IAR CE Needs to be completed by 12/24/24.

A few months ago I wrapped a year long project of pouring my heart and soul into building course for investment advisers.

I wish I had this course when I was an adviser. It (literally) details everything you need to know as an adviser when you are working with “held away” 401(k) accounts. Many advisers don’t know that 9 times out of 10, they are an ERISA Fiduciary when working with their clients 401(k) accounts (advising or trading).

As an ERISA Fiduciary, there are very specific things an adviser NEEDS to do. They are not optional and if not done, the adviser could end up paying back any client losses with their own personal assets (there is no “corporate protection” when working with ERISA accounts).

I was very honored when we got the course approved 6.5 hours of CFP credit and 6 hours of IAR “Ethics”. There are currently 18 states that require investment advisers to earn 12 hours of CE credits every year. An IAR MUST complete 6 hours of “Products and Practice” and 6 hours of “Ethics and Professional Responsibility”.

It’s pretty easy to pick up hours for “products” as any wholesaler can easily provide those (oftentimes with a “free” steak dinner)!

However, it’s harder to find “ethics” CE. So, I was very pleased when our course was approved for all six hours.

If you are in any of the states below, please know you need to abide by these requirements.

• Arkansas (effective in 2023)

• California (effective in 2024)

• Colorado (effective in 2024)

• Florida (effective in 2024)

• Hawaii (effective in 2024)

• Kentucky (effective in 2023)

• Maryland (effective in 2022)

• Michigan (effective in 2023)

• Mississippi (effective in 2022)

• Nevada (effective in 2024)

• North Dakota (effective in 2024)

• Oklahoma (effective in 2023)

• Oregon (effective in 2023)

• South Carolina (effective in 2023)

• Tennessee (effective in 2024)

• Vermont (effective in 2022)

• Washington, D.C. (effective in 2023)

• Wisconsin (effective in 2023)

As an “official” CE Provider of “Ethics” we have been notified by FINRA that all IAR CE needs to be reported to them by 12/26/2024 at 6pm EST.

If you still need to complete 6 hours of “ethics” CE, please checkout our course.

We have created the first ever course for IARs that work with “held away” 401(k) accounts.

The course has been approved for the 6 required hours of “ethics” CE and 6.5 hours of CFP credits (if applicable).

You can complete your ethics requirement for the low cost of a onetime investment of $99.

(Use code “IAR100” at checkout for $100 off).

We also have a course available for CCOs that comes complete with sample ADV language, compliance manual language, annual review, etc for just $399.

Sharpen your knowledge of being an ERISA Fiduciary for “held away” accounts and earn CE (we do all the reporting to FINRA and the CFP Board).

You just need to complete the course and final exam (70% or higher) before 12/24/24.

This will give us a 2 day “buffer” for FINRA to process the CE so it is credited for 2024.

Click the button below to learn more.

And be sure to use the Coupon Code of “IAR100” to take $100 off any package!

2024 the Year of CEO turnover – what should we expect in 2025?

According to a 9/21/24 NewsNation article, CEO turnover is up over 50% from the previous year.

It’s not just in our industry.  But major companies like Starbucks, Nike, and Boeing to name just a few.

And it seems that every week there is another CEO stepping down (or being forced out) in the financial industry.

Is there an underlining “cause” for the increase in 2024?

Are the sun, moon and stars aligned (or misaligned if you are the CEO getting replaced)?

With the exception of a few news making departures, it appears that many of these departures are voluntary.

So, that got me thinking.

What is the financial industry going to look like in 2025? 

There will be a new crop of leaders who are eager to make their mark. 

But will they be willing to take risks and increase their company’s market share? 

Are they being brought in to “right size” the company after years of growth? 

Only time will tell.

But my hope is, the new leaders taking over in the financial industry will be those that want to help as many hard-working Americans as possible.

I hope they will be willing to embrace new business models in working with younger clients who don’t fit into the “old” AUM / commission model of financial services.

