DOL Fiduciary Rule – Violation Charges – Proof the DOL Rule is “Live”

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As recently stated in the news, “Massachusetts charged Scottrade with dishonest and unethical conduct and failure to supervise, in what is the first known enforcement action under the Department of Labor’s revised fiduciary rule.”[1]

Essentially this was the result of their running two sales contests between June and September 2017.[2]

“The Massachusetts complaint asserts that the Scottrade sales contests encouraged their brokers to put their own interests — winning $285,000 in cash prizes for attaining new assets — ahead of their clients’ interests in building their nest eggs. The complaint seeks an order forcing Scottrade to cease and desist, as well as censuring the firm, requiring it to disgorge ill-gotten profits and imposing a fine.”[3]

DOL officials had previously stated they would not pursue claims against “fiduciaries working diligently and in good faith to comply.”[4]

One would assume, among other allegations, that Massachusetts does not believe that Scottrade was “working diligently and in good faith to comply.”

Massachusetts Secretary of the Commonwealth, William Galvin, further stated, “If the Department of Labor will not enforce its own laws and rules, then the states must do what they can to protect retirees from firms who believe they can play with peoples’ life savings by conducting sophomoric (sales) contests.”[5]

Other States are expected to follow the Massachusetts lead.[6]

Many believe that any (and all) sales contests or sales incentives create a conflict of interest and negate a firm’s ability to comply with the best-interest standard.  The Director of Investor Protection and the Consumer Federation of America said the case “perfectly illustrates the kind of practices that go on behind the scenes at firms that claim to be complying with a best-interest standard.”[7]

No doubt this is a shock to many advisors and institutions, as I’m sure Scottrade was not alone in running sales contests in 2017-18.  Unfortunately, many professionals have been under the false belief that the DOL Fiduciary Rule was delayed in its entirety, rather than only partially, as is the case.

For more information click & refer to these previous Advisor Skinny posts…

That’s the Skinny,

    1. February 15, 2018, Financial Planning, “Scottrade charged with fiduciary violations in rebuke to Trump administration.”
    2. February 15, 2018, Investment News, “Galvin charges Scottrade with DOL fiduciary rule violations.”
    3. February 15, 2018, Investment News, “Galvin charges Scottrade with DOL fiduciary rule violations.”
    4. February 15, 2018, Financial Planning, “Scottrade charged with fiduciary violations in rebuke to Trump administration.”
    5. February 15, 2018, Financial Planning, “Scottrade charged with fiduciary violations in rebuke to Trump administration.”
    6. February 21, 2018, Investment News, “Maryland jumps into fiduciary fray with legislation requiring brokers to act in best interests of clients.”
    7. February 15, 2018, Investment News, “Galvin charges Scottrade with DOL fiduciary rule violations.”

Everyone on Staff is in Sales (whether they realize it or not)

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I’ve been saying for years, “anything you ever do to earn income requires selling.”

There are obvious direct sales roles, but even the “best” of those have been re-positioned as “consultative selling” by today’s standards.  Financial advisors may now be the best example of the consultative (and fiduciary) approach to building business (aka, selling), with attorneys, accountants and consultants in that same category.

Beyond that, no matter what the role someone plays on staff, sales skills are “still” required – even if you don’t think of them that way.  Imagine a receptionist (the voice of your company), or customer service rep (CSR) dealing with both happy and disgruntled customers.  Every situation you can imagine requires some sales skills:

  1. Helping a customer make a decision or choice of any kind.
  2. Handling a difficult conversation and/or delivering bad news.
  3. Getting along with co-workers.
  4. Solving problems and creating solutions of any kind.
  5. Project management and/or new initiatives.
  6. Thinking creatively.
  7. Interviewing for a job.

Simply put, revenue dries up and the world stops spinning without sales.  My dad used to always say to me, “nothing happens until someone sells something.”  But the trick is, people don’t actually want to be “sold.” However, they love to “buy” and they very much appreciate sincere assistance and trusted guidance in every situation along the way.

Quote - Jay Abraham

My point for sharing this today is simply that I read the blog re-posted below from Seth Godin (best-selling business author) and felt it was one of the better ones I’ve seen that describes the subtleties and broad scope for all that includes sales…

Enjoy & and may I suggest, contemplate:

“I’m not selling anything” (from Seth Godin)

Of course you are. You’re selling connection or forward motion. You’re selling a new way of thinking, a better place to work, a chance to make a difference. Or perhaps you’re selling possibility, generosity or sheer hard work.

