Insurance and financial advisors often find themselves in competition to provide for the benefit and pension plan needs of business owners. Many owners seek referrals from such other advisors as accountants and attorneys. Others talk to fellow business owners or friends. Still, many owners remain at a loss as to how to find and vet a benefits or retirement plan advisor.
No matter what approach you take, here are a few suggestions on finding advisors.
First and foremost, make sure they’re fully and licensed and their registrations are current. Insurance is licensed at the state level, so you should check with the Colorado Department of Regulatory Agencies Department of Insurance. Investments require licensing at the national level as well as registration at the state level. For these advisors, check the Financial Industry Regulatory Authority (FINRA) website at www.finra.org.
Next, get something in writing they adhere to the U.S. Department of Labor fiduciary rule. According to the DOL website: “The DOL’s definition of fiduciary demands that retirement advisors act in the best interests of their clients and put their clients’ interests above their own. It leaves no room for advisors to conceal any potential conflict of interest and states that all fees and commissions for retirement plans and retirement planning advice must be clearly disclosed in dollar form to clients.” It’s in the best interests of business owners to work with advisors who know and follow these guidelines.
In addition, the fiduciary definition has been expanded to include any professional making a recommendation or solicitation in this area, not simply giving ongoing advice. Previously, only advisors who were charging a fee for service — either hourly or as a percentage of account holdings — on retirement plans were likely to be fiduciaries. Details can be found at www.everycrsreport.com/reports/R44884.html.
Finally, consider certifications. Training, mentoring and on-the-job experience are essential parts of qualifications. But spending time and money to earn professional, industry-recognized designations goes even further, showing a dedication to and interest in becoming a specialist in the benefits and retirement areas.
Some of the relevant designations to look include:
Accredited Pension Representative: The National Institute of Pension Administrators bestows this designation. According to www.nipa.org: “The Accredited Pension Representative designation program provides a general survey of all types of retirement plans and engages in the advanced study of retirement plan topics, ranging from fiduciary responsibility and prohibited transactions to minimum coverage testing and distributions.” Candidates must pass two exams and possess one of the following: a FINRA Series 6, 7, 65, 66 or 24 license or insurance license.
Certified Financial Planner: The CFP program is a multi-part course of study with examinations after each module. Those who complete the course must demonstrate competency in all areas of financial planning, including retirement planning. Other professionals, not just financial advisors, may earn the CFP designation, including accountants, attorneys and insurance agents. For more information, visit www.cfp.net.
Chartered Financial Analyst. The CFA designation indicates the advisor has completed courses and examinations in accounting, ethical and professional standards, economics, portfolio management and securities analysis. This is one of the most difficult designations to obtain. It takes a minimum of three years and 900 hours of study to pass three tests. For more information, visit the CFA Institute website at www.cfainstitute.org.
Chartered Financial Consultant: This designation is similar to the CFP. The holder is deemed proficient in advanced financial planning, including estate planning, income taxes, investments and insurance. Earning the designation requires a minimum of three years of work in the financial services industry. For more information, visit the American College website at www.theamericancollege.edu.
Designations are not an end in themselves. Some of the best insurance and financial advisors have never earned any designations. But if someone tells you they hold a certain designation, always check with the certifying organization to make sure.