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Retirement Planning > Retirement Investing

Make the DOL Fiduciary Headlines Work for Your Retirement Practice

By Ric Lager

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I could not find a clear source for the phrase “strike while the iron is hot.” Whoever uttered these famous words might as well have been talking about the latest White House proposals regarding The Department of Labor’s proposal on fiduciary investment advice to individual company 401(k) retirement-plan participants.

If you took a blank piece of paper and outlined a perfect marketing message for your clients and prospects, you could not envision a better one than that. There’s an urgent need for investment advisors to take full advantage of the timing of the current fiduciary and company 401(k) fee disclosure debate.

Clients and prospects who don’t follow financial-industry news on a daily basis have been exposed to the most important elements of individual company 401(k) retirement-plan advice.

Even the U.S. Supreme Court has grabbed headlines recently in the area of 401(k) advice and fees. The Tibble v. Edison International case goes to the very basic issue of a level playing field for all individual company 401(k) plan participants.

I have spent the last 31 years in the investment advice business and the past 17 years building an individual company 401(k) retirement-plan investment advice business. 

Just Do It

I can’t ever remember a better time when the national headlines were more favorable to building a niche in the individual company retirement-plan participant 401(k) advice arena.

Keep in mind that you don’t need to have any experience as a broker of record for a company 401(k) retirement plan. All indications are that the business model that worked in the past should result in wholesale changes going forward.

Plus, you don’t need to have provided investment advice to individual company 401(k) retirement-plan participants in the past. The current generation of robo-advisors has now defined the product niche that is company 401(k) investment advice.

Two-Step Process

There are two levels of analysis that are precisely where you can add value to individual company 401(k) retirement plan participant client and prospect. If you focus on these two levels, your marketing message will be well positioned to take full advantage of the current headlines and debate.

First, secure from your best clients and prospects the complete list of their default company 401(k) retirement-plan menu. Along with this list, find out if there is an SDBA (self-directed brokerage account) option available to them.

Rank the long-term and short-term investment performance of each of the mutual fund menu options. My favorite ranking system includes the relative strength rankings for each individual mutual fund, asset class peer group and investment style peer group.

You can use any mutual fund database ranking system that you like. My main point is that you should share that information and your expertise with clients and prospects. They likely have never seen that depth of analysis on the menu of mutual fund options in their default company 401(k) retirement-plan menu.

The second area to focus on is the current mutual fund holdings in individual company 401(k) retirement-plan accounts. Compare the investment-performance ranking of the mutual funds currently owned vs. the mutual fund options available to them.

You will often find a noticeable investment performance gap. Most individual company 401(k) retirement-plan participants have left a great deal of money on the table over the last six-plus years of stock market advance.

Finally, compare the annual fees and expense of the mutual funds in your clients and prospects’ company 401(k) accounts to other default menu mutual fund options available to them. In most cases, you will find expensive mutual funds with poor investment performance.

Headline Highlights

Investment performance and annual costs are exactly where the current fiduciary and 401(k) advice headlines are focused. Add your fiduciary investment advice strategy to the client and prospect discussion.

Get these current headlines to work in your favor as you move to gather assets. Act quickly while the opportunity is still available to you.

Your clients and prospects will appreciate your experience and independent analysis of both their company 401(k) retirement-plan menus and their current account options.

You can provide the positive investment analysis and advice that the headlines are hinting at. 

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