Dos and Don’ts of Seminar Selling Under DOL Rule

Agents who have long relied on free seminars and steak dinners to educate prospective clients will have to tread lightly once the Department of Labor fiduciary rules take effect.

The rules impose a fiduciary standard of care on financial advisors dealing with retirement accounts. The DOL says the rules are needed to better protect neophyte investors from product complexities and hidden fees.

Most of the concern and study over the past year has focused on the impact of the DOL rule on agent compensation. DOL officials say rampant conflicts exist when advisors and agents are paid higher commissions to recommend certain products.

Lesser attention is being paid to how the rules will affect the definitions of “education” and “advice.” Where lines were blurred in the past, they will now be more black and white. Or at least the new path to litigation will make it seem that way.

Kim O’Brien, vice chairman and CEO of Americans for Annuity Protection, recently hosted a webinar to discuss how the new rules impact traditional sales practices.

Panelist Cailie A. Currin, president and owner of Currin Compliance Services, said agents should pay no attention to the January 2018 deadline for full compliance. That is largely for the systems and recordkeeping components.

The initial April 10, 2017, date is the only deadline agents need to focus on, Currin explained. From that date on, product sales must comply with new rules. And that date is just six months away.

“There isn’t a lot that can be just delayed,” Currin said. “We really need to be looking at compliance now. We need to be planning for full compliance and not focusing too much on the Jan. 1, 2018 date and really keeping a laser focus on that April 10, 2017 date.”

Affects All Messaging

The new rules affect nearly everything from marketing tools to seminars to social media, panelists said. What constitutes “education” is the main sticking point.

Department officials claim they want to preserve education and address the topic extensively in the rule. But there is a gray area between “education” and “general communications.”

“General communications that a reasonable person would not view as an investment recommendation … would not constitute communications that are considered recommendations,” the DOL said in a fact sheet accompanying the rule.

Some examples include newsletters, talk shows, speeches, marketing materials and other items. Panelists urge agents to err on the side of caution. The rule opens the door for investors to sue the sponsoring financial institution, and the trickle-down affect threatens agents as well.

“What’s important to remember about, even if you’re having a newsletter or a talk show, it can very quickly start to become personalized,” said Glenda Bean, education program director for Currin Compliance Services. “Really think through how you are using personalization. How is your content appearing to somebody throughout the entire process?”

The key is whether somebody listening will interpret your words as a call to action, Bean said. Keep conversations general, she advised.

“That way you’re in control of if and when you become a fiduciary, when and if you make that recommendation,” she added.

Talk About You!

The best default strategy for staying out of the fiduciary web when talking products and investing is to focus inward, Currin said.

“When you keep the information about yourself, your practice, your services, that’s going to keep you safe as much as you can,” she said. “You want to think about whether anything you’re saying is crossing the line and making the listener, the recipient of that message, think you’re speaking directly to them.”

The private right of action contained in the DOL rule allows investors to file class-action lawsuits. Uncertainty and lack of preparation for those seminars and dinners could quickly get agents in trouble if someone in the audience is looking for a lawsuit opportunity, Currin said.

“It makes it really easy for somebody to go out, start going to those presentations, listening to what’s being said, and to make the argument that some of them, certainly not all of them, but that some statements might cross that line and might be advice,” she cautioned.

The emphasis on caution does not mean agents can’t host seminars meant to showcase a particular product or products, the panel agreed.

But it’s important to remember to pay attention to what a reasonable person would think hearing that information, Currin said.

“Would they think ‘I’ve got to buy an indexed annuity. It’s the only product that’s going to meet all my needs?’ That may or may not be accurate,” she said. “It probably is accurate for some and it’s not going to be accurate for others.

“So the statements need to be clear what they’re talking about, to whom they’re talking about and we have to be thinking about what would a reasonable person hearing those statements think?”

The same rules apply for social media. Studies show more and more agents are discovering the potential customer that exists in cyberspace. But problems can arise when interaction takes place and you hit send on a message that looks too much like a recommendation.

The new rules mean agents need a new emphasis on how they present their products. The better prepared one is, the less likely he or she is to stumble once rules take effect, the panel said.

“You have to watch out what you’re saying because you don’t want to cross that line into giving that person investment advice that would fall under this rule,” Currin said.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].

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