I hope that many of these new leaders will understand there are more generations who are willing to pay for financial advice and services other than the baby boom.

In fact, they will have to.

According to Neuberger Berman, 66% - 95% of children will fire their parent’s financial advisor after receiving their inheritance. 

However, a  study from Nuveen states that an advisor can have an 80% chance of retaining the child as a client if the financial advisor meets the child(ren) at a very young age.

This means that financial firms have tremendous risk of going out of business during the “great wealth transfer” or have a tremendous opportunity due to the “great wealth transfer”!

The firms that will fail are the ones that are doing business the same way they did ten years ago, with a focus on AUM or commissions.

The firms that will prosper will be the ones that embrace multiple business models, that will meet younger generations they way they prefer (online and on demand versus in the office). 

They will need to bring in services tailored to generations that have most of their wealth tied up in their 401(K)s until the great wealth transfer.

And they will be willing to charge the younger generation in a whole new way as the AUM / Commission model won’t work for them.

Firms will need to be creative.

They will need to embrace change.

And hopefully, that’s exactly why we are seeing the mass exodus of CEOs in 2024.

I hope that 2025 is going to be the start of a revolution in the financial industry starting with a new crop of CEOs.

I am optimistic and looking forward to see what the future holds for the industry that I love so much!

Am I an ERISA Fiduciary?

This is one of the main questions that I get from advisers. 

Or I get an adviser telling me they don’t have to worry about being an ERISA Fiduciary as they are an SEC Fiduciary. 

Now, I don’t have the time in this blog to write about all the reasons that advisers could potentially end up losing their house by thinking they don’t have to worry about being an ERISA Fiduciary because they are an SEC Fiduciary.

And here is the main reason, you can be “personally” liable for your client’s losses as an ERISA Fiduciary, but not as an SEC adviser!

And your client could file a class action lawsuit in a federal court for a breach of ERISA Fiduciary duty but they do not have that same legal protection when you operate as an SEC Fiduciary.

The risks for an adviser are much higher for an ERISA Fiduciary than they are for an SEC Fiduciary!

And this was done purposefully when ERISA law was signed into law in 1974. 

Apparently, Congress and President Ford didn’t think the protections provided to clients as an “SEC Fiduciary” (that were written in 1940) were adequate for employees with money in their workplace plans.

Since the penalties for breaching your duties are much more severe for ERISA Fiduciaries than they are for SEC Fiduciaries, you might be asking yourself, “Am I an ERISA Fiduciary”?

And this is an answer that has changed over time.

In fact, every presidential administration since President Obama has been trying to re-define “who” is an ERISA Fiduciary.

And the answer is a little complicated.

To be an SEC registered fiduciary you just need to pass your series 65 and have more than $100,000,000 in assets under management (AUM).   (There are a few other ways to be an SEC registered firm as well).

But anyone can become an ERISA Fiduciary, regardless of exams passed or how much money they have under management.

There are currently two different ways to become an ERISA Fiduciary.  Both ways can be found under section 3(21)(a) of ERISA.

3(21)(a)(i) and 3(21)(a)(iii) state that if you have discretion over an ERISA covered account or assets (like 401(k) accounts) then you are an ERISA Fiduciary.  This one is pretty cut and dry.  Really easy to understand.  If you are trading a 401(k) account with discretion, then you my friend are an ERISA Fiduciary.  Period.  Full stop.

Now, if you are not trading with discretion, but you are advising your clients on what to do with their 401(k) accounts, it is a little more complicated.  3(21)(a)(ii) defines that if you are providing non-discretionary investment advice to an ERISA covered account or participant, then you “may” be an ERISA Fiduciary. 

In fact, the Department of Labor (DOL) has created a Five Part Test to determine if a non-discretionary adviser is an ERISA Fiduciary.

Here is the test:

(1) providing advice or recommendations regarding purchasing or selling, or the value of, securities or other property for a fee,

(2) on a regular basis,

(3) pursuant to a mutual understanding that

(4) the investment advice will serve as a primary basis for an investment decision,

(5) the advice is individualized

This is the test that every president since Obama has been trying to update and modernize. 

