It’s finally here, and you no doubt have a ton of new forms you will need complete with clients who wish hire you to manage their rollover. The first one I read actually asks the client to state that I didn’t recommend what I did indeed recommend.
Confusing as heck, but done properly, this is a major win for you.
Let’s first be clear what the DOL’s fiduciary ruling is all about: lawsuits. It will be a lot easier to claim damages using the fiduciary standard than the suitability standard. The only enforcement of the ruling will be civil litigation.
In my selling system (www.KillTheCaveman.com), we utilized a design meeting where together with the client a comprehensive strategy is developed. A major feature is the discussion of all the pros and cons of each component of the plan.
In matters of a rollover, the discussion will go like this:
“Now that we’ve laid out what your portfolio should look like to reach your goals. I want to discuss what’s involved with managing your 401k. As you know, you can it keep with your former employer. You are not required to roll it out. And, if you do roll it out so that I can manage it, there will be a quarterly management fee that currently you are not paying. I want to make sure that’s clear.
When we complete the paperwork, there will be a section asking you to acknowledge this fact as well as stating that the decision to roll it out was made by you and not influenced by me. This is a matter of legality. Pension plans like a 401k fall under the purview of the Department of Labor. which requires that I place your best interests ahead of my own. As a Certified Financial Planner and a registered investment advisor, I take such an oath for all of my clients. But in the matter of your 401k, we need to state clearly you are aware of the pros and cons of the rollover, my fee being considered a con in this case. Is this clear?”
Never leave the discovery of a potential negative to the day the client signs paperwork. Get all obstacles out in the open and explain each one in detail while creating his strategy. Done properly, explaining the fiduciary standard will be viewed by your client a good reason to work with you. You’ve accepted the role as his financial caretaker, not the purveyor of products.