement may be harmed.”

Shortly thereafter, examination letters from OCIE to RIA firms began to arrive. The letters involve some 75 points of inquiry that dig deep into the matters cited in the ReTIRE launch announcement.

Although neither SEC nor Labor Department leadership have said whether they are sharing information at the examination level, both agencies say they have been comparing notes on the proposed DOL fiduciary rule.

Perhaps they are doing more than just that. Post-Madoff, the SEC has made a concerted effort to eliminate a “silo mentality” in which various SEC departments were unaware of other investigations, both inside and external to the agency. It's certainly possible that the SEC is now intent on achieving broad cooperation with other agencies.

For example, take rollover advice. Until the Government Accountability Office's (GAO) June 2013 report on conflicted advice involving 401(k) account rollovers to IRAs, this issue was not very prominent on radars at the SEC, FINRA, or even DOL. In fact, the DOL's first fiduciary rule proposal in 2010 left out any discussion of fiduciary coverage of rollover advice by brokers. It's now in the current proposal. Later that year, Finra came out with a clarification that rollover advice was subject to its suitability requirements under Rule 2111. In 2014, and in the ensuing two years, OCIE has made retirement accounts an examination priority.

However, the new OCIE exam letter digs deeper than previously into rollover advice and other aspects of conflicts related to retirement accounts. For example, based on the document requests, examiners will review the extent to which the advisory firm explored all five rollover options: keeping the current plan account, transferring assets to a new employer's plan, rolling over to an IRA or taking a lump sum distribution. Documentation of the due diligence process naturally comes into focus, with OCIE requesting written disclosures and scripts used in discussing tax implications, availability of penalty-free withdrawals (presumably for liquidity needs), protection of assets from lawsuits and estate planning.

In asking about conflicts of interest, the SEC is also digging more deeply into costs and compensation — traditional areas of concern for the DOL. OCIE wants data not only of the account-level fees and expenses of an RIA's clients, but other investment options that were available, such as when considering an IRA rollover.

Unlike ERISA, which seeks general prohibition on unnecessary services or excessive expenses, the SEC has previously been concerned about disclosure or improper omission of such information, not the actual expenses, unless accumulated through fraud or deceptive practices. This seems to be a major change in direction for the SEC.

These kinds of inquiries should not alarm advisers who adhere to fiduciary best practices and document their decision-making processes. Wealth management and financial planning firms that do so, from defining the initial scope of engagement to collecting pertinent data, performing systematic analysis and formulating recommendations and alternative courses of action, will not have to adjust their compliance regimen much, if at all.

If anything stands out as a difference from prior OCIE exams, it's the ERISA-like request for up to 25 documents covering Qualified Default Investment Alternatives, or QDIAs. This is the safe harbor established by Congress in the 2006 pension reform law that permits plan sponsors to use, among other options, separate managed accounts as a default investment option for plan participants.

One of the items notably missing from the OCIE list that is more common in the ERISA world is the adviser's investment policy statements (IPS). IPS documents are commonly used by plan sponsors and by many advisers for their retail clients. An IPS provides benchmarks and guidelines for portfolio allocations. Neither the SEC or DOL require a formal, written IPS, but the DOL considers an IPS to be an important part of a plan's governing documents.

It's no coincidence that the steady growth in self-directed retirement accounts, with assets of $16.5 trillion, compared to $8.2 trillion in defined benefit plans, has attracted the attention of nearly everyone in Washington – from Congress to at least three federal regulators.

As their number-one priority, advisers should be focusing on mitigating (preferably avoiding) conflicts of interest, which are at the heart of current regulatory attention. Having in place a deeply engrained fiduciary best-practice structure covering ERISA and securities regulations will put advisory firms in the best position of preparedness when OCIE or the DOL comes knocking.

fi360 Fiduciary Talk 13: The DOL Sends Fiduciary Rule to OMB for Final Review

Posted by fi360 on February 22, 2016

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The DOL Sends Fiduciary Rule to OMB for Final Review

On January 25, the DOL's fiduciary rule was sent to the OMB for final review.  Hear what fi360 Executive Chairman Blaine Aikin and Senior Policy Analyst Duane Thompson have to say.


Are Consumers Blind to your Digital Banner?

Posted by Renee Watkins, Digital Marketing Manager, fi360 on February 02, 2016

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Are consumers blind to your digital banner ads?

