Having previously written about how advisers can use the “hire me” approach to explain their services and fees without becoming a fiduciary, ERISA attorney Fred Reish outlines some clarifications on the concept.
Reish notes that recently he has seen confusion about the extent and scope of the “hire me” concept when advisers use it to explain their services and fees without becoming a fiduciary, as long as the adviser doesn’t discuss specific products or platforms. Specifically, in a recent blog post, Reish explains that this is because people want to extend “hire me” to all kinds of scenarios, and thereby limit their fiduciary status and legal exposure.
Reish cites a recent example where he was asked if an adviser could tell an IRA owner that the adviser would charge 1% per year to help select, manage and monitor individual variable annuities. He notes that that approach might work if the IRA owner initially told the adviser that he wanted to hire someone to search for individual variable annuities. However, if the “suggestion” that an individual variable annuity would be appropriate comes from the adviser, that would likely result in fiduciary status for identifying the particular type of investment to be made (and, therefore, cause the loss of the non-fiduciary “hire me” approach), he explains.
Reish offers a word of caution: “…if you intend to use ‘hire me’ to market your services, keep in mind that it is to describe your services and fees, but without a suggestion that any particular product, investment or platform, be used by the IRA owner.”
From the preamble to the fiduciary regulation:
“An adviser can recommend that a retirement investor enter into an advisory relationship with the adviser without acting as a fiduciary. But when the adviser recommends, for example, that the investor pull money out of a plan or invest in a particular fund, that advice is given in a fiduciary capacity even if part of a presentation in which the adviser is also recommending that the person enter into an advisory relationship. The adviser also could not recommend that a plan participant roll money out of a plan into investments that generate a fee for the adviser, but leave the participant in a worse position than if he had left the money in the plan. Thus, when a recommendation to ‘‘hire me’’ effectively includes a recommendation on how to invest or manage plan or IRA assets (e.g., whether to roll assets into an IRA or plan or how to invest assets if rolled over), that recommendation would need to be evaluated separately under the provisions in the final rule.”
