CFP Board 2022 Chair Kamila Elliott, CFP® Testifies at DOL Hearing on Retirement Security Rule

CFP Board 2022 Chair Kamila Elliott, CFP® on December 13, 2023, testified in her personal capacity in support of the U.S. Department of Labor’s (DOL’s) retirement security rule, stating the following: “Some have argued that financial advisors cannot serve moderate-income individuals if they are required to provide advice that is in those individuals’ best interests. That is not our experience at Collective Wealth Partners, where moderate-income people are the bulk of our client base. DOL wants to require financial professionals to act in their clients’ best interests when providing retirement investment advice. This won’t cause firms to abandon moderate-income clients. My firm isn’t the only firm that serves these clients; there are firms all over America serving retirement savers of more modest means with best interest advice.”

Elliott’s full testimony is as follows:

“Thank you for the opportunity to talk about my experience working with retirement savers and how important this proposed rule is to all Americans.

My name is Kamila Elliott. I served as the 2022 Chair of CFP Board. I was the first African American Chair and one of the youngest people to ever serve in this role. I spent the earlier part of my professional career at Vanguard working with ultra-high net worth individuals, endowments and foundations. I now am the founder and CEO of the financial planning firm Collective Wealth Partners. We are a majority women- and Black-owned Registered Investment Adviser firm headquartered in Atlanta, Georgia. We provide holistic financial planning advice primarily to resilient communities. The term resilient communities may be new to you, as this is usually stated as underserved communities. Underserved has a negative connotation to it. Yes, it is true that these communities have barriers to accessing competent and ethical financial planning. However, these are communities working to increase their financial literacy and net worth, and to close the racial wealth gap. Regardless of these impediments, they are resilient and are investing more in stocks, and slowly closing the racial wealth gap. All our advisors are CERTIFIED FINANCIAL PLANNER^TM professionals who provide fiduciary advice to our clients — that is, financial advice in their clients’ best interests.

Some have argued that financial advisors cannot serve moderate-income individuals if they are required to provide advice that is in those individuals’ best interests. That is not our experience at Collective Wealth Partners, where moderate-income people are the bulk of our client base. We charge fees for individual, household or business financial planning, which can be charged as a fixed fee or on an hourly basis, whichever works best for the client. We establish fees based on the complexity of the client’s financial situation and help with implementation of our recommendations and a time frame for ongoing monitoring. We charge an assets under management fee if we’re managing a client’s financial assets. To allow us to best serve our clients, particularly moderate-income families, we have no minimum asset requirement for investment management services, and we consolidate household assets under management to provide our clients with the best value for our services. Using this flexible compensation arrangement, we can work with a client to provide them with what they need at a price they can afford. This is how we meet our clients’ financial needs across the income spectrum.

We educate our clients in an easy-to-understand manner so they can understand personal financial advice and use those concepts to pursue their financial objectives. We talk to our clients about the importance of saving early in life, even if they can afford to save only a small amount each month. Our goal is to provide comprehensive advisory services about retirement, taxes, estate planning, investment strategy and insurance, and provide them with holistic, lifetime assistance so they can build financial independence for themselves and their families.

We know that, in these resilient communities, every dollar counts. I have witnessed and researched the impact on these communities when they are charged too much or don’t receive advice that is in their best interests. These are the kinds of things that expand what is already a large racial wealth gap. When we address our clients’ financial needs holistically and act as fiduciaries, we are taking steps to close that wealth gap. The wealthy receive financial advice that is best for them. Why shouldn’t those with moderate incomes be treated the same?

The stakes have never been higher. Retirement savers today are responsible for making their own investment decisions. Gone are the pensions for many savers, including myself. This was not the case in 1974 when ERISA was adopted. Because retirement savers are not investment specialists themselves, they look for help from financial professionals whom they trust and are confident will do what is good for them. But that trust and confidence is often misplaced. Financial advisors who are not required to work in their clients’ best interest may sell products that carry high commissions or management fees or annuities or illiquid privately held investments that can tie up their assets well into retirement.

The potential for harm is enormous. These types of products usually introduce unnecessary risk and costs that erode savings over time. It may not look like a lot in one year. But over time it can be the difference between someone retiring at 65 or 75. Or maybe not being able to retire at all.

Resilient communities are especially vulnerable to receiving incompetent and unethical advice that can erode retirement savings, regardