Retirement-plan leaders grapple with different degrees of fiduciary and how best to address advisors and clients

October 21, 2011 — 2:18 PM UTC by Lisa Shidler


It should come as no surprise that when retirement plan heavy-hitters from an IBD, a wirehouse, and a massive RIA take center stage in front of an audience comprised mostly of financial advisors, that a few jabs will be thrown – all in the spirit of collegial competition, of course.

The Tuesday breakaway session at this week’s Center for Due Diligence Conference in Chicago brought together Bill Chetney, executive vice president of LPL; Pat Oberlander, head of retirement plans with UBS; and Randy Long, founder and managing principal for SageView Advisory Group, LLC, an RIA with more than $12 billion in assets, for a lively discussion about how to handle tricky fiduciary and compliance issues facing retirement plan advisors.

The great fiduciary debate

The hottest topic concerned fiduciary standards. Advisors aren’t required to take on fiduciary responsibility for the 401(k) plans they oversee, but a select few choose to do so. Right now, just a fraction of LPL and UBS retirement advisors have fiduciary status. At UBS, 400 of 6,500 advisors can act in fiduciary capacity, Oberlander says. At LPL, it’s 400 to 500 out of 12,000 advisors, according to Chetney.

Under a new regulation from the Department of Labor – 408(b)(2) – advisors are required to present clients with a written agreement of services, fees, compensation and any conflicts of interest. The rules go into effect on April 1, 2012. The issue of whether or not the advisor is serving as a fiduciary is also to be addressed in these disclosures.

No biggie

Both the UBS and LPL chiefs are confident they won’t lose business when the notifications go out, as most clients understand that their advisors are not fiduciaries.

“We don’t think it’ll be a huge event,” said Oberlander, but “in a number of situations it’ll be news. We’re trying to prepare advisors to get ready so they won’t be surprised when the clients say, you’re not a fiduciary.”

Watch your back

At that point, the SageView founder saw his opening and took it.

“You notice how they didn’t ask me the question,” said Long, addressing the audience. “I’ll be calling all of their clients…For those of you advisors in the room, you need to specialize in retirement plans and get your hands around being a fiduciary.”

The LPL and UBS chiefs were silent as chuckles were heard from the audience.

Fiduciary aspirations

Chetney and Oberlander say that it’s their advisors, more so than their clients, who are putting pressure on them to gain fiduciary status.

“Our advisors want to be at the forefront and want to be able to differentiate their services,” Oberlander said.

Chetney said the same was true at LPL, adding that the company’s new recruits are particularly interested in the fiduciary model.

“The people who are looking to change and are shopping around – they’re the ones who are forcing us to look for this type of solution.”

Same difference?

Many 401(k) advisors are actively debating the benefits and drawbacks of serving as an investment advisor to ERISA qualified plans under section 3(21) or as an investment manager under section 3(38). While the definitions get murky, the differences can be significant. Advisors acting under 3(38) must assume a greater level of fiduciary responsibility, including taking on more legal liability for the selection and monitoring of the investments. Advisors who accept 3(38) status can’t accept revenue-sharing payments or have conflicts of interest.

Bill Chetney: Our group looked at this and we don't feel there's a lot of risk. We want to roll it out in the fourth quarter.
Bill Chetney: Our group looked at
this and we don’t feel there’s
a lot of risk. We want
to roll it out in the
fourth quarter.

These rules aren’t new, but have been in the spotlight recently, in part because employers are increasingly worried about lawsuits from their 401(k) plans.

The three retirement leaders launched into a cheerful, spirited debate about which way to go. All have had their lawyers scrutinize the language and, in some cases, have come to the conclusion that there’s not a huge difference between the two categories of fiduciary.

Finding the right path

Chetney says his firm is rolling out options so that clients can become investment managers under 3(38). He says the solution would be a compromise in which LPL, not advisors, would bear the responsibility of selecting the investment funds.

“Our group looked at this and we don’t feel there’s a lot of risk. We want to roll it out in the fourth quarter.”

Oberlander says UBS retirement advisors have asked the firm to craft language saying they’d be willing to be investment managers under 3(38).

“Our advisors are asking us to develop something,” he says. “It doesn’t seem like it’s much different than things are now. However, trying to supervise it and trying to put processes around all of the record-keeping platforms is something we’ll struggle with.”

Loving the littler plans

Long says that his firm frequently takes on fiduciary responsibilities under 3(38), adding that SageView actually charges 15% to 20% more to plan sponsors for these services.

“You need to make sure you have everything well-documented,” Long said, “But it’s a way to distinguish yourself.”

Long also offered a surprising insight on his biggest accounts.

