A new law makes it easier for
advisors to leverage themselves.
Why collect clients one at a time if you can find and serve many clients through a single contact?
Many advisors have tried to establish corporate
contacts that would allow them to advise multiple employees under one
contract. Sounds like a great strategy, even if relatively few succeed
at it. Finally, new federal legislation is opening doors for advisors.
In August 2006, President Bush signed into law the Pension Protection
Act of 2006.
"Corporate employees have always needed help sorting
through the sheaves of papers and financial concepts to make sound
decisions affecting their retirements," says Kevin Condon, executive
vice president of advisor services with Boulder, Colo.-based
myFinancialAdvice LLC. "With the Pension Protection Act of 2006,
employers' corporate liability for company involvement in giving
personal financial advice has been dramatically reduced and the burden
shifted to the 'fiduciary advisor.'"
Indeed, the Pension Protection Act defines as
"fiduciary advisors" individuals who may offer personally tailored
professional investment advice to help employees manage their 401(k)
plans, individual retirement accounts and other retirement vehicles-if
they meet disclosure, qualification and self-dealing safeguards. In
such situations, employers and plan sponsors are not obligated to
monitor the specific advice given to any particular participant or
beneficiary, just to prudently select and monitor advice providers.
"Suffice it to say the door is open quite wide now for advisors to help
employers," adds Condon.
And that is precisely what Condon and
myFinancialAdvice have done. Originally conceived as an online planning
delivery system for individual clients wanting to pay for help by the
hour, myFinancialAdvice (www.myfinancialadvice.net) is now branching
out to deliver advice to employees of small businesses with which
they've negotiated service agreements.
Normally, an individual would go on the
myFinancialAdvice Web site, scroll through the various advisors
participating on the site, select one, pay his or her hourly rate via
the site and receive advice. Under agreements directly with employers,
employees wanting 401(k) advice or, perhaps, advice on implementing an
HSA, would follow a link on the employer's Web site to a
myFinancialAdvice Web page created specifically for that employer, pay
a flat rather than hourly fee, select from a somewhat narrower list of
advisors than would be available on the retail site, receive a
proposal, accept or reject it and finally complete a data form and
await contact from the advisor. "After the employee receives advice on
a specific issue, he can access our public site for broader advice, if
desired," explains Condon.
In conjunction with these employer agreements,
advisors affiliated with myFinancialAdvice receive a template giving
them all the details on the employer benefit plans they'll be advising
on. Says Condon, "The advisor doesn't have to figure out how the
employer's benefit package works because we've prepared that
information for him. And, if she's advising on HSAs, for example, the
advisor can take a short course followed by an exam that we've designed
and which qualifies for continuing education credit by the CFP Board."
But how does an advisor approach an employer if he
doesn't have an organization like myFinancialAdvice backing him up? Hal
Schweiger of Capital Financial Advisors LLC in San Diego says, "I focus
on the 401(k) market for medium-sized businesses and provide all my
services on a fee-only basis. I have found it difficult to reach
business leaders directly, no matter how poor their current plan. They
are a little more receptive now that the Pension Protection Act has
passed and is raising their awareness."
Schweiger says he's made some headway by approaching
CPAs who audit 100+ participant plans to discuss plan costs and his
investment approach. "I have gotten some referrals this way."
Bonnie Hughes of A&H Financial Planning and
Education Inc. in Kennesaw, Ga., landed one corporate client when Helga
Cuthbert, a colleague and local advisor with Touchstone Financial
Guidance, was asked to consult with a 90-employee firm and turned to
Hughes for help. "We delivered group presentations on general financial
planning and retirement concepts and included specific information on
the plan changes being offered to the employees. Following that, we met
with each of the 90 employees for one hour to review their individual
circumstances," says Hughes.
When auditioning for the job, Hughes and Cuthbert
learned the employer was seeking "independent, fiduciary, Certified
Financial Planners" to work with his firm. He had his legal department
do a background check on Hughes and Cuthbert, including their proposal,
contracts, privacy policies and ADVs, the latter of which the company
gave to all its employees. Hughes and Cuthbert completed the job
successfully and began marketing themselves with the Web site
www.educatingyouremployees.com.
"I would love to do more of this work," says Hughes.
"There's almost no paper given to participants and the gratification is
instant compared to the other planning we do." What she's learned is
that larger employers are more likely to rely on their plan providers
for employee education, so she and Cuthbert will target small- to
medium-sized employers going forward.
Unless you already work with small business clients,
getting on an employer's radar as an option in their efforts to educate
employees may be slow going. However, if you like the idea of
partnering with a larger entity that can make these contacts for you
and secure planning engagements for entire employee segments, you have
some choices. There's the aforementioned myFinancialAdvice, and there
are also the Heartland Institute of Financial Education and the Merit
Retirement Advantage program.
The Heartland Institute of Financial Education
(www.hife-usa.org) is the brainchild of Alan Gappinger, based in
Aurora, Colo. Gappinger is a CFE, or Certified Financial Educator, a
credential awarded by the Institute to advisors who have completed its
financial literacy training course. On the firm belief that clients
should start financial planning early in life, Gappinger developed the
Institute in 1997 and, since then, has brought its financial literacy
courses to more than 100 Colorado employers.
Gappinger saw that financial planners promoted
themselves and educated the public primarily through seminars, and
thought, "Shouldn't colleges and universities be involved in this
effort to promote financial education?" Gappinger began approaching
universities in Colorado and first convinced the Community College of
Aurora and Colorado State University that they should be part of the
financial literacy process. He also convinced Dr. Thomas Garman,
considered by many in the education field to be the guru of financial
literacy and financial education in the workplace, to become an advisor
to the Institute's Board.
Now the Institute offers a dozen different courses
sponsored by ten colleges and universities. "We are ad hoc instructors
for the various colleges and universities the Institute represents. But
instead of teaching the courses on college campuses, we take them
on-site to major companies for use in educating their employees," says
Gappinger.
Todd Kelley, a Lincoln, Neb., financial advisor,
earned his CFE in June 2004. Says Kelley, "I previously owned an
advertising agency, and this was easily the most effective marketing
program I've seen to get in front of potential clients. I also enjoy
knowing that I'm helping individuals truly learn about finances without
any hype or specific sales objectives." Kelley says that in the last
two years, half of his annual revenues have come from his work with the
Heartland Institute.
Adds Gappinger, "We have recently joined forces with
a California company that supports 21,000 employers and 25 million
households. We're helping to educate and coach employees of those firms
on 401(k) choices and other financial education issues." In addition,
says Gappinger, the Institute is making the Fiduciary Advisor
qualification part of its Certified Financial Education curriculum, for
those who want it.
Another opportunity to join forces with a larger
entity that can get you in the door to do employee counseling is the
Merit Retirement Advantage (www.meritretirementadvantage.com) program
by Rick Kent, a Securities America advisor in Alpharetta, Ga. Kent
developed and perfected the Merit system after working extensively with
BellSouth employees over the past six years. "After meeting hundreds of
employees, we realized how important it was to provide basic education
and 401(k) help. What we found is that 90% of the employees we met with
desperately needed help understanding the basics of their retirement
benefits. And almost all employees wanted face-to-face personal help
when it came to managing their 401(k)."