In 2006 and 2007, the planning industry achieved a fiduciary trifecta. During those two years, the Pension Protection Act of 2006 ushered in a new fiduciary standard for retirement advice; the Financial Planning Association triumphed over the Securities and Exchange Commission in a court case involving brokers' fiduciary responsibilities under the Investment Advisers Act of 1940; and the Certified Financial Planner Board of Standards released strengthened ethical standards for its 54,000-plus designees. "What a confluence of events," says Blaine Aikin, CEO of Fiduciary360, an organization devoted to promoting ethical standards in the planning profession. "It says to me that incidental advice doesn't cut it anymore."

On a Course with the PPA

This year, too, may prove eventful on the fiduciary front, as industry professionals work to understand and implement the various laws and regulations of recent years. In one such effort, Fiduciary360 and Linsco/Private Ledger have joined together to educate advisors on their responsibilities under the Pension Protection Act (PPA). The broker-dealer behemoth's new Retirement Plan Consulting Program, announced in November, requires that all LPL advisors who want to provide consulting to retirement plan sponsors enroll in a Fiduciary360 certification program to receive the Accredited Investment Fiduciary, or AIF, designation. "Because of the heightened fiduciary awareness in the marketplace, we want to make sure our advisors providing these services attain advanced certification," says John MacGregor, LPL's senior vice president of retirement services. Fiduciary360's partnership with LPL is the organization's first partnership with an independent broker-dealer on retirement consulting and the AIF designation.

The AIF curriculum teaches industry professionals an investment process to implement with both individual and institutional clients. Students learn the legal and regulatory underpinnings of the industry's fiduciary standards. Coursework includes the requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and other major pieces of investment legislation, best practices in asset management and best compliance procedures. This type of study has taken on a heightened urgency because of the PPA. Under the Act, advisors must accept fiduciary responsibility and assume liability for their advice if they counsel plan sponsors, 401(k) plan participants or IRA participants. Before the law, it was less clear that plan participants and plan sponsors could sue advisors under a fiduciary standard for advice received.

Fiduciary as Default

The PPA discusses two types of advisor: the investment fiduciary who advises plan sponsors, and the fiduciary advisor who counsels individual plan participants. The LPL program focuses on the former. Under the PPA, investment fiduciaries are on the hook for the advice they give plan sponsors. For example, an investment fiduciary who helped a plan sponsor choose a fiduciary advisor could find himself held legally responsible by the plan sponsor or plan participants if either is unhappy with the advice participants received from the fiduciary advisor. (Under the PPA, individual participants can also hold fiduciary advisors accountable for the advice they receive.) These provisions have contributed to a new climate where "the presumption is you are [a fiduciary] unless you prove you aren't," Aikin says, noting the suitability standard prevalent before involved "multiple loyalties."

Dan Kinney is acutely aware of his legal liability as a consultant to plan sponsors. "It's a concern," the Des Moines, Iowa-based planner says. Kinney, a planner with Sommers & Danforth and a participant in the new LPL Retirement Plan Consulting Program, consults on a fee basis with employers on fund selection, investment policy statements and other aspects of retirement plans. He is pleased with the new "Fiduciary Liability" protection that LPL added to its Errors & Omissions insurance in response to the PPA. All LPL advisors received the additional coverage at no charge.

The 25 members of the retirement consulting program represent but a tiny fraction of LPL's more than 10,000 advisors. This small participation partly reflects the stringent criteria for inclusion: To be eligible, LPL advisors must obtain the AIF designation, work with at least 15 retirement plan sponsors and have at least $15 million of retirement assets under management. Advisors in the program can get preapproval for their processes, outputs and consulting fees, so they can offer services such as fund selection and monitoring or vendor and fee analysis without having to go through an approval process for each designation. Advisors must pay for their own AIF certification, which costs from $995 for the online curriculum to $1,950 for the classroom curriculum, plus $325 in annual dues.

Deep Pockets

LPL created the new retirement consulting program in response to advisor feedback, MacGregor says. But such a program could potentially offer LPL a degree of protection if the broker-dealer is sued by a plan sponsor or plan participant under the PPA. Asset custodians may also face legal liability if their independent RIAs are sued under the PPA, says TD Ameritrade Institutional President Tom Bradley. In lawsuits, "people always reach for the deep pockets," Bradley says. While this hasn't been tested in court, a broker-dealer or custodian could argue that the company escapes liability for an affiliated advisor's actions because it required all advisors to go through fiduciary training before they offer retirement consulting. MacGregor declined to comment on this hypothetical scenario.

Aikin predicts that product design will change to reflect the industry's increasing focus on fiduciary standards. Expect more simplified and transparent fee structures, he says. (Certainly, the consumer media has been lobbying for better fee disclosure.) Retirement plans especially are ripe for change, he notes, with their multiple service providers.

As industry participants navigate this new regulatory landscape, Aikin says, they should take comfort from this: "You don't need protection from liability if you do what you're supposed to do in the first place."