New book offers advice on how to navigate the post-DOL rule world

Forty industry leaders offer insights in crowd-sourced guide

Oct 26, 2016 @ 1:35 pm

By Mary Beth Franklin

New government rules require that financial advisers put their clients' interests first when recommending what to do with their retirement savings. But no one has defined what good advice actually means or how to accomplish it — until now.

“While the principles-based [Department of Labor] Conflict of Interest rules redefine the financial adviser's role and responsibilities and require an adviser to act in the retirement investor's best interests, the rules do not provide a clear path as to how advisers and their firms must meet those requirements,” said Kevin Knull, president of PIEtech Inc., the creator of MoneyGuidePro financial planning software.

“If there were a clear definition of good advice, what it really means to be a fiduciary or performance measures to track the quality of their advice, perhaps advisers would be better able to define their offerings and clients would have a better understanding of an adviser's value,” Mr. Knull said.

(More: Big gap between Social Security cost-of-living adjustment and retiree inflation)

In an attempt to bring some clarity to the evolving landscape, Mr. Knull invited dozens of industry leaders to weigh in. Together with 39 contributors, he explores three questions: What is good financial advice? What constitutes a quality financial plan? What does it mean to be a fiduciary? The result is the newly released book, “Exploring Advice: What You Need to Know About Good Financial Advice, a Quality Financial Plan and the Role of a Fiduciary” (Create Space Independent Publishing, $17.95).

“The objective of this book is to prompt anyone who provides advice to explore what it means to render good advice and a quality financial plan, which we think is the most prudent and easiest way to meet the spirit of the DOL regulations,” Mr. Knull said. He helps define a path to success based on research and insights from hundreds of conversations with industry advisers, regulators, attorneys, academics and consultants, and data from over one million plans.

“In a post-DOL environment, retirement advice will go well beyond investment advice and products, and we, as an industry, will need to elevate the quality of advice provided,” he said. “Asking the right questions, thoroughly evaluating retirement clients' full financial circumstances and developing practices to ensure advisers act in the clients' best interests will be critical to any firm's success.”

“Exploring Advice” is effectively a crowd-sourced compendium of insights about the revolutionary shift that is occurring in the financial industry as a result of five key factors: The Department of Labor's new regulations, asset management commoditization, fee compression, an increasingly competitive environment and a more informed consumer.

(More: Adviser compensation, rollovers most complex factors under DOL fiduciary rule)

In an unprecedented forum, leading CEOs and executives from wirehouses, regional, independent and retail broker-dealers, global and regional banks, and investment advisory firms; consultants; a leading ERISA attorney and even a former U.S. Securities and Exchange Commissioner explore and share unedited insight and best practices for good financial advice, a quality financial plan and the role of a fiduciary.

I'm honored to say that I contributed a chapter on “The Broken Three-Legged Stool” of retirement planning, where I explained how incorporating Social Security claiming strategies into a holistic income plan can provide for a more secure retirement for millions of boomers. The other participants and I received no compensation for our chapters. Mr. Knull said the goal of the book's sale is to cover publication costs in order to distribute as many free copies to consumers as possible.

To be honest, there are a lot of overlapping sentiments expressed in “Exploring Advice.” That's to be expected when multiple authors weigh in on a single topic. And there is no shortage of metaphors for the role of advisers as marathon coaches, personal trainers, fiscal healers and GPS guidance systems.

But there are also some fascinating discussions on the role — or threat — of technology in the financial advice arena. The general consensus is computer software and robo-advisers can enhance the process of crunching numbers for a financial plan or comparing competing investment strategies, but they can't replace the human touch and empathy that is the basis of a financing planning relationship with a client.

(More: Pershing's Mark Tibergien: RIAs are at risk of running afoul of the DOL fiduciary rule)

“Technology is not very good at holding hands or at encouraging people to hang in there,” wrote contributor Harold Evensky, chairman of Evensky & Katz/Foldes Financial. “Ultimately, in the investment universe, our real value, or certainly a major part of it, is helping clients weather bad times.”

(Questions about new Social Security rules? Find the answers in my new ebook.)

Mary Beth Franklin is a contributing editor to InvestmentNews and a certified financial planner.

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