“I’d like to call the employee benefits “advisory” space another one of the most respectable professions in existence, but I can’t. Advisory is in quotes because that’s not really what it is. Many employee benefits consultants are brokers, a line of work that differs sharply from what it means to be a true advisor.”
OUT OF THE LAW FIRM, INTO THE ADVISORY WORLD
26 APR 2018
I didn’t go to school to be an advisor. Nor did I ever suppose I’d be immersed into the complicated world of employee benefits. In fact, for almost five years, I practiced law as a civil litigator at one of the most well-regarded law firms in Dallas, Texas. Despite enjoying where I worked and who I worked for, it was evident that my heart was not in litigation. Shortly after leaving the law firm, as I set out to start a new path, I received a phone call from John Harvey, the CEO of Wincline.
At the outset of our call, I could tell John was heated and frustrated with what he was experiencing as an employee benefits advisor. John explained to me that he started Wincline with the goal of changing the way employers purchase healthcare. Our industry is saturated with greed and inefficiency and John needed help fighting back, so he asked me to review, amongst other things, a few provider contracts and various articles detailing the waste in the U.S. healthcare industry. It’s safe to say that after completing the reading, I immediately called John back and asked him how soon I could move out to Phoenix and start. I knew at that moment where my heart was and it was in doing whatever I could to help fix this industry.
Despite the fact that there’s no attorney relationships to be had at Wincline, I do use my skills as an attorney from time to time. This includes reviewing and interpreting provider contracts, negotiating and drafting contract terms, ensuring that clients are compliant with all regulations governing ERISA benefit plans and researching new issues we face from day to day.
This expertise is not the only benefit my legal background confers upon me; it also gives me a wide perspective on how “advisory” (generally speaking) professions are regulated. Let me explain why this matters so much.
Attorneys are governed by rules of conduct and their state bar association. Among many other duties to their clients and their firm, they must doggedly avoid conflicts of interest and completely disclose their material conflicts if such conflicts cannot be avoided. Lawyers are strictly forbidden from representing a client if that representation may be limited by the lawyer’s responsibilities to another client or third party unless the lawyer reasonably believes the representation will not be adversely affected or s/he receives informed consent from the client after consultation. In short, attorneys must work for their clients and their clients only. They owe a fiduciary duty to their client, and must act in his or her best interest at all times.
Aside from avoiding legal repercussions, why is this so important? Why is it imperative for the legal profession to govern its practitioners with such a high code of conduct?
The first reason for its stringency is the apparent information asymmetry between a legal advisor and those seeking legal advice. Lawyers have had multiple years of intense study of their discipline; experience that a person seeking legal counsel does not have, which is precisely why they are seeking advice in the first place. The power imbalance must come with a proportional amount of responsibility from the professional. The words I uttered while operating as an attorney carried significant weight. Those whom I counseled entirely relied upon the accuracy and objectivity of my advice to make sound decisions and judgments of their legal situation.
The second reason involves the upholding of the institution of law. People must be able to reasonably believe that lawyers operate under a strictly defined code of conduct if they are to put faith into the legal system. American jurisprudence is only as strong as people’s trust in the judicial system. That trust is predicated, in large part, on how attorneys conduct themselves in their client relationships. Hence, why a lawyer in breach of his or her fiduciary duty can be disbarred. Intense self-regulation preserves the vitality of one of the most respectable professions in existence.
I’d like to call the employee benefits “advisory” space another one of the most respectable professions in existence, but I can’t. Advisory is in quotes because that’s not really what it is. Many employee benefits consultants are brokers, a line of work that differs sharply from what it means to be a true advisor.
An advisory relationship has many similarities to how legal relationships are governed. Both are fiduciary, and so the same conflicts of interest provisions apply, and the duty of loyalty and care apply as well. An advisor is someone you can trust to be on your side, financially and ethically, with the full backing of the law (ERISA). Like an attorney, an advisor cannot profit at your expense in any direct or indirect way. They must treat your assets and well-being as they would their own.
Contrast such peace of mind with the lack of loyalty and care that characterizes your relationship with an ordinary benefits broker (or as they so oftentimes falsely call themselves, “benefits advisors”). Aside from minimal statutory guidance, there are little to no Rules of Conduct or Ethics Provisions in place, no matter what they say. They are allowed to have conflicts of interest, and indeed conflicts are a key part of their business model, since healthcare and insurance-related costs rising for you means a higher commission for them. What kind of incentive is that? Brokers are not fiduciaries by any definition or legal precedent. Mistaking them for one can cost you big.
And mistake them people do. I have seen firsthand how much employers rely on the words of their benefits broker to make decisions that affect their employees’ benefit plans. They take brokers’ shoddy “advice” as words of wisdom because they know no better. And while you could point out that employers have a duty to be diligent and comprehensive in their approach to employee benefit plan management and should know better, the information asymmetry is too great. The industry knows this, doles out conflicted product sales talk, and passes it off as advice with little to no accountability to speak of. It’s not only wrong, but it diminishes the profession. It’s more than time for benefits brokers to acknowledge the far-reaching influence of their words and actions. America’s employers and employees deserve better.
Migrating from a legal career to an advisory firm surrounded by a brokerage world has had me scratching my head more than once. I assist companies in managing multi-million-dollar plans, but could only be held legally accountable for “gross negligence” if I operated as a broker, which is the mere lack of proper diligence or care (a far cry from the severity of a breach of fiduciary duty). This is especially so with no contract in place, which is how brokers are hired.
I call myself an employee benefits advisor for good reason. I was drawn to the advisory world because my professional life has its foundations in a fiduciary duty of care and loyalty to the people I serve. The advice I give to people who solicit it matters. It matters more than the employee benefits broker community will admit. It matters precisely because employers make decisions based almost wholly on the advice employee benefits professionals give to them, and these decisions in turn affect the livelihoods of innumerable employees.
That’s why I’m proud to call Wincline my home.