Leveraging the DOL Rule to Prospect Millennials and Boomers

The U.S. Department of Labor’s new fiduciary rule provides credible financial advisors an immediate opportunity to differentiate themselves from competition when prospecting new clients. Trust and confidence are important considerations as investors choose a financial planner, and an advisor's ability to easily articulate the ways in which he or she abides by the standards of fiduciary care can help establish that trust early in the prospecting process. But authentically articulating these points in a way that breeds rapport and trust requires a deep understanding of what they mean and how they should be applied to advisory activities.

Let’s quickly revisit the five pillars of your fiduciary duties as defined by ERISA, pillars that should ideally underlie every move you make as a financial advisor, especially in a post-DOL rule environment:

1. Loyalty: You must act in the sole interest of plan participants and beneficiaries
2. Documentation: The investment policy statement and benefit plan must be in writing
3. Prudence: First recall the dictionary definition of prudent: “acting with or showing care and thought for the future.” And with that in mind, here’s the word interpreted as a fiduciary duty:
   • Your actions must be executed “with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character with like aims.”
4. Diversification: Investments must be diversified to minimize loss risk
5. Reasonable Plan Expenses: You need to create a process that ascertains if fees and expenses are reasonable.  

It’s likely your business-building and prospecting efforts involve targeting two massive U.S. population segments — millennials and baby boomers. As of 2015 census data, there are 83.1 million millennials and 75.4 million boomers living in America. With a total population of approximately 322 million, baby boomers and those born between 1983 and 2000 account for almost 50 percent of the population. If you’re not actively prospecting members of these groups, you may be missing out on a tremendous opportunity.

According to data from a 2015 GoBankingRates report, the biggest financial challenge of baby boomers and seniors is planning for retirement, while the biggest financial challenge of millennials is paying for college and sticking to a budget. The biggest worry across all age groups and income levels was individuals’ fear of living paycheck to paycheck and being in debt for the rest of their lives. Fear and worry are a common pain point felt by the people you’re trying to help. Choosing a financial advisor to help alleviate and manage this fear is a monumental decision for many investors. Openly discussing how your duties as their fiduciary will help make them successful and protect them from misfortune is a conversation that can quickly set you apart from advisors taking more aggressive, less transparent, or product focused approaches. 

Beyond transparency and proactively addressing the ways your fiduciary responsibilities will benefit them, here are three steps you can take to:

• Ensure productive prospecting conversations
• Maximize potential for closing new clients
• Solidify your credibility as a competent fiduciary

Step One: Uncover Prospects’ Concerns

Before having a conversation about financial solutions or retirement income planning strategies it’s important to have a comprehensive understanding of a prospect’s needs and concerns. Generally speaking, millennials are more concerned with tackling their student loan and other debts, while baby boomers are honing in on retirement planning. According to 2015 data from GOBankingRates, the top four financial concerns of boomers and millennials are:

Baby boomers:

• Paying for health care
• Maintaining an income stream
• Saving enough money
• Claiming Social Security at the right time

Millennials:

• Living paycheck to paycheck
• Being in debt forever
• Never being able to retire
• Not being able to afford a home

Advisors abiding by a true fiduciary standard of care, even in the earliest stage of a relationship, should take an active interest in understanding the prospect’s motivators and needs. Ideally, these will form the foundation of any financial advice or decisions made once the advisor-client relationship is forged.

Step Two: Recommend a Custom Solution

A qualified fiduciary can customize recommendations targeted to address the prospect’s present and future needs. Simply uncovering these needs and talking about them isn’t enough.  Advisors must know how to translate needs into a strong financial plan. However, a recent study conducted by The American College of Financial Services Cary M. Maguire Center for Ethics in Financial Services found this is the exact type of knowledge lacking in the industry. Of the financial advisors surveyed, 71 percent worried that other financial service professionals lacked the knowledge to properly utilize Social Security claiming strategies for their clients, and 88 percent of advisors were concerned about their clients’ ability to understand their retirement income plans.

It’s fair to assume that prospective clients want peace of mind. They want to be financially successful. They want to avoid financial mistakes and misfortune. The DOL rule prioritizes the highest standard of care when providing investment advice and this requires a comprehensive understanding of financial planning solutions. Advisors who wish to most effectively build their client base, grow assets under management and offer sound, DOL rule-compliant advice can gain this holistic expertise with financial designations like a Chartered Financial Consultant® (ChFC®) or the Retirement Income Certified Professional® (RICP®) from The American College of Financial Services.   

Advanced financial designations enable advisors to increase their knowledge of investment products and solutions, and educate prospects about the best ways to achieve goals while avoiding financial pitfalls.

Step Three: Combat Mistrust and Skepticism

Millennials are going to be the largest population segment by the end of this decade. That fact holds much power and opportunity for advisors who know how to effectively convert millennials as new clients. Consulting firm Deloitte found that millennials do not typically trust financial advisors and wealth managers, a sentiment detrimental to successful prospecting efforts. One way to offset and change this negative perspective is through transparency, especially in regards to compensation and fees, an activity explicitly required by the new DOL rule. One way to avoid feelings of hesitancy or fear in prospecting conversations is by speaking candidly about product fees, service fees, the reasoning for recommending one product or strategy versus another, and your advisory fees.

In addition to transparency, remember that often the way something is said matters just as much as what is said. Research shows that advisors can benefit by using positive language, and highlighting realistic situational possibilities in a way not intended to scare or concern. Rather than employing fear-based tactics that address potential negative outcomes or circumstances, framing conversations around protection, potential and optimism builds trust with prospects.

Addressing and preparing for “what-ifs” is an important part of providing the highest standard of fiduciary care, but investors are emotional beings and inducing negative emotions during prospecting conversations may backfire.

Become a trusted retirement income expert with valuable insight about the new DOL rule. Check out our fact sheet, "5 Things You Didn't Know About the DOL Conflict of Interest Rule But Should."