From the December 2008 issue of Investment Advisor • Subscribe!

Thesis. Antithesis. Synthesis.

  • The advisor: John Carl
  • The firm: Retirement Learning Center LLC, and the PlanSponsor Institute
  • The Web site: www.retirementlc.com
  • The approach: Providing content on retirement planning for advisors and the firms that serve them.

In a retirement planning world where information is king, John Carl is the master synthesizer. Carl, 41, is the founder of Retirement Learning Center (RLC), LLC, and executive director of the PlanSponsor Institute, where he oversees programs to keep advisors abreast of legislative, regulatory, and business arena expectations.

RLC also works with firms to help them create strategies and programs for their retirement business branded with the client's name but powered by RLC's content. "It's their brand, our stuff," Carl notes. For example, the Retirement Income Industry Association (RIIA) has an education and training effort and "we are the vendor," he says.

At its Brainerd, Minnesota office, Carl says RLC gets 400 calls a week from advisors who are working with plan sponsors or individuals looking for advice and guidance. "We are the Intel chip inside of great organizations like Dalbar and Columbia," he says of RLC, which has been in business for five years.

One of the big areas of focus now for Carl and his team is the anticipated Department of Labor (DOL) rules on acknowledgement of fiduciary status. The DOL is now using an IRS rule to try and force broker/dealer firms to address the fact they may be giving advice, not just guidance, Carl says.

DOL's August 21 investment advice proposal on the fiduciary advice provisions that come under the 2006 Pension Protection Act is expected to be issued before year-end and perhaps sooner. While it's still just a proposal, Carl says that "everything that we are hearing is that they intend to turn it into formal guidance in a matter very similar to what the proposal originally looked like. If the original intent and the heart of that proposal is formalized...it will have a profound impact in the industry," he says.

How will things change? "First, it will make it easier to provide advice to participants in plans and give exemptive relief to the plan sponsor," he says, through allowing off-model advice in-person without a level-fee requirement if accompanied by a computer model or educational asset allocation information, as Dalbar's analysis spells out.

"It will force firms to address the issue with the applications relating to IRAs because the IRA market is such a vast pool of assets and an important form of revenue for the industry. If DOL says 'If you give advice on an IRA, you have to do it under a fiduciary standard,' firms can't ignore that. There are too many assets." The proposal would prevent direct compensation for advising an IRA account holder unless the professionals are audited financial advisors.

The IRS Prohibited Transactions Code is the cudgel the DOL is using to force fiduciary advice in an IRA, according to Carl. "I think that the DOL is saying we [the agency] have authority over retirement assets and we have a very strong belief people should have high-quality advice and not receive compensation on the product--X, Y, Z for mutual fund or annuity or ETF...the only way is in a level-fee world."

If this proposal turns into formal guidance and is mandated for IRAs, then you have something that cannot be ignored in the industry, he says. Before, brokerage firms were saying they weren't fiduciaries, he notes. "The reality is that most financial advisors give advice. That makes them fiduciaries...but firms saying, 'No, no, no we give them education.' It's ridiculous."

Carl cites a Dalbar Financial Advisory Network study that found 72% of workers say they would likely use employer-provided investment advice delivered through a financial advisor (for a copy of DOL's proposed regulations, see the Web Extras section of the December 2008 issue at InvestmentAdvisor.com).

If the spirit of the investment advice proposal gets formalized, "it will be huge," Carl says. In a recent meeting with a big recordkeeping client, there was discussion on how--and whether--to implement fiduciary standard of advice, "so there is a lot of interest and uncertainty out there," he points out.

That's why call volume from advisor and brokerage firms are going through the roof at plan sponsors and recordkeepers, Carl notes. At a recent meeting that Carl had with one of the largest recordkeepers in the U.S., the recordkeeper client said that their previous peak call was 4,000 calls in a day, but just the day before, during one of October's tumultuous weeks for the markets, they had received 9,000 calls in one day.


Elizabeth D. Festa is a freelance business writer based in Washington, D.C. She can be reached by e-mail at elizabeth.d.festa@comcast.net.

Reprints Discuss this story
This is where the comments go.