It’s become vital to the success of insurance and financial advisors that they differentiate themselves with their exemplary ethics, that they operate by a higher moral code and that they communicate that higher standard to their clients. Why? Because research proves that ethics builds trust, and trust sells — in the long-term and - in the short-term, as well.
The last few years have been a period of heightened scrutiny and scandal for the financial services industry. Most recently, the SEC issued a report on pension consultants regarding conflicts of interest and the objectivity of advice given to retirement plan sponsors. It’s become vital to the success of insurance and financial advisors that they differentiate themselves with their exemplary ethics, that they operate by a higher moral code and that they communicate that higher standard to their clients. Why? Because research proves that ethics builds trust, and trust sells — in the long-term and - in the short-term, as well.
Taken from the SEC report and the information provided by the Dept of Labor, below are Affirmations of Ethical Behavior for Financial and Insurance Industry Representatives. The Ten Affirmations of Ethical Behavior
1. If registered with the SEC or a state securities regulator as an investment adviser I will provide my clients with all the disclosures required under those laws (including Part II of Form ADY).
2. I will describe any relationship I have with money managers that I recommend, consider for recommendation, or otherwise mention to the plan.
3. I will describe any payments I receive from money managers I recommend, consider for recommendation, or otherwise mention to the plan for consideration.
4. I have prepared policies and procedures to address conflicts of interest or to prevent conflicting payments or relationships from being a factor when providing advice to my clients.
5. I will monitor and reconcile the amount of commissions paid when using brokerage commissions to pay consulting fees and alert plan sponsors when consulting fees have been paid in full.
6. I have established procedural steps to ensure that the plan receives the best execution for its securities trades when the consulting fees are paid with the plan’s brokerage commissions.
7. I will describe any arrangements with broker-dealers under which I will benefit if money managers place trades for their clients with such broker-dealers.
8. If hired, I will acknowledge in writing whether or not I have a fiduciary obligation as an investment adviser to the plan while providing consulting services.
9. I will acknowledge whether or not I consider myself a fiduciary under ERISA with respect to the recommendations I provide the plan?
10. I will describe the percentage of my plan clients that utilize money managers, investment funds, brokerage services or other service providers from whom I receive fees?
Post these affirmations on your website and include them in your marketing materials. If you complete the affirmations for prospective clients, you will have distanced yourself from the scandal ridden and differentiated yourself in an industry where the value added to products and services is quickly commoditized
Making Every Penny Count….
On May 25, 2005 and retroactive back to January 1, 2005 the IRS has redefined section 415 Compensation for 401k retirement plans to include post severance compensation if it’s paid within 2-1/2 months after separation from service. But this is only for payments that would have been paid if the participant had continued in employment or if they are for bona fide sick, vacation and other leave.
Build Credibility with Expertise
Next to an IRS or Dept of Labor audit, nothing frightens retirement plan sponsors more than a notification letter from the Dept of Labor regarding inadequacies in their responses on the Form 5500 or 5500-EZ filing. Inadequacies that, if not corrected within 30 days of the date of the letter,would subject the plan sponsor to substantial fines and penalties, not only from the Dept of Labor but from the IRS as well.
