Trust consultant career introduction

The Pension Protection Act (PPA) of 2006 brought much-needed tax and retirement plan relief to individuals and institutions. One of the main provisions of the bill was the creation of a new type of financial professional called a trust consultant.

This innovation may usher in a new era of financial planning-in this era, objective financial advice has become as common employee benefits as group health insurance or retirement plans. What does this bill mean for financial industry players?

What is a trust advisor?

Trusted consultants, as the name suggests, are consultants paid by employers for employment fees. They provide employees with advice on retirement plan investment and provide a full set of other products and services. Trust consultants are not responsible for the retirement plan of the entire company; they are only responsible for the advice given to employees by individuals.

Key points

  • Trusted consultants advise employees on investment plans and other products and services.
  • Trusted consultants are selected based on criteria such as regulatory history and salary.
  • Trust consultants benefit employers, employees and consultants.

What are the requirements for becoming a trust advisor?

The PPA contains a set of guidelines that financial planners must meet before they can be considered for the position of trusted advisor. Employers must screen potential applicants according to the following criteria:

  • Regulatory and/or disciplinary history: Have prospective consultants participated in any previous legal or arbitration proceedings, or have there been any judgments against them?
  • Previous experience and customer satisfaction: Does the financial advisor’s trustee designate potential advisors currently have a thriving practice of a satisfied customer base? How long have the consultants been in the business, and what results have they produced?
  • Knowledge and/or professional level: Do potential consultants have the ability to provide professional advice to clients? Does the consultant specialize in areas that are particularly relevant to employees (for example, stock options, if the employer is a listed company)?
  • Personal or professional affiliation or relationship: If the consultant is involved in any other organization or business arrangement that may represent a potential conflict of interest, this information must be fully disclosed to the employer.
  • compensation: The employer must consider the compensation arrangements requested by the consultant. Will consultants charge hourly or yearly hiring fees, commissions, or a combination of the two? Is the compensation for all services the same? Can a trust consultant charge a fixed fee for providing retirement plan recommendations and then charge a commission for selling long-term care insurance to the same employee?
  • What services will the trust consultant provide for employees? Will the consultant provide simple retirement planning advice, or will it include comprehensive financial planning? Is it appropriate to provide employees with other financial products and services; things such as mortgage advice, income tax planning and preparation, and estate planning? If so, how will these services be charged and compensated? Will the employer pay for all services, or will some services be treated as an ancillary benefit paid by employees?

Once the trusted consultants are selected, they will accept an independent third party’s annual performance audit.

Employers are also required to conduct periodic internal reviews of trusted consultants to ensure that the consultant continues to comply with the initial standards that it met when it was hired. In fact, the PPA Act allows an exception to the Securities and Exchange Commission (SEC) rule, which prohibits advisors from using the client’s historical investment results in written documents or any type of advertising.

According to this provision, future trust consultants can outline in writing all the qualifications related to meeting the above criteria in order to provide employers with the necessary information to properly select candidates. This includes the past performance of client investments within certain guidelines.

The trust consultant is audited by a third party every year.

Trust Consultant: Advantages

For employers

There are many reasons why employers should consider hiring non-affiliated full-time trusted consultants.

  • First, no computer model or customer service department can match the level of service provided by on-site financial professionals. Computer models usually require a certain level of professional knowledge to correctly interpret financial data, and retirement plan customer service representatives usually can only provide employees with a range of recommendations. Therefore, the provision of trust consultants among employees will meet the employer’s trust requirements in a way that cannot be replicated.
  • Second, it may be dangerous for employees to rely solely on computer models to achieve satisfactory asset allocation. At this point, they do not have enough performance records to provide any true historical performance results.
  • Finally, having an independent consultant will ensure that employees will not turn to other places for advice due to possible conflicts of interest.

For employees

The advantages that employees can obtain from trusted advisors are mainly based on personalization. Employees will have a full-time financial planner who personally understands them and their personal circumstances, and considers their best interests when making recommendations. This level of personal service may also bring other benefits, as consultants can help employees in other areas such as budgeting, estate planning, or income tax.

For consultants

From a marketing and prospecting perspective, being hired as a trusted consultant can represent a huge windfall in the potential business. The time-consuming individual business exploration tasks can be replaced with a ready-made employee base that is exclusively accessed by trusted consultants.

As companies abandon traditional fixed-income plans in favor of fixed-contribution plans or other cheaper alternatives, such as stock option plans, the market will continue to grow rapidly. In addition, the mandatory automatic participation in the employer’s retirement plan will keep the consultant’s bureaucracy and paperwork to a minimum. The consultant is only responsible for the actual advice provided by the individual, not the overall plan assets and its overall performance.

Of course, the trusted advisor must meet the professional standards of prudence, loyalty and adequate asset diversification, and comply with all ERISA regulations. When making any suggestions, the best interests of the client must always be the first priority, although the potential benefits to the trusted advisor and/or employer can also be considered, as long as they are subject to the needs of the employees.

Bottom line

The prosperity of trust consultants may be coming, and the prosperity may be waiting for those who can meet the selection criteria for the position, and then take advantage of it.The possible market basis for trust advisors includes all 128 million households in the U.S.A considerable foundation that any standard can learn from. Financial planners who are looking for new ways to grow their business should investigate this possibility immediately.


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