It might be that the selling you’re doing costs time and effort, not money, but if you’re trying to make change happen, then you’re selling something.

If you’re not trying to make things better, why are you here?

So sure, you’re selling something.

Perhaps it would be more accurate to say, “I’m not selling something too aggressively, invading your space, stealing your attention and pushing you to do something that doesn’t match your goals.”

That’s probably true. At least I hope it is.

(But if you are any good at all, you are always selling something, especially through infectious enthusiasm for what you do.)

That’s the Skinny,

Creating the Most Value in Your Practice

Here’s the Skinny…

The first quarter of any given year is probably the time that most financial advisors visit strategic planning topics  – such as , “How do I get the most value out of my business and/or create the most value in my business?”

Historically, I’ve consulted many advisors regarding the flip-flopped order for the “Top 4 Targets” regarding positioning your practice for clients vs. positioning your practice for market valuation.

Interestingly, I believe the Top 4 Targets are identical in both scenarios (or from both viewpoints – customer vs. buyer), however the order is changed.  


The reality is that systems, sustainability, and profits can be hard to assess separately as they can be so intertwined in their functionality.  The main point is that clients are specifically looking for your expertise, while potential buyers know that you will be exiting the business (at some point after they buy it from you) so they are much more concerned with the repeat-ability and duplication of your systems, sustainability and profits.

For a 5-minute deep-dive discussion on how to structure your practice for success, watch Positioning for Clients vs. Positioning for Market Valuation

One of the strongest contributors to systems, sustainability and profits is the overall percentage of recurring revenue from AUM that you receive within your practice (in comparison to non-recurring revenue from commissions).  In fact, the Succession Resource Group has published a 15-page report titled, “Your Guide to Increase the Value of Your Business”.  Specifically, when it comes to revenue they state…

“The recurring revenue currently receiving the largest premiums (from business buyers) are 3rd-party managed assets due to their recurring nature and ability to scale…” 

They go on to publish a chart that illustrates the Industry Average Valuation for Transactional Revenue (i.e., commissions) is a factor 1.0 X Revenue.  Whereas, the Industry Average Valuation for Recurring Revenue (i.e., AUM fee revenue) is a factor of 2.60 X Revenue.

Source:  Succession Resource Group

Obviously, that represents a 160% “premium or advantage” for AUM recurring revenue over commission non-recurring revenue.  And they also argue that 3rd-party AUM is valued higher than other form of AUM.


Well, think about it as if you are a buyer and then it makes perfect sense…

If you are buying a practice chock-full of 3rd-Party AUM, you can hit the ground running, not miss a beat, and have potentially endless scalability.  You can continue with the systems that are already in place to gather assets with no worries about having to “climb inside the brain” of a self-managing advisor.

On the other hand, if the selling advisor is self-managing the money, how exactly is the buyer to duplicate that thought process and execution once the seller leaves?  And furthermore, how are they to gain scalability whereas the more assets they gather, the more workload, complexity and liability they create for themselves as the money management component escalates, and by default puts strain on the ability to gather new assets?

Additionally, the “business risk” associated with those assets skyrockets in a self-managing practice.  Meaning, if the customer is unhappy with the money management performance, they have no choice but to leave the practice.  Whereas, an advisor “managing the relationships” rather than “managing the money,” can easily pivot to another money manager that more closely aligns with the investor’s needs or desires.

Simply put, buyers are not looking to purchase a job…  They are looking to purchase a business!

Utilization of 3rd -party money managers enhances your practice in ways that commission and self-managed models cannot.

That’s the Skinny,

Moonshots in Business: Your Tool for 10X Growth!

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Business adopted the “moonshot concept” from President John F. Kennedy, after the speech he delivered before a joint session of Congress on May 25, 1961, where he stated, “I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the earth.”[1]

On July 20, 1969, Neil Armstrong and Buzz Aldrin became the first men to walk on the moon.[2]

Thus, the “moonshot” was born.

Some have incorrectly categorized business oriented moonshots as being outlandish ideas that have little or no founding in reality, but this is not the case. President Kennedy didn’t make this challenge on a whim.  The idea was researched, feasibility assessments were made, and then an educated challenge was proposed.  There was no guarantee of success, but that does not mean that the idea was something he snatched from an old episode of Flash Gordon.  (Too young to recognize that reference?  Google it and you’ll understand.)