See, the test was written years before the 401(k) even existed.  And decades before “rolling” money into an IRA was en vogue after switching jobs.

But as of today’s date, since the Biden Administration’s changes were “stayed”, this is the test that we need to use.

If you can answer “yes” to all five questions, then you are an ERISA Fiduciary when providing “non-discretionary” advice.

If there are any parts of the test that you can answer “no” to, then you are not an ERISA Fiduciary. 

So, you can provide your clients with personalized, ongoing advice, but not charge them a fee, and you will not be an ERISA Fiduciary.

Or if you provide “models” to all your clients for a fee but you don’t allow for any individualization of the models, then you are not an ERISA Fiduciary.

See, becoming an ERISA Fiduciary is a matter of function, not what license you hold or how much money you manage.

And you are only an ERISA Fiduciary if you have discretion or you are providing non-discretionary services (and pass the Five Part Test) to an “ERISA Covered” account.

If the account is not covered by ERISA law, then you cannot be an ERISA Fiduciary.

So, it is very important to know when you are providing services to an ERISA covered account, whether you are operating as an ERISA Fiduciary or not.  And if you are, you need to follow the ERISA law and rules created by the DOL.  We have a course designed to teach more about all of this as it is too much to cover in a blog.

And if you work for a large RIA or have a broker-dealer affiliation, be sure to double check with them.  They may not allow you to work as an ERISA Fiduciary due to the high risk. 

Also, be sure to double-check your E&O insurance, as many standard policies do not cover you operating as an ERISA Fiduciary.  Oftentimes you need to add a “rider” to your policy.

So, when advisers ask me, “Am I an ERISA Fiduciary”?, my primary answer always is “maybe”!

Hurricane Milton - 1st person view!

It’s Thursday October 10, 2024 at 1030am EDT. 

Last night Hurricane Milton made landfall on Siesta Key Beach, five miles from my house.

I’ve been in Florida for ten years and this was not my first hurricane.  But this was my first time that I’ve been in a hurricane where we took a direct hit!

The experience was surreal. 

We all knew that we are going to lose power.  It’s just a matter of “when” we lose it.  You hope that can keep power as the storm approaches so you can keep watching the news.

I lost power at 730pm shortly after the hurricane made landfall.

The problem with getting a direct hit from a hurricane is that you get both “parts” of the storm.

So, when we lost power, we were getting hit with the “northern” part of the storm.

The wind was blowing from the back of my house towards the front of the house.

For me, this is the worst part as the back end of my house is all windows with a (normally) beautiful view of a forest preserve.  So, naturally I was very concerned about branches snapping off and flying through one of the windows.  Fortunately, that did not happen.

There were many branches flying onto my roof and landing in my backyard.  But none of them went through the pool cage and through any of our windows.

And the strangest thing happened, as the “eye” of the storm was over me.

Complete darkness.

Complete silence.

No wind.

No rain.

This lasted for over a half hour.  And it is a really bizarre and eerie feeling.  Because deep down you are hoping the worst is over, but logically you know what is coming next.

The southern of this storm was much more violent.

The winds were over 100 mph.

There was more debris as it was picking up everything the north end of the storm left behind an hour ago.

My only savings grace, the winds go in the exact opposite direction.

Fortunately, I don’t have many windows on the front end of my house.

So, I was able to open all the windows on the south end of my house and not worry about any of the forest joining me in my living room.

It was good to have the windows open as the house was getting warm without any A/C.

However, I got a front row seat of the power of mother nature.

The sound of the sustained wind is extremely loud and the wind gusts over 100 MPH are deafening and nothing I’m going to forget for quite a while.

As I type this, we are still without power, internet or cell phone service.

But I am calm and grateful.

I walked around my house and there is a lot of debris, but not any damage (as best as I can tell).

So I am very grateful.

