Education Is No Longer a Best Practice, It’s A Requirement

You can undoubtedly expect to see more articles on the subject of Fiduciary Education in the months to come and do not be surprised to see the following Department of Labor (DOL) position on training as evidenced by the preamble quoted in those articles:

“In particular, Financial Institutions must ensure that Advisors are provided with information and training to fully understand all investment products being sold, and must similarly ensure that customers are fully advised of the risks.” 

While we await the DOL’s response to many questions, a plain reading of the statement above implies a new fiduciary standard of product expertise has been established that was not previously expected of advisors​. Although advisor success has historically been measured by who they know, it now appears that advisor success will be based on what they know especially​ if they intend to keep the revenue they have collected. As the old adage goes, “knowledge is power but applied knowledge brings success.” In the future, product knowledge is a fiduciary risk mitigation ​strategy designed defend a fiduciary advisor against plaintiff claims they did not understand the risks because of advisor incompetency.

More specifically, does the advisor fully understand the risk associated with the recommendation and has the advisor fully educated the investor of all risks so s/he can make an informed decision? Furthermore, is the advisor educated on the role a recommendation might fill under an ERISA standard of care?  In other words, the advisor not only needs to be educated about the products they recommend but also why the products recommended are prudent and meet the best interest standard of care.

With less than 7 months before April 10, 2017 effective date, product manufacturers are under the gun to provide the necessary product education to their distribution channels. Smart compliance officers will demand documentation to support a claim their advisor has been adequately trained on each product they sell before permitting an advisor to sell that product after April 10, 2017. I also foresee a compliance officer prohibiting any advisor from selling products without documented proof that they have been properly trained to mitigate litigation risk. Unfortunately, it is impossible for a product manufacturer to train all the advisors they have agreements with by April 10, 2017, if the education is delivered face to face. To reach all advisors that have or may sell manufacture’s products the product manufacturer must consider an online Learning Management System (LMS) as their deliverable.

In other words, a product manufacturer that trains advisors in their distribution channel using a web-based, on-demand, and gamified LMS has a much better chance of meeting the deadline. Training tracks should include multiple modules that are content-rich and that are no longer than 15 minutes per module including the competency test. Upon completing each module and successfully passing the test the advisor should be given a certificate of completion signed by the product manufacturer. Electronic access to the certificates should be provided to an advisor’s compliance officer.  Content must not only cover the product comprehensively, it must also address ERISA nuances, especially fiduciary duties. ERISA training should be provided by a law firm since plaintiff attorneys tend to hold training from the peers in higher regard than ERISA laypeople.

In short, training provided by an attorney on ERISA statutes, regulations, and judicial decisions is a strategy that maximizes risk mitigation.  However, product modules should be prepared by the product manufacturer to avoid liability for education that cannot be controlled by a party outside of the product manufacturer.

FRA PlanTools and Wagner Law Group have partnered together to provide a low-cost solution that can be provided for free to advisors if structured properly. To learn more about this solution visit For more information, contact David Witz at 704-564-0482 or

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