Every day, consumers are bombarded with banner display advertisements.  In fact, the average internet user is exposed to 1,707 banner ads on a monthly basis!  This has resulted in a phenomenon called, “banner blindness” which is defined as when consumers either consciously or subconsciously ignore the majority of banner display ads they encounter.  86% of consumers today suffer from banner blindness.  This phenomenon has caused to average click rate of a banner ad to drop to a mere .11%.

However, despite these dismal numbers, banner display ads still play a very crucial role in today’s marketing efforts.  So what is a marketer to do?

Below are a few ways you can give your banner ads the best chance of engaging consumers:

  • Develop goals before brainstorming the goals of the ad.  For example, brands looking to boost engagement metrics should leverage interactive, rich-media ads, while brands looking to convert consumers should leverage retargeting ads.
  • Keep it simple. Cluttered designs tend to underperform.  Headline copy concise and benefit-oriented to drive engagement and conversions.
  • Give value to your call-to-actions. Avoid the standard “Click Here” call-to-action and swap it out for something that invokes a stronger emotional response from the user such as “Download the report”” or “Get Coupon.”
  • Validate authority and brand awareness by placing your logo on the ad. However, a recent Rocket Fuel study revealed that digital ads with logos in the lower left-hand corner averaged 81% higher than ads with logos in other locations.

  • Maintain campaign cohesiveness.  This includes color combinations, font, and layout.  Ads should have a synergistic connection across a multi-channel campaign.

Of course, like any other marketing channel out there, there isn’t a “single recipe for success.”  So it’s important to A/B test your digital ads, compare your results, and go with what is working best for you.

The DOL Sends Fiduciary Rule to OMB for Final Review

Posted by fi360 Staff on January 29, 2016

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The Department of Labor’s conflict of interest rule has been turned over to the Office of Management and Budget for a final review. This is a significant step in what has been a contentious regulatory process going back to 2010. It means the final rule is nearing public release. 

Read fi360's Client Memo to learn more.

Download the Client Memo

fi360 Fiduciary Talk 12: Recent trends in SRI

Posted by fi360 on January 22, 2016

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fi360 Fiduciary Talk 12: Recent trends in SRI

In this session, fi360 Executive Chairman Blaine Aikin and Senior Policy Analyst Duane Thompson will discuss recent trends in Socially Responsible Investing or SRI.

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4th Quarter 2015 Markets in Review

Posted by Matthew Wolniewicz, Chief Revenue Officer at fi360 on January 21, 2016

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Domestic equities struggled in December, but due to solid gains during the rest of the fourth- quarter, the year finished essentially flat. Stocks outperformed bonds for the fourth consecutive year, the S&P Composite climbed to an all-time high in May, and several sectors were buoyed by merger and acquisition activity. According to data from Dealogic, 2015 was the biggest year for global M&A with over $5 trillion in transactions and $2.5 trillion in the US. Large-cap benchmarks outperformed small-cap benchmarks for the year and growth outperformed value. The 50 largest stocks at the beginning of 2015 were up an average of 1.5% by year-end, while the 50 smallest stocks were down 11.9%. However, worries about global economic growth, China, interest rates, commodities and the energy sector were a drag. Consumer discretionary was the best performing sector for the year up 10.1%, while energy was the worst performing sector down 21.1% as oil prices ended the year at an 11 year low, and commodities had their fifth consecutive year of negative price returns.


Total Returns


December 2015

Fourth Quarter 2015

2015 YTD





S&P 500




Nasdaq Composite




Global markets underperformed the US markets in 2015 and emerging markets stocks lagged their developed market counterparts by a wide margin. Small caps outperformed large caps, and growth outperformed value. Once again, Chinese economic weakness, oil, commodities and central bank actions drove uncertainty and underperformance for the year. Almost every sector declined in the EAFE, with health and utilities barely squeaking into positive territory.


Total Returns


December 2015

Fourth Quarter 2015

2015 YTD

MSCI EAFE (Developed)




MSCI Emerging Markets




Fixed income performance was relatively weak in 2015. Bonds were more volatile and yields trended higher as the Federal Reserve made its first interest rate hike since 2006, raising the federal funds target rate by 25 basis points on December 16. Investors favored high-quality bonds as concerns about the high-yield market triggered record outflows from corporate bond funds.


Total Returns


December 2015

Fourth Quarter 2015

2015 YTD

Barclays US Aggregate Bond Index




Source: Morningstar Direct; Russell, MSCI, Barclays, Citigroup, and Dow Jones benchmarks.