What many forget is that earlier in that very same speech, President Kennedy stated, “With the advice of the Vice President, who is Chairman of the National Space Council, we have examined where we are strong and where we are not, where we may succeed and where we may not. Now it is time to take longer strides – time for a great new American enterprise – time for this nation to take a clearly leading role in space achievement, which in many ways may hold the key to our future on earth.”[3]

What defines a moonshot in business?

While there is no official formal business description, I define a moonshot as…

  • Undertaking an initiative so unique that it could/would change the trajectory of your business;
  • Attacking problems/challenges so magnificent in size and scope that it both scares and excites you;
  • Requiring radical thinking to fuel giant leaps forward (10x growth vs. 10% growth).

The Harvard Business Review describes a good moonshot as having three key ingredients:[4]

  1. It inspires (it’s not a routine goal like trying to increase sales by 13%).
  2. It is credible (as I mention above, it is not ridiculous, but is founded in reality).
  3. It is imaginative (it’s not the next logical step, but is a meaningful leap).

I contend that most great businesses are riddled with moonshots even if they have gone unrecognized by outsiders.

In fact, I think that in certain world-class companies, moonshots become commonplace (or even expected) as they are embedded into the normal culture of the company.  In our case (USA Financial), I would describe our moonshots as being key “turning points” or “giant leaps forward” that pinpoint our past and shape our future.  Essentially, they become the major milestones in our historical corporate timeline.  Here’s a look back over our 30-year history as example:

  • 1988 Distribution – We launched the firm as an Independent Insurance & Annuity Distributor before any such niche existed.
  • 1992 Practice Management – First developed entrepreneurial training and educational systems to advance advisors’ practices including industry qualified continued education credits.
  • 1995 OSJ – Upon recognizing 96 of our top 100 relationships were with securities reps, we became the largest Office of Supervisory Jurisdiction with two consecutive broker dealers inside of 36 months.
  • 1998 Broker Dealer – We executed our 5 year “OSJ to BD strategic growth conversion plan” two years ahead of schedule.
  • 2001 Fill the Room – Pioneered a marketing service model to fill client events nationally on behalf of local advisors, growing into numerous turnkey “Plug-n-Run” multi-media offerings.
  • 2001 Registered Investment Advisor (RIA) – Predicting the trend toward assets under management, we structured a corporate RIA in support of advisors converting their practice to this “new” model.
  • 2002 UIT – Began investment product research & development applying risk management models to the structural chassis of Unit Investment Trusts (UIT) as we designed product for two different administrators.
  • 2007 Money Management – Our investment product “development” led to our becoming an investment product “manufacturer” via our patented formulaic trending approach to risk & money management.
  • 2008 Tech Company – Crafted our first piece of proprietary financial industry technology, launching and converting our overall cultural mindset to our being “a technology company in the financial services space.”
  • 2012 Syndicated Radio – Subsequent to a previous multi-year local radio show, we restructured and relaunched as a nationally syndicated radio show promoting the consumer value of local independent advisor representation.
  • 2016 TAMP – Designed a highly flexible and benefit-rich turnkey asset management program and platform to streamline and simplify account custody and management for both advisors and investors.

That looks like a lot of success – and it is…  But keep in mind, moonshots, by definition, may include equally explosive failures.  And this is crucial to your understanding moonshots.  A moonshot failure may be even more important than success!  Therefore, it must be okay to fail (as long as proper strategy and effort was applied) as today’s failure often leads to tomorrow’s breakthrough and/or strategic byproduct.  It can truly be said that failure leads to the next-bigger-better moonshot.

For example, two failures directly led to two of our absolutely greatest moonshot successes:

  1. Between 1992 and 2001 we were coaching and mentoring financial advisors all across the country on how to run large, extreme, PR oriented prospecting events.  However, few advisors had expertise or resources to execute the concept from A-Z on their own, so we were being run ragged making appearances all across the continental U.S. in support of advisors nationwide.  We were failing and sinking fast.  Finally, we recognized the need to reboot our entire way of thinking.  After a complete scraping and retooling, we introduced the Fill-the-Room System, which has arguably placed more investor clientele in front of qualified advisors since year 2001 than any other program in the industry (25,000 RSVPs last year alone).
  2. From 2011 through 2013 we undertook a complete corporate re-branding for all of our subsidiaries.  The concept was strategically sound and well-meaning as we tried to separate our investor-oriented branding from our advisor-oriented branding.  Specifically, we were trying to further support our advisors in a rapidly escalating online and social media world.  The whole thing blew up in our face.  We lost traction in the industry.  We created mass confusion.  People literally thought we went out of business.  It was disastrous.  We pulled the plug, stole a page form the historic “New Coke vs. Classic Coke debacle” and did a 180 degree re-branding back to a singular and cohesive USA Financial brand across all subsidiaries while making fun of ourselves at every chance along the way.  We even created a comical video positioning ourselves as the butt of the joke.  It spread like wildfire, worked brilliantly, helped set the stage for our syndicated radio show – and laid the groundwork for our current marketplace positioning that has proven crucial for our TAMP launch in 2016.