“Probably our least-profitable plans are ones more than $1 billion. That’s not the business you want to focus on. Your fee gets capped. I love $20 million to $50 million plans,” he says.

Extinction event?

When asked to predict the state of 401(k)s five years from now, the retirement executives agreed that advisors whose plans make up just a portion of their practice won’t last as the industry will continue to seek out specialists.

Long said that those who don’t act as fiduciaries will likely face extinction. He also predicted that more consolidation of advisory firms working with 401(k) plans will occur.

Oberlander and Chetney say that regulators will be keeping their eyes on the 401(k) plans for the foreseeable future.

Some politicians have suggested that providers include statements showing the amount of income that participants will earn in retirement based on their savings. See: The advisor-to-401(k) business could be set back by Democrats and Republicans. Oberlander says that predicting such financial outcomes will be a difficult, if worthy, undertaking.

“While that’s a very noble goal and easy to talk about, it’s very hard to deliver,” he said.

No people referenced

Mentioned in this article:

LPL Financial
Asset Custodian
Top Executive: Bill Morrissey

SageView Advisory Group, LLC
Consulting Firm, 401k Plan Consultant, Performance Reporting
Top Executive: Randy Long

Share your thoughts and opinions with the author or other readers.


John Pemrick Lewis said:

January 12, 2014 — 5:29 AM UTC

A fiduciary standard requires ethics: Randy Long CLAIMS he is the founder of Sageview – here is the REAL story – Randy was fed intel while I was employed at Willis Group (WSH) as their West Coast Practice Leader for Retirement Services. Randy would never have earned the opportunity otherwise. He had zero, none, noda contacts at Willis outside of me. Randy was my former Office of Supervisory Jurisdiction. Randy was my supervisor and I respected and trusted him. My clients included some of the best resorts & country clubs in N. America and throughout the Southwest including professional NBA & MLB teams. Needless to say, I was well rehearsed in retirement services and I learned quickly Walnut Street was not fit to serve Willis clients. I hired Ed Wagner out of Portland as my assistant after encouraging Steve Thompson (WSH home office – NY) to provide additional compensation resources which was like pulling teeth. I was reserved in hiring Ed. He too had integrity challenges on his record and was fined accordingly. The bottom line, Randy lied. We had an agreement that included significant compensation (10% of gross dealer concessions) to be awarded when we flipped the switch from Walnut Street Securities, Inc. (a MetLife Company) to Financial Network Investment Corp. – Randy paid me all right. Randy ordered FNIC to pay my brother instead, Daniel Lewis, a mere $10,000 to pay an E&O deductible for lapses caused by my brothers lack of integrity and then forced him to resign. I was unaware of my brothers integrity challenges and Randy used this against me as leverage and without my knowledge. My brother lied too. And as a result, I no longer have a relationship with my brother – Randy could have but chose not to, advise me of my brothers integrity issues. My brothers registration was also with FNIC at the time but with a separate OSJ out of New Jersey. Randy also strongly encouraged me to resign my position knowing that when the switch flipped he & I would be co-founder(s) of Sageview Advisory. The record will show Randy was managing a small amount of business up until Willis came to the table.
I write this for two reasons. I was wronged by Randy. Randy has kept this issue quiet for the past 7 years. It’s so important the truth be told. I feel like ive been ripped off by Bernie Madoff. In an industry that requires the utmost honesty & integrity, Randys actions are clearly reprehensible. This article above demonstrates Randys true personality. He does do his best to lie & cheat others. For me, I sleep well at night knowing Ive never wronged anyone nor have I ever received a complaint for services rendered. Today, in retrospect, (hindsight is 20/20 as the old adage goes) I have no choice but to conclude Randy Long ruined my good name and career for his own self interest. My question to you is, would you want your advisor managing your monies knowing he lies and cheats his way in business dealings? Call it libel, call it slander. For me it’s about principle and that being said I’d be happy to discuss this in a court of law with a competent judge presiding. We have many people on our end, with integrity, who are well aware of Randys questionable business ethics. And each of them are willing to step up and expose Randy for who he really is.

Randy was a trusted FINRA Office of Supervisory Jurisdiction and he lied and cheated for his own self interest at the detriment of others.
Shame on you, Mr. Long.

Thank you,

John Pemrick Lewis


Stephen Winks said:

December 2, 2011 — 10:08 PM UTC


You do realize as a fiduciary you are obligated to provide continuous comprehensive counsel.

Don’t confuse transactions, with no ongoing fiduciary duty of care and loyalty to the consumer, with fiduciary counsel. Once you have a fiduciary relationship you are responsible for addressing and managing a broad range of investment and administrative values required by statute. You are actually accountable for fulfilling your fiduciary duties.

Do you disagree?



Stephen Winks said:

December 2, 2011 — 8:28 PM UTC


So, you are saying “acting in the client’s best interest” depends on who the client is?

If it is in the best interest of an institution, how is it not in the best interest of the individual?

You might want to rethink that assertion.



Jeff McClure said:

December 2, 2011 — 6:11 PM UTC


I am not quite sure I follow your reasoning, but given your argument, I cannot imagine how the best medical treatment for my child would be in any way contrary to my best interests.

If I presume that the comment about the high commissioned product and the annuity reference the same product, there are some apparent contradictions in your comments. First, annuities do not need to be “high commissioned.” We, as fiduciaries, do recommend non-qualified variable annuities in some circumstances, particularly when an existing contract has a large tax-deferred gain, or when a person has a large-gain variable life product and does not want or need the life insurance part of the contract. In those cases we use a no-load company for the 1035 transfer.

If one company has a total charge on a given fund of 1.5% or so, as in many variable annuities, and the other has a total charge of 0.25%, over time there is likely to be a relatively large differential in value created.

Twenty years ago I was using high commissioned annuities. Some of the companies I used on the fixed side no longer exist and the contracts became almost totally non-liquid. In a couple of cases customers lost money, sometimes a lot of money. if you are selling annuities for their “guarantees” it might be wise to remember that the only reason about ten of the largest annuity issuers in the world are still in business today is that their respective governments stepped in an bailed them out. In the United States that action will not be repeated as is is now illegal. In Europe, the nations that bailed out ING and AEGON, as examples, no longer have the capability of doing so.

Betting a person’s entire future on the financial health of a single company does not strike me as a prudent action.

I have no idea what the financial landscape will look like in five years. Setting up a disadvantageous position for five years in the hope that all will be well after that implies a knowledge of the future that is well beyond my meager capabilities. I have client who are stuck in variable and fixed products because of surrender charges while we hold our collective breaths hoping that the parent company makes it long enough to pay off. Some of those companies, mainly in Europe, have a very large portion of their investment portfolios in European sovereign debt. Unlike here in the U.S., they are not required to mark it to the market. Considering that the entire European Monetary Union is at risk today, those guarantees are not exactly what I consider to be “safe.”

The Prudential was within about three days of insolvency in 2009. It is teetering along today, cutting employees and trying to survive. The same is true of more than a few others. Like I wrote above, entrusting a person’s financial future to the kind ministrations of a single publicly-traded company, insurance or no, is not, in my opinion, a prudent move. That it pays a high commission to you to do so does not make it better. As a fiduciary I would be absolutely liable for such a thing. As a broker-rep you are not if you can point to an AM Best report or some similar thing. I find it quite interesting that AM Best still had a high rating on The Prudential even as it was within days of bankruptcy and required a federal, extra-legal bail out.


Elmer Rich III said:

December 2, 2011 — 5:13 PM UTC

Ok, let’s look at it this way. What if the “best interests” of the client: – Can best be measured in 20 years

- Include the advisor making a large fee for, say, an annuity.

- Run directly counter to what the client and their family want the advisor to do.

- May hurt the client financially, for the next 5 years?

- Involve trading securities at a high commission to motivate the broker?

The possible scenarios are endless and immensely complex and nuanced. Again, who determines the client’s best interests? How can that ever be done? In fact, can’t it only be judged after the fact, in multiple ways?

Is a doctor of lawyer dedicated to serving the client’s best interests or their best technical professional advice?

Do you want your doctor to treat your child on the basis of your “best interests” or their best technical, scientifically proven knowledge and treatments? Hopefully, the two are the same but not always. Do you want the cheapest financial or medical advice? Do you want full disclosure of all medical and scientific facts in all medical treatment you receive? Really.

If we set aside the moral (really sales) arguments, it is very complicated. There is no black and white just a whole lot of shades of gray. Now in the institutional businesses we have had decades of practice and vast sums of professional time to established working processes and principals.

How long do people think it will take to do the same with retail and insti-individual accounts? 10 – 20 years?


Jeff McClure said:

December 2, 2011 — 4:59 PM UTC

Quite an interesting, and apparently frank and honest discussion. – Regarding whether or not a member of the public wishes to have fiduciary treatment, my three decades in this area suggests that most retail broker-dealer customers assume that they are receiving advice that is primarily in their best interest. The fact that many of the best mutual funds, where they could have been over the years, are not offered by their broker/“financial advisor” comes as quite a shock to them.