And I am calm as I had a plan going into the storm.

I purchased a lot of food that we can eat without cooking or I can cook on the grill.  I bought an extra propane tank knowing the grill may be are only source of hot food for awhile.

I set out candles, charged up all of our electronics and spare batteries.

My daughter and I packed a “go” bag of our valuables, spare clothes, shoes, cash, water and power bars.  We packed this in case we needed to ride our kayak out of the neighborhood if the storm surge made it all the way to us.  (It never even came close).

I am only calm today because I had a plan, executed the plan and was prepared as best as possible.  The rest was out of my hands.

Having no power and internet is not good.  But that will be back up and running soon. 

Not having Air Conditioning in a hot Florida sun is less than ideal.

Being cutoff from the rest of the world without cell service feels strange.

But all of these things are temporary.

The fact that my daughter and I could ride out a horrible hurricane with confidence is psychologically amazing.

All because we knew what was coming, created a plan and then executed our plan.

So far, the biggest problem that I am facing this morning is not being able to start it with a hot cup of coffee!

Mass Challenge Early Stage Cohort – graduate!

I am typing this blog from the couch of a hotel room in Dallas, TX. 

What seemed like forever ago, I was in Boston, MA (with 100+ entrepreneurs) for the kickoff of a 12-week program to “accelerate” my ERISA compliant software business.

The program is called the Mass Challenge, and it took me 4 attempts over 4 years to get accepted to it.

I almost didn’t apply the fourth time but my friend Joe Messinger from CollegeAidPro (another Mass Challenge alumni firm) encouraged me to look at the judges’ feedback over the years and give it another shot.

And I am glad that I did.

Over the 12-week program, I felt like I was drinking from a firehose.  There was so much information to digest about building a business, running a business, funding a business, scaling a business and showing the world what we have created. 

I was overwhelmed at times, as every day I would have pages of notes of things to either fix, create or enhance in our business.

I have two books of notes that I have frantically made.  This weekend, I will be going through all the notes and converting them into an action plan in Asana (the app we use for our task management).

I could not be more excited about my business and the businesses of many others that I have met through this program. 

And that’s the one thing that really sticks out for me.  The program was good (chaotic at times) and the information was useful, but the people were amazing.

I have never met a group of people that are so willing and eager to help before. 

And I am 51 years of age! 

The Mass Challenge staff is amazing.  A shoutout to a couple of super stars.  It starts with the CEO Cait, who I met during lunch on Tuesday and we had a very engaging and enthusiastic conversation.  Later that day, she was going out of her way to introduce me to people who understood the fintech space that I am in.

Jessica at Mass Challenge is always running around making sure everyone feels welcomed and has what they need.  I’ve seen her interact with almost every member the way she does with me.  With a smile on her face, asking me about my daughter, how it is going in Mass Challenge and what they can do better.  She must take a lot of gingko biloba to remember personal details about every member. 

Finally, Steve, a Mass Challenge alum and mentor in the program.  He was the first person that I spoke to that completely understood the fintech space and knew what ERISA was.  He knew first hand that I can’t just “sell my software” to an Edward Jones or Merrill Lynch rep.  He knows there is a process that needs happen to get the “permission” (sales agreement) with the home office of a firm first, before one can “sell” to the reps.  He understood the importance of building the ERISA Rules into our software.  It was refreshing and exciting to find another who just “got it”.

So, I want to give a huge shout out and say Thank You to everyone at Mass Challenge!

They have made huge contributions into inspiring me to make my company bigger, faster and better.  And I feel that I have people that I can turn to when I need help, inspiration and guidance.

Yesterday in Dallas, everyone in the 12-week program became a Mass Challenge “alumni” (myself included). 

I am proud to be an alumni of such an awesome group of people.  I hope that I can live up to the standard that they created. 

Now, I need to get back to work, as I have never been more inspired to help as many investment advisers deliver (ERISA compliant) advice to their clients at scale!

More to come, stay tuned . . .