By Deb Castellani, CFA and Bill Conrad, JD - October 16, 2019
Investment designations have become an industry of their own with FINRA publishing a list of 206 current or past professional investment designations in the financial services industry. Investment providers and other service providers have used and continue to use designations to help educate themselves and differentiate themselves from the competition.
Today a retirement plan advisor needs more than designations - they need ERISA knowledge..
In January 2019, Sharon Pivirotto published a list of 24 different retirement plan designations and certification programs. The designations include those for DC only, §401(k) only, general retirement, non-qualified plans, retirement sales, and even §403(b) and §457.
A provider studying and obtaining a retirement plan designation makes some sense depending on the designation and how they’ve structured their practice. But today they need more…today being in the retirement plan industry is difficult, not just because ERISA is over 460 pages with over 200,000 words or because there are interpretations, court cases and CFRs, but because of the disruption in the industry caused by regulators, lawmakers and lawyers scrutinizing all players more than ever. (We wrote about this in Compliance-Minded Service Providers Have a Competitive Edge dated September, 2019)
Selling in the retirement plan world is not “simple” wherein having a designation or two distinguishes you from your competition. Some of the designations take only hours of study whiles others take years. A plan sponsor or even fellow retirement plan providers don’t understand the differences.
Too Much Information
How can so many people read, comprehend and pass a test that covers much of the retirement plan market with only a few days of “study”? In defense, not all the designations are about ERISA, many are about various aspects of the retirement plan world. But again, plan sponsors don’t know this and during the sales process, not all investment providers are open about what their designations really mean. For example, we have met some investment providers with various retirement designations who don’t have basic ERISA or fiduciary knowledge, yet they are selling and supporting retirement plans and giving “advice” to plan sponsors.
In one case a fiduciary investment advisor brought us in to do an independent fiduciary review of the plan sponsor’s activities via The FIRE System. Through conversations and the review, we found the prior investment provider, who had a retirement designation, had given “advice” which caused the plan sponsor to breach their fiduciary duty. Because of this, the plan needed corrective actions on it to bring it back into compliance.
How to be Successful in this Market
To be successful in this market, it goes beyond designations. They’re important, so important that many investment companies are “forcing” their reps to get them to retain their accounts. But with so many people having them, it waters them down as a sales tool.
Designations are useful and important if used correctly. Today, designations have become big business and it can be argued too big of a business with users forgetting it’s about the knowledge and not just about getting as many designations as possible. With the Department of Labor and the Securities and Exchange Commission looking at retirement plan service providers more and more, education and learning ERISA should be the most important aspect and the best way to distinguish yourself against the competition.
Compliance-minded service providers, with or without a designation, have much more to offer with the right approach and tools. Investment providers who can talk to their retirement plan clients about ERISA and what they need to do to run a plan and be in fiduciary compliance is the best way to distinguish yourself in this competitive marketplace.
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