Every time I speak with entrepreneurs about failed moonshots, it seems they always point to the power of what was learned, along with phoenix-like stories of how even greater success has risen from the ashes within subsequent moonshots.

Moonshots may be one of your most powerful tools in business.  Who’d have known?

That’s the Skinny,

  1. May 24, 2004, under NASA History, “Excerpt from the ‘Special Message to Congress on Urgent National Needs'”
  3. May 24, 2004, under NASA History, “Excerpt from the ‘Special Message to Congress on Urgent National Needs'”
  4. May 14, 2013, Harvard Business Review, “What a Good Moonshot is Really For”

FIA Insurance Companies have begun Auditing for PTE 84-24

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If you are not operating under BICE, you better have a PTE 843-24 document signed by clients and in your files for all FIA sales!

At least three of the largest FIA Carriers (Fixed Index Annuity Carriers) have announced that beginning January 2018, they will be conducting random audits and/or random app requests in order to verify that agents/advisors are properly disclosing and collecting client signatures on their PTE 84-24 disclosure forms.

The carriers include (but are not limited to):

  • Allianz Life
  • American Equity
  • Athene USA

Last year I wrote in detail regarding the conundrum for advisors between BICE and PTE 84-24.  As I shared at the time, if your BD and/or Corporate RIA do not extend BICE coverage to you (and most do not) on FIA transactions, then you must adhere to PTE 84-24 on all your FIA transactions.

As I stated in that previous Advisor Skinny blog post

“Under the transitional PTE 84-24, the agents/advisors must disclose conflicts of interest plus the sales commission, expressed as a percentage of gross annual premium payments for the first year and for each of the succeeding renewal years, that will be paid to the agent in connection with the purchase of the product. Documentation must be provided to and signed by the client and retained by the agent/advisor for 6 years (meaning written disclosure and client signature is required).”

For additional commentary on this subject, click here and refer to the full Advisor Skinny blog post titled,  “Did You Get Abandoned (to Fend for Yourself) on DOL PTE 84-24?”

Again, if you are not afforded BICE coverage, make sure your files are in order and signatures are being obtained under PTE 84-24.

That’s the Skinny,

The Inside-Scoop on USA Financial for 2018 (and Beyond)

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For your curiosity and in the spirit of transparency, I just shared a recent announcement, “The Inside-Scoop on USA Financial for 2018 (and Beyond),” that was sent to all of our affiliated advisors. It’s a bit of a state-of-the-company address that I do each year:

“Long ago, economic security was simply a function of a company’s SIZE and AGE, whereas now economic security is a function of a firm’s continued GROWTH and AGILITY.

The quote above is something I originally said a few years back, but have restated to our team and others numerous times since. Ironically, even though we strategize as a growing, agile organization, I’m proud that we can lay-claim to achieving high-grades in each of those four categories:

  1. SIZE – Our overall custody is over $3.5 billion with three-quarters of a billion in annual sales.
  2. AGE – This year, we will celebrate our 30th year in business.
  3. GROWTH – In 2017, we were named to the Inc. 5000 list for the fourth year in a row. This is an annual list of the fastest-growing private companies in the United States.
  4. AGILITY – Early 2017 “took-off” with USA Financial Exchange making a splash as a turnkey asset management program (TAMP) with industry leading features. USA Financial Securities then “officially became more RIA than BD,” as fee revenues surpassed commission revenues for the first time. Finally, at the end of 2017, we quietly launched USA Financial Consulting in response to and in support of IARs, Hybrid RIAs, and Stand-Alone RIAs assessing and implementing compliance, transition, and registration opportunities.

I go in to more detail in the full announcement that can be accessed here: “The Inside-Scoop on USA Financial for 2018 (and Beyond).”


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How Just 20 People Can Redefine Your Practice

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Can you name the 20 most influential and important people in your practice right now?

I’m not referring to your 20 largest clients (although many could not list them either).  Some may be in your largest client grouping, but others may not even be customers of your firm – while you let that sink in, I’ll tell you a story about one of the influencers of USA Financial.