There is a fundamental difference between what a broker practices, no matter how well intentioned, and the practice of a fiduciary. There are good brokers and many others who are just out to practice the orderly conversion of their customers’ wealth into the broker’s commissions. If a member of the public wants a voice on the other end of the phone to practice market speculation, a broker rep is ideal. On the other hand if serious long-term planning is involved with the intention of providing the means for a person or family to live out their later years in a reasonable level of comfort, there is no substitute for someone who will take full and absolute responsibility for advising and acting in their clients’ interests.

I practiced as a broker/dealer representative for my living for twenty-five years. I believed in my heart of hearts that what I was doing for my “clients” (really customers) was the best that could be done. Looking back with the knowledge I have today, I realize that I could have done much better but was blinded by my very real need to make a living. More, my b/d rewarded me each year with an “educational conference” accompanied by my wife at a five star resort somewhere very, very nice. I got a taste of what money could provide and was driven to buy the big house and the nice cars and all that go with those. That mandated that I make the big bucks every year to support my lifestyle. That, in-turn, caused me to gravitate to the highest commission-paying products.

Please understand that all along the way I sincerely believed that each of those products was the best thing I could do for my “clients.” In fact, that high payout was even higher to the b/d both in visible and invisible payouts and all of the money paid out came out of the investor’s positions.

It is not a matter of being evil or being righteous. It is the simple fact that if someone pays me a lot of money to advise my customers to invest in something, over time that is where the investments will go. Considering that there were “no-load” and extremely low cost investment products out there that had a record and a very good reason for dramatically outperforming the relatively high cost brokerage products, my decisions as a broker were, with 20:20 hindsight, not as good as they could have been.

I have modeled this concept over and over, basing those models on what I knew at the time or what I could have known if I had bothered to look. Yes, I have added the fees I now charge. I have also added in the dramatically increased overhead associated with being a fiduciary. The end result is always the same. The client has more money and I have less using a fiduciary/adviser model. My first models were intended to prove that my actions as a registered rep of a broker/dealer were more advantageous than being a fee-based adviser. I just couldn’t get it to work over the long term unless I cheated.

I sold my million-dollar house. I now live in one that meets qualifying numbers on a conventional mortgage. I drive a 2007 Toyota, purchased used. But, I also now have a staff of 8 non-advisers (supporting 2 advising principals) and the overhead to go with it. The good news is that I just did a review for a client who started with us at almost precisely the top of the stock market in 2007 (with the Dow around 15,000). He has a nice gain in his account with the Dow at 12,000. We were able to move quickly and appropriately to adjust to the market conditions. I never could have done that as a broker.


Elmer Rich III said:

December 2, 2011 — 4:50 PM UTC

Our perspective is that investment advice be held to the same professional standards of peer-reviewed evidence and proof as say doctors. Client’s buying something is no proof of anything other than that.

No, our point is very simple: – Fiduciary standards and practices are required in ERISA governed financial services

- Applying those kinds of standards and practices to individual accounts, of any kind, will be a major challenge and complex process — very demanding.

- It will take, likely, years of careful, professional, disciplined, development, testing and piloting of different approaches and learning from other country’s systems. There will be trials, there will be errors.

- Yet the same people who claim to have the client’s “best interests” in mind for all their ideas and actions attack any careful and thoughtful process of implementation of the idea of fiduciary as “evil.” Apparently, these righteous folks are willing for their own client’s assets to be subject to the necessary trial and error learning process!

OK, let’s delineate the supposed “best practices.” Where are these written? Who has validated and tested them — independently? Have any scientific or academic peer-reviewed studies been done with data to support this claim? If not, why pretend otherwise?

Some advisors and vendors are loudly touting “best practices”, fiduciary this and that, “evil” brokers, “easy”, “simple, “clients best interests”, etc with no more evidence, data and proof then their own feelings and opinions, many self serving. That isn’t even minimally professional.


Stephen Winks said:

December 2, 2011 — 4:22 PM UTC


Soverign Wealth Funds don’t take anybody’s word for anything. They require proof. I focus on peer reviewed, patented and proven expert advisory services to institutions.

The difference between the retail market which relys on trust in the advisor and the institutional markets which trusts no one is quite significant. There is an ongoing effort to always push the envelope in efficacy where the retail market is more of a sales function where no one is accountable for their recommendations nor are they responsible to a high professional expert standard.

You seem surprised by this?

There are actually best practices not remotely close to being executed in retail sales. I assume you would agree the brokerage industry has not distinguished itself in advisory services given Congress just now is about to hold brokers to the fiduciary standard of care. Thus by extention, the utilization of innovations in modern finance are not widely practiced in the retail market.

