John Hancock's new fiduciary program for high-end advisers beats coming regulation to the punch
Anticipating upcoming regulation from the Labor Department, John Hancock Financial Network today launched a program catering to high-end fiduciary plan advisers.
The insurer-owned broker-dealer joins other retirement plan service providers in gearing up for enhanced disclosure of fees and services, mandated by the Labor Department, as well as a proposed rule that would expand the definition of fiduciary. The current definition has allowed brokers and others to provide advice and other services without being held to the highest standard of care.
Sure enough, a recent John Hancock survey revealed that 85% of some 220 plan advisers are providing fiduciary services, while most of them aren't declared plan fiduciaries.
Reps affiliated with John Hancock and who want to step up as fiduciaries to retirement plans under the Employee Retirement Income Security Act of 1974 can provide their services through the firm's fee-based investment advisory subsidiary, Signator Investors Inc.
That tier of the program, which permits financial advisers to act as 3(21) co-fiduciaries under ERISA, will be open to advisers who have at least half of their business in 401(k) plans and a minimum of $10 million in plan assets. Advisers acting in a 3(21) fiduciary capacity can make recommendations to their plan clients, but the decision remains in the hands of the plan sponsor.
By contrast, a 3(38) investment manager under ERISA has the authority to buy and sell securities and takes on the discretion — and the liability — for choosing and replacing investment options. A number of insurance companies have come up with ways to offer plan clients access to 3(38) investment fiduciary services by outsourcing advice to a third party.
Earlier this week, Nationwide Financial Services Inc. announced such a relationship with Iron Financial Cos.
Bruce Harrington, head of retirement sales and strategy at John Hancock Financial Network, said that the firm would consider its options about whether to provide 3(38) services, but noted that “plan sponsors don't want to give up control” of their retirement plans.
John Hancock's advisers can train for their Accredited Investment Fiduciary designation through the program, which was completed by 30 of the firm's advisers in April, according Mr. Harrington. A second AIF training program will take place in September.
Mr. Harrington estimates that about 75 to 100 of the 1,900 reps affiliated with the firm fall into the expert plan adviser category. About 200 advisers in total focus on plans.
Midtier financial advisers who may not want to focus on retirement plans can attend a Retirement Plan Symposium and 401(k) Boot Camps. Meanwhile, all advisers would have access to online retirement plan training.
John Hancock also has created a solicitation program for brokers who come across leads for retirement plans: Those reps can refer the business to the plan-focused advisers, but the original broker's relationship with the retirement plan would end there, Mr. Harrington said.
Finally, the firm has established a sales support team that will give financial advisers prospecting ideas.