We started a partnership with this company in 2005. Over the years we have gotten to know each other better as business partners and have grown relationships with key individuals within each of our firms. This past year, they started introducing us to several wonderful potential clients. Now, this isn’t something we asked for, it’s not part of our business agreement and they aren’t directly compensated for sending someone our way. So why send us referrals? Because they know our business and trust us enough to stake their reputation on the experience someone will have when interacting with USA Financial. It’s easily the best compliment to receive and you can bet that they are included in our firm’s top 20.

Investing in these people, hyper-focusing the majority of your time resources and energy, can be like adding fertilizer to a perennial chunk of fertile soil capable of generating bumper crop after bumper crop if just given a bit of tender loving care.

I dive into greater detail on this topic and the secrets of these 20 influencers HERE (free 6 ½ minute video: Top 20 Mavens).

For those of you already affiliated with USA Financial, you can find this video on the dashboard in the Coaching and Consulting section (video # 18).

That’s the Skinny,


A New Stock Market Era has Begun (actually its already 5 years old)… Yet Almost Everyone Missed It

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The popular 1st Quarter 2018 USA Financial Trending Report has been released along with the January 2018 USA Financial Trend Tracker.

Here’s an except from the report…

On January 4, 2018, the Dow Jones Industrial Average (DJIA) closed above 25,000. Just eight trading days later, on January 17, 2018, the DJIA closed above 26,000, sprinting through the fastest 1000-point growth milestone ever. Many may remember years ago when I first introduced the stark visual differences of “your father’s stock market” (1980-1999) in contrast to “your stock market” (2000-2012).

The visual distinction for the S&P 500 for the 20 years of 1980-1999 compared to the 13 years of 2000-2012 is shocking. In fact, in my opinion, it changed everything. It ushered in the age of risk-management as king, unseating passive buy and hold investing as the logical approach. However, we are now dealing with a whole new era that began in 2013. (Note: I consider 2012/13 as the transition point for the next era, as 2013 was the year the market surpassed its previous highs, finally recapturing gains from both 2000 and 2007).

Once again, we see a very distinct contrast from the previous era, even with the performance flatness from late 2014 to early 2016. If we string all three eras together on a single chart, you can quite literally see and feel the “tone” of the market change as we progress through time (the RED vertical lines separate the eras).


Continue reading the 1st Quarter 2018 USA Financial Trending Report.

See the most recent  trending updates and the accompanying explanatory video.  

That’s the Skinny,

Year-End + Sweeping Tax Changes = Donor-Advised Funds Surge

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It’s tough to beat the simplicity, convenience and benefit of a donor-advised fund – and as you may already know, USA Financial Portformulas enjoys a money management relationship with the National Christian Foundation in order to make things even easier for you and your clients. Other options include Fidelity, Schwab, Vanguard, etc.

If your clients already have a donor-advised fund, it’s time to get those year-end tax-planning contributions submitted. If not, you still have time so set up accounts before year-end, but you better hurry.

Simply put, a donor-advised fund allows an investor/donor to make a contribution today, getting the deduction immediately, even though they may not grant the money to a charity (of their choice) until some entirely flexible future date (instantaneously and/or years from now). Really, it’s that easy. Plus, you can use it as a repository to collect and consolidate 100% of your charitable donations in one convenient reporting mechanism (which is a side benefit I love).

Here are three timely resources providing additional information:

Click below for the National Christian Foundation.



Click below for USA Financial Portformulas.

Click below for an Investment News article titled, “Interest in donor-advised funds surges in response to tax changes.”



The clock is ticking. Don’t let 2017 slip away before locking in your year-end contributions and tax deductions.

Merry Christmas & Happy New Year!

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DOL Rule Delay – What to Believe & NOT Believe!?!

Image result for department of labor logo

Here’s the Skinny…

Many a false preacher exists when it comes to explaining the DOL Fiduciary Rule delay and its latest requirements. Depending upon the information source (and their economic interest), we’ve unfortunately seen vastly incorrect (and potentially dangerous) explanations being distributed as if they were factual.

Following and/or listening to (or running your business according to) such bad information as if it’s gospel could ultimately devastate you and your organization. It’s important you get it right as the delay is now extended until July 1, 2019 … meaning, you must operate accordingly and by the rules between now and then.

Click here for two complimentary documents:

You can count on the accuracy of these resources as they’ve been prepped and reviewed by attorneys working in the securities and asset management world.


That’s the Skinny,