Document everything and...

I was reading the latest 401k lawsuit from the Schlicter law firm. This lawsuit was filed by plan participants/ employees against TIAA (the plan provider) alleging that TIAA breached its fiduciary duties under the ERISA for allegedly cross-selling the firm’s adviser-managed account service known as Portfolio Advisor, which comes at a higher cost than remaining in the plan. In other words, TIAA is alleged to have aggressively cross-sold a higher cost investment choice to employees and it seems the employees were not pleased with the performance and aggressive manner in which the investment was marketed.

I am not an attorney and I am not party to the case but this reminds me of the old adage of "Document everything". In thirty-four years in the industry, if I have learned anything, it is to document why I offered an employee/ client/ plan sponsor a particular investment. I will literally type up a Microsoft Word document which I will sign and the client will sign. This document lays out what the investment is, what it might do, and how this could serve the stated needs of the client. This is for the protection of me as well as the client. This document also serves as a grounding in future conversations.

I refer to this document in subsequent service meetings. I might say, "Your balance in XYZ investment is $57,000. This investment fits into your stated needs of A, B, and C in the following way and we discussed this back in April 2014". By doing this over and over, it reinforces the "why" of the portfolio. Why was it constructed in this manner? Why did we do this? Why is this possibly going to be helpful for the long-term? All of these "Why's" can be answered in one document that is referred to over and over.

But beyond "document everything", I would ask you to consider one more thing. My industry is awesome at disclosure and documentation. Having said that, just because I put a mountain of fine print in front of you and have you sign it does not mean you read it. And if you read it, it does not mean you understood it. I firmly believe that in my role as a 401k advisor, I need to be confident that whatever I offer is right for the client. I need to be able to look myself in the mirror each morning and say, "I did right by my client even if it did not benefit me".

You are probably wondering at this point how I am in business. Simple. I do right always. While I am proud of the clients I have, I am even more proud of the business I have directed elsewhere. My firm, Green Retirement, Inc., is not right for everyone. I know this and I state it upfront. We are not the lowest fee. Our high-touch service model is not what everyone needs. Our focus on green investing does not play in many parts of the US.

I would rather direct prospective clients to where they (and I) will be happiest even if that means forgoing business. This reminds me of a 28-year-old friend who was bending my ear about a financial advisor who took the friend's old 401k and put it in an annuity. My friend was asking me why he wound up in an annuity. I happened to know the financial advisor only sells annuity. Could it be when the only tool you have is a hammer, the world looks like a nail?

Document everything. More importantly, look yourself in the mirror each morning and be able to honestly say, "I did right by my clients and prospective clients". Full stop. End of story. No amount of money is worth doing the wrong thing.