Should we disect the investment process and painfully dileneate every area in which the brokerage industry has failed in supporting advisory services?



Elmer Rich III said:

December 2, 2011 — 3:22 PM UTC

Ok, let’s unpack some of these ideas. Let’s leave aside deamoning other professionals, that’s unprofessional and merely self-serving.

- How do we know what is in the client’s best interests? Over what period of time? How is this to be measured and assessed? By whom? Likely an independent 3rd party should define this.

- Must then the advisor offer independent proof of effectiveness of what they do and recommend? Again how is that to be measured?

- So there are absolutes? Again, Who, what, where, when and how?

“will make advice safe to acknowledge, scalable, easy to execute and manage, resulting in a unprecedented level of investment and administrative counsel being routinely executed at a cost lower than packaged products.” Whoa!

We are aggressive marketers but even we, along with compliance, would draw the line at many of these promises.

Its sounds like more of a Utopian ideology and belief system then a realistic professional set of expectations.


Stephen Winks said:

December 2, 2011 — 2:57 AM UTC


I agree that it is not wise for the brokerage industry to acknowledge the fiduciary standing of their brokers unless they are able to support fiduciary their standing.

But I could not disagree more, that the brokerage industry is way over its head when it comes to supporting fiduciary standing. When it is required by date certain, the industry will execute. Let’s not be apologist, the industry is fighting fiduciary standing and the best interest of the investing public, tooth and nail.

Either the industry supports the best interest of the investing public and the professional standing of its advisors, or it does not.

We are about to see a rennaissance in advisory services that is long over due.

I hope you are on the right side of history in this discussion.



Stephen Winks said:

December 2, 2011 — 2:46 AM UTC


What is in the client’s best interest, is in the client’s best interests regardless whether they are a retail or institutional account. Your logic is precisely why the investing public has lost their trust and confidence in the brokerage industry. The investing public expects the broker to act in their best interest, be accountable for their recommendations and be responsible to the highest professional standard—acting in a fiduciary capacity on behalf of the client in the client’s best interest.

There is nothing self-righteous nor is there demonizing in observing the consumer protections afforded under fiduciary duty. Either the broker is accountable for their recommendations or they are not. Either the broker has responsiblility for fulfilling their ongoing fiduciary duties or they are not. The broker is either absolved from any responsibility for their recommendations under prearranged arbitration proceedings in managing client disputes, or they are not. It is a violation of internal compliance protocol of the brokerage industry for a broker to acknowledge they render advice and owe their client a fiduciary duty to act in the client’s best interest, or it is not.

The SEC has established it is the broker/dealer’s responsibility to support the fiduciary standing of the broker, not the responsibility of the individual broker. These are facts, not conjecture. I leave it up to you to draw your own conclusions.

I look forward to engaging you in this discussion as it delineates the reliability of advice, the role the industry plays in facilitating advice and the role and counsel of the advisor.

All terribly interesting topics the resolution of which will make advice safe to acknowledge, scalable, easy to execute and manage, resulting in a unprecedented level of investment and administrative counsel being routinely executed at a cost lower than packaged products.



Elmer Rich III said:

December 1, 2011 — 11:51 PM UTC

We disagree. It’s comparing apples, footballs and pineapples. Fiduciary standards and practices are for tax qualified, mainly institutional retirement, accounts. Brokers serve a different, and mainly retail, set of accounts. RIAs serve mixed kinds of accounts, but mixing the standards for ERISA accounts with retail accounts solely for a sales “gotcha” is dishonest and a misuse and understanding of the fiduciary idea.

Demonizing brokers and using self-righteous, moralizing language is silly and false.

Our point is simple — advisors may rush to label themselves as “fiduciaries” to (hopefully) grab assets away from brokers, they may claim moral superiority in the process, but they will likely get a lot more than they bargain for and end up alienating and confusing clients.

Put another way: the sales benefits for claiming fiduciary are hypothetical — the compliance, additional oversight and extra regulations are a certainty.

We think the B/Ds are being appropriately prudent by being careful, slow and cautious.


Stephen Winks said:

December 1, 2011 — 10:54 PM UTC


You are absolutely correct, there is a significant difference in the accountability and ongoing responsibilities between brokers and advisors that result in most significant differences in the consumer protection afforded the consumer. If a broker thinks selling an advice product makes them a fiduciary, they are in for a rude awakening. Advice is not a product the broker sells but a prudent process the advisor manages which provides continuous comprehensive counsel in the best interests of the consumer, based on objective, non-negotiable fiduciary criteria of statute, case law and regulatory opinion letters.

