November 3, 2015

As you may be aware, Bill Stratton and I attended the Financial Planning Association’s Business & Education Conference in Boston during the last week in September.  The conference is the largest annual gathering of Certified Financial Planning (CFP®) professionals. We come together to share ideas, to network, and to learn about the latest technology tools and practice management strategies.  The event is usually a highly motivational experience, and this year’s program did not disappoint.

Opening Session: Miracle on Ice

The keynote speaker for the opening session was Jim Craig, the goalie for the 1980 US Olympic “Miracle on Ice” Hockey team.  Jim is now President of Gold Medal Strategies, and provides inspirational consulting presentations on team building, leadership and accountability skills.  He had an amazing understanding of the financial planning profession. He suggested that advisors need to prepare for servicing their client’s needs in the same manner that Olympic medalists train to win their events.  Mr. Craig’s presentation interwove stories of what his teammates needed to do to become Olympic champions with pointed references as to why advisors need to acquire strong technical knowledge, be mentally sharp, and develop keen listening skills to successfully earn the respect & business of their clients.

Breakout Sessions:

Two of the numerous breakout sessions offered that I attended were “Managing Risk – Assessing Long Term Care Strategy Options” and “Seven Steps to Protect Yourself, Your Practice, and Your Clients Who Have Diminished Mental Capacity”.    

“Managing Risk – Assessing Long Term Care Strategy Options”:

Unfortunately, there was not a lot of new information in this presentation, but it did reinforce the toll that a serious & prolonged health crisis has on the primary caregiver and how a Long Term Care solution can provide some planning & care option flexibility.  The handout materials, which included results of a 2014 study on Long Term Care needs by the Boston College Center for Retirement Research, compared the pros and cons of self-insurance with traditional stand-alone long term care insurance policies, life and annuity combination policies, and other strategies such as longevity annuities, life insurance wealth replacement, and reverse mortgage funding alternatives.  

“Seven Steps to Protect Yourself, Your Practice, and Your Clients Who Have Diminished Mental Capacity”:

I felt that the Diminished Mental Capacity program delivered more actionable items that we could bring back to the office and share with our clients.  The speaker, Bob Mauterstock, is a retired CFP® who has written a number of books on this timely subject, including “Can We Talk? – A Financial Guide for Baby Boomers Assisting Their Elderly Parents” and “Passing the Torch – Critical Conversations with your Adult Children”.  

Bob indicated that he has personally experienced the awful impact of this increasingly common condition which is being shared by so many families today – that of helping to care for his mother during her final years.  His presentation discussed the importance of having a “Diminished Capacity Checklist” for recognizing, reporting, and working with such clients; the legal documents that should be part of everyone’s records; and of holding family meetings to help Mom & Dad communicate what they may want for their future care and how to put it place.

General Session: What is Washington Doing?

The last of the general sessions I attended was a rather timely, detailed and important session about “transformative” compliance & disclosure legislation being pushed by the Department of Labor (DOL). Also included in the discussion were tax reform proposals that could change the funding and tax deductibility of retirement plan contributions that are currently in place. 

The DOL is seeking to expand the definition of who is a financial “Fiduciary” needing to implement his/her best efforts to act in good faith and put the client’s interest first.  The DOL is also specifically concerned with conflicts of interests that can arise when consumers investigate advice to determine if they should rollover existing corporate retirement plans into Individual Retirement Accounts (IRA).  They propose that any rollover advice would need to be conducted by a plan or IRA fiduciary.

There has been a very intense debate taking place over the last few years on this subject, as many advisors or brokers are not deemed to be a fiduciary under the existing definition.  Many financial professionals currently operate under a “suitability standard” and only have to ensure that a product or service is “suitable” for a client at the time of the transaction, which leaves open the possibility that it may not necessarily be in the client’s best interest. The new legislation would bring most financial professionals in under the fiduciary definition, with a carve-out for investment education (not referring to a specific product) but with few other limited exemptions.

As a CPA & CFP® professional, I have been required, for my entire career, to conduct our business guided by a Code of Ethics and Professional Responsibilities that emphasizes putting our clients’ interest above all other activities.  It has always been my position that anyone who does business with the public should operate in a fiduciary capacity as to that transaction, and thereafter.  While the new legislation may be a bit overbearing as to the additional disclosure responsibilities that will be placed on our firm, and on much of the financial services industry, I believe it is a move in the right direction for protecting the typical or average consumer who interacts with financial professionals.

The speaker of this session, Marcia S. Wagner, Esq., also addressed some tax reform and other regulatory initiatives designed to address the federal deficit and “retirement savings gap” affecting so many consumers.  Ms. Wagner indicated that the administration is seeking to limit the maximum annual elective or lifetime aggregate contributions a “high earner” employee can make to a corporate plan.   The administration is also pushing to have automatic and mandatory enrollment into IRAs for employees of firms with at least 10 employees but no retirement plan.  There is also momentum growing for a number of alternative federal and state retirement saving plan proposals. These include one originally suggested by former Iowa Senator Tom Harkin that would feature automatic/universal enrollment by employers with no retirement plan - it would be financed by employee payroll contributions and government tax credits and be privately managed by a new set of entities known as the USA Retirement Funds.  

Other ideas being discussed in Washington appear to be in the area of “Lifetime Income Initiatives”, designed to help retirees take plan distributions without the risk of outliving them.  One topic specifically noted was the potential further expansion of a recent tax law change allowing the use of Longevity Annuities within IRA accounts.  As of now, there has been limited interest in this new product, but proposals exist to remove some of the regulatory hurdles and promote more education to encourage plan sponsors to voluntarily offer longevity annuity options to their plan participants.

If you would like more information on any of these topics, or which to discuss them in more detail with me or another member of our team, please call my office at 732-739-8991.