Domestic equities struggled in December, but due to solid gains during the rest of the fourth-quarter, the year finished essentially flat.  Stocks outperformed bonds for the fourth consecutive year, the S&P Composite climbed to an all-time high in May, and several sectors were buoyed by merger and acquisition activity.  According to data from Dealogic, 2015 was the biggest year for global M&A with over $5 trillion in transactions and $2.5 trillion in the US.  Large-cap benchmarks outperformed small-cap benchmarks for the year and growth outperformed value.  The 50 largest stocks at the beginning of 2015 were up an average of 1.5% by year-end, while the 50 smallest stocks were down 11.9%.  However, worries about global economic growth, China, interest rates, commodities and the energy sector were a drag.  Consumer discretionary was the best performing sector for the year up 10.1%, while energy was the worst performing sector down 21.1% as oil prices ended the year at an 11 year low, and commodities had their fifth consecutive year of negative price returns. 

View The Full Report

5 Benefits of Business Blogging

Posted by Renee Watkins, Marketing Specialist, fi360, Inc. on January 06, 2016

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The other day I had a friend ask me about blogging and websites.  As a new business owner, she was instructed to create a blog or website.  She didn’t know much about either marketing platform.  So to make sure she had her bases covered, she chose to create a website that included a blog.  Smart move!

However, it occurred to me that even though blogging is a very beneficial, cost-efficient marketing platform, it can also be intimidating to first time bloggers.  Therefore, for this week’s post I will be covering the benefits of business blogging as well as sharing some best practices and tips to get you started.

Benefits of business blogging 

  1. Blogging generates revenue. You might be surprised to learn that 57% of companies have acquired a customer from their blog.  61% of online consumers in the United States have made a purchase decision based on recommendations from a blog and small businesses with blogs generate 126% more leads than businesses without them!
  2. Blogging drives traffic to your website. Every time you add a new blog post to your website, you have a chance to increase your website’s page ranking.  15 blog posts per month.  Each post you publish adds another indexed page to your site, demonstrating to search engines that your website is actively maintained and updated.  This is great for improving your search engine rankings.  But how many times a month should you blog?  The answer is as much as you can.  However, keep in mind that companies who blog 15 times or more a month, get on average 5 times more website traffic than companies without a blog.  However, only blog if you have relevant content to share.  Once you have created these blog posts, it’s time to share them on social media.  Social media allows users to find your blog and share it with others who will also find the information useful and helpful.  Moreover, SEO rankings are partially determined by social interactions.
  3. Blogging helps convert website traffic into leads. Every blog post is a new opportunity to generate new leads.  By simply putting a lead generating call-to-action on every blog post, you have the opportunity to gain new leads.  Call-to-actions should be written in a clear, concise, actionable request to your potential customer.  For example, Julie could write a blog post on tips for retirement saving.  At the end of the blog post she can put a call-to-action that asks readers to submit their contact information in exchange for a free retirement savings consultation.  This exchange of information helps Julie generate a list of new leads.
  4. Blogging helps you build credibility, trust, and distinguishes you as an industry leader. This is one of my favorite benefits of blogging.  Some of the best industry blogs answer common questions that their leads and customers have.  By answering those common questions, you are positioning yourself as a credible, trustworthy, industry expert.  For example, one of the most frustrating things about saving for retirement is understanding how much savings you will need.  Well, blogging gives Julie the opportunity to address this common challenge, share insights in deterimining a savings goal, and provide readers with tips that have worked for others.  Would this blog post make you trust Julie as your financial advisor?  In fact, 81% of consumers trust advice and information from blogs!
  5. Blogging drives long term results. Once a blog post is published, it will continue to attract web traffic and leads.  For example, a blog post may attract 50 new leads this week, 25 the following week, and so on.  Just remember to keep marketing your blog posts through social media!

Are you ready to start writing your first blog post?  Check out 10 best practices for corporate blogging to get you started on your first post!

fi360 Fiduciary Talk 11: The SEC and Swing Pricing

Posted by on December 30, 2015

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fi360 Fiduciary Talk 11: The SEC and Swing Pricing

In this session, fi360 Executive Chairman Blaine Aikin and Senior Policy Analyst Duane Thompson will analyze the SEC's recent rule on Swing Pricing and discuss its immediate impact.

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