Very few brokerage firms have been interested enough in fiduciary standing to make advice safe to acknowledge, scalable, easy to execute and manage as a busines enterprise in the consumer’s and advisor’s best interest. The brokerage industry expediency in trying to make advice a product the broker sells versus a prudent process the advisor manages, precludes the broker from fiduciary standing as well as the consumer protections afforded the consumer.

The advisor addressing and managing investment and administrative values in the client’s best interest need not be in conflict with advisory services excellance and modernity, as is the case today in the brokerage industry. But unfortunately, it is presently a violation of internal compliance protocol for brokers to acknowledge they render advice or owe their clients a fiduciary duty of loyalty and care.

This disregard for the professional standing of the broker is a massive lapse of judgement in the brokerage industry, has resulted in a loss of trust and confidence of the investing public and has resulted in an Act of Congress to protect the best interest of the consumer to which the brokerage industry resists rather than embraces as a second chance of getting things right.

This is very sad for brokers who really want to act in their client’s best interest but are impeded from doing so because of the broker/dealer which employs and supports them.



Elmer Rich III said:

December 1, 2011 — 9:49 PM UTC

We have strong advocates of full ERISA coverage of 401(k) plans for over a decade. Fiduciary standards and practices apply to all tax qualified assets — period; including full and fair disclosure of all material benefits and monies received. There is no argument on these points.

However the requirements get implemented will hopefully be a matter of care and caution, experimentation, testing and evidence-based decision making. Ready, Fire, Aim will not work and is wholly inappropriate.

Unfortunately, the new “F” word , fiduciary, has been sold as a sales/asset-gathering “silver bullet” to many advisors. It’s not. As marketers and professional communicators we can tell you that even the idea of fiduciary kinds of issues is completely off-putting to investors. They are simply not experienced of equipped to understand, let alone make decisions from the information.

There have been zero attempts to create useful and meaningful communications around the matter. All that has been done is produce sales materials.

Mainly advisors are only concerned about using the term in competition with other financial advisors to distinguish themselves, they hope, but mainly in their own minds.

The word, idea and practices behind fiduciary are serious, and historically only applicable to institutional, and not retail, assets. Advisors seem to be learning, the hard way, that for every possible (imagined mainly) sales advantage there are endless compliance, recordkeeping and communications demands.

It seems a case of the sales use of fiduciary words “tail” hard-shaking the poor “dog” of every advisor’s practice.


Mike DiCenso said:

November 15, 2011 — 5:01 PM UTC


I hope my comments help. Your latest round of comments in this discussion are in corelation with what i have been saying in all my prior comments


Stephen Winks said:

November 15, 2011 — 4:57 PM UTC

Brooke and Mike,

The equivalency arguement of acting like a fiduciary is the same as being a fiduciary does not secure the same consumer protections for the consumer thus is a brokerage industry work around. It is great for the brokerage industry but terrible for the consumer.

As we know disclosure does not remove conflicts, it just perpetuates conflicts. It is saying I am not acting in your best interest but as an advisor I feel better that you know I am not acting in your best interest—which just compounds the conflict.

Full transparency is different from full disclosure, as cited above. The fiduciary standard based on statute, case law and regulatory opinion letters is clear on all this. Further the OCC is definitive on trust powers and fiduciary responsibility.

I would love to see this definitively explained for retail application.

Many brokerage firms, TAMPs and advice products are misleading advisers that an entity acting as a money manager in a fiduciary capacity absolves the advisor of their fiduciary responsibilities to the consumer. It doesn’t. The structure and nature of the relationship between the advisor and the consumer is different from that of a money manager which is governed by offering document.

I would be glad to be of assistance in clarifying these issues.



Mike DiCenso said:

November 14, 2011 — 11:16 PM UTC

Brooke, I would be more than happy to help you with such an article. Please let me know if you would like to discuss this topic further. As you can see from the responses above i dont believe there is only one way to approach this business. i do belive in full disclosure as to whether or not you are acting in a fiducairy capacity, full disclosure of all fees, zero conflicts of interest ( no soft dollars in any way) and consulting soley in the best interest of the plans sponsor, plan participant and beneficiaries. If I can be of help to you in any way please do not hesitate to contact me


Mike DiCenso said:

November 14, 2011 — 11:12 PM UTC

you can disagree all you want but just by saying you are a fiduciary does not make it so. Under todays ERISA definition of fiduciary it is only actions that make you a fiduciary. This if you poerform a fiduciary function you are a fiduciary.

in our industry the vast majority of people who say they are a fiduciary do not perform a fiducairy duty and thus alieviate no liability for the plan sponsors which is exactly why the DoL is looking to establish a new definition of fiduciary under 3(21).

Gallagher Retirement Services and GBS Investment Consulting now has more tha $87 Billion of assets under care and $52 Billion under management. We are an SEC registered RIA that is held to the fiduciary standards when acting as a fiduciary. i see numerous people in ouor industry who are dual registered and are riddled with conflicts of interest. Again, this is the vast majoriyt of those “false fiduciaries” in the DC market who have no liquidity of financial backing to pay a claim.

Please tell me this, who pays the claim if the fiduciaries under a breach do not have enough money to make the plan whole and pay the penalties?...the answer is the plan sponsor. So how much protection do you feel a plan sponsor fiduciary receives when a hired fiducairy who claims to protect them does not have enough money (networth) to pay the claim?


Brooke Southall said:

November 14, 2011 — 8:02 PM UTC

This is a very elucidating back and forth. I appreciate the tone and thoughtful arguments both of you are using. It’s helping me to better understand these complex issues.

Occasionally, I have turned a dialogue like this into its own article. I’m tempted to do that here.



Stephen Winks said:

November 14, 2011 — 7:45 PM UTC


I couldn’t disagree more, either you are a fiduciary or you are not.

If the client does not want their advisor to be accountable or responsible, it is clearily their call. The problem arises when the client does not undestand that they are letting the advisor off the hook when descretion is not permitted. Named fiduciary has too many caveates to be materially effective.

The consumer does not understand if their advisor holds themselves to a fidciary standard but is not allowed to acknowledge fiduciary status by virtue of the client withholding descretionary, it is literally not possible for the advisor to act on behalf of the client in the client’s best intererst as the client has thwarted the intended purpose of fiduciary duty and protection. The teeth of being a fiduciary is fiduciary liability as it forces a legal, professional and technical dicipline that has material consequences. Thus, the disagreement is there is a difference between acting as a fiduciary and being a fiduciary.

You are incorrect in asserting fiduciary status is not an all or nothing consideration as it actually requires one to be a fiduciary, not acting like one. It is clearily preferable to act as a fiduciary with accountability and responsibility to being absolved from accountability and responsibility for recommendations like brokers. But acting as a fiduciary is not the same as being a fiduciary.

Your thesis leaves a hole big enought for the brokerage industry to drive a truck through, as the brokerage industry would simply act as a fiduciary but the broker would never become a fiduciary. If that position were to prevail, the meaning of fiduciary would be subject to intrepretation, rendering it meaningless and providing disincentive for the brokerage industry to properly support the fiduciary standing of the broker to the fullest extent possible as required in the best interest of the consumer.

This is not splitting hairs, as the question is whether the brokerage industry will support the fiduciary standing of the broker to the fullest extent possible—making advice safe, scalable, easy to execute and manage. The SEC has already established it is the responsibility of the broker/dealer to properly support the fiduciary standing of the broker, not each individual broker’s responsibility.

If acting like a fiduciary were the solution rather than actually being a ficuciary, the brokerage industry would never create the necessary authenticated prudent processes, technology, work flow management, conflict of interest management and expert advisory services support essential to make advice safe, scalable easy to execute and manage.

Thus I respectfully disagree. One actually has to be a fiduciary rather than acting like one on TV.



Mike DiCenso said:

November 14, 2011 — 3:52 PM UTC

The facts are the facts. the vast majority of plan sponsors are not willing to give up discretion autority and/ or controll of the decisions. In order to truly alieviate the fiduciary liability this must be done by an advisor who is an independent fiduciary, taking full disdcretion and control ( or a naqmed fiduciary), with the financial backing to pay a potential claim. What protection is there is the said fiduciary advisor does not have the financial backing and liquidity to pay a claim? What is there to disagree with?
In our business model we either act as a consultant or as a Fiducairy, which ever the client desires. Either way we hold ourselves to the fiduciary standard of non conflicts of interest working soley in the best interest of the plan sponsor, participants and beneficiaries. We then document in writting whether we are a fiduciary or not. I am sorry but this is not an all or nothing propositon and clients do not want it this way


Stephen Winks said:

November 14, 2011 — 3:25 PM UTC


The two counter fiduciary arguements you advance are specious.

First, literally every investor wants their broker to be accountable for their recommendations after the recommendations are consumated and the broker is paid. Further, literally every consumer expects the broker to have an ongoing duty of care and loyalty on behalf of the investor in the investors best interests entailinga broad range of ongoing fiduciary duties. To maintain otherwise suggests the consumer/investor is acting against theor own best interest. Only in the preverse logic of the brokerage industry would that make sense and then simply because it serves the best interest of the brokerage industry. Is this not clear?

Second, in the institutional world, brokerage licenses are often dispensed with to avoid any appearance of conflicts of soft dollar compensation, further at the top of the food chain, mutual funds are rarely used for a number of reasons principally the expense and redundance of account administration that adds no value and the absence of real time holding data required for continuous comprehensive counsel required for fiduciary standing.

Most importantly, fiduciary standing has absolutely nothing to do with the financial backing of the advisor. It has everything to do with accountability and responsibility for recommendations— which entail duties and liabilities from which brokers have absolved themselves through preagreed upon arbitration proceedings. In fact, it is the very fiduciary liability associated with the broker being accountable and responsible that assures the broker/dealer will not allow the broker to act in the consumer’s best interest.

All in all, until the brokerage industry supports the fiduciary standing of the broker to the fullest extent possible—the RIA will be able to win any brokerage account at will.

The facts argue against your counter fiduciary assertions, the ball is in the brokerage industry’s court to be responsive to the best interest of the consumer and supporting the professional standing of the broker.



Mike DiCenso said:

November 14, 2011 — 1:25 PM UTC

Actually both sides are correct. First of all not every clients wants a fiducairy therefore why would you provide a service that is not desired and in conflict with the clients needs. Second of all, those clients who do want a fiduiciary need to hire a truly independent fiducariy who is acting soley in thier best interest and not accepting any soft dollars in any way from providers, mutual fuind companies and investment managers. This is includes no meals, no entertainment, no conference discounts, and no training trips. The key answer to this issue is not whether the advisor is acting as fiduciary or not, the key is whether the advisr is holding themselves as truly independent under the Fiduciary Standard.

Also, clients need to understand what hiring a fiducairy really means. If you hire a fiduciary who posses little to no networth and no financial backing from a larger parent company there is actually no fiduciary risk mititagion for the client. If there are no funds to be recovered from the fiduciary should something gto wrong then there is no risk mitigation and protection. This is a major issue in our industry. Many advisors are saying they are a fiduciary and providing protection to the client but have little to no net worth to delvier any protection at all. The days of the “false fiduciary” are coming to an end.


Stephen Winks said:

October 21, 2011 — 8:36 PM UTC

Randy Long is absolutely correct in his assertion that if a broker is not a fiduciary to the fullest extent possible, they will not have chance at serving retirement assets in the best interest of the consumer of their services, to include IRA assets.

Fiduciary Plan Review’s innovation which empowers brokers to provide 338 services through FPR eliminating the b/d fiduciary liability cited by Bill Chetney does resolve the b/d fiduciary liability problem, but is an inferior competitive market position to that provided by Randy Long. The only way for b/ds to compete is to empower the broker to actually act in a fiduciary capacity, acknowledgeing fiduciary status, requiring b/ds to professionally support the broker with the prudent processes, technology, work flow management, conflict of interest management and expert advisory services support for advising retirement related assets.

Morgan Stanley Smith Barney is making great strides in creating the most complex consideration of advisory services—the development of comprehensive performance reporting of all a client’s holdings to include those not directly custodied—which is essential for the asset/liability study and adding value. Those firms which are whistling past the grave yard thinking no serious transformative innovation is required—will be vulnerable to those firms that professionally manage the enabling resources necessary to support the expert fiduciary standing of the broker.

Randy Long is simply saying through asking eight or ten questions that consumers readily understand, there’s presently not a broker in the business than can compete with an accomplished RIA like himself. The number of such examples is very large and growing, constituting very large businesses.



Jeff McClure said:

October 21, 2011 — 4:28 PM UTC

It is interesting that both those who identify themselves as financial planners and the “financial adivsors” affiliated with broker/dealers want recognition as “professionals” yet the view of a “professional” versus a tradesman/salesman is that a professional will always act in the best interest of his or her client. I wonder how many of the b/d executives would personally consult with an attorney who advised them that he or she might have undisclosed conflicts of interest or be working primarily for someone else? Would they use a physician who gave them a statement that he or she may be recommending a medication or a procedure with an eye toward the profit gained from that recommendation?

The entire securities industry (note that it is an “industry” and not a “profession”) is in serious need of a bright line being drawn with fiduciary advisers on one side and trades-persons on the other. As long as the b/d reps insist on being perceived as “advisors” but when challenged offer the defense that they are not a fiduciary but only have to meet the “suitability” standard, then Occupy Wallstreet will be right.

We either are professionals, with the implication of a fiduciary responsibility, or we are not and we function in a “buyer-beware” mode. Implying the first while practicing the second is not a stable solution. I suggest that the movie “Margin Call” be mandatory viewing for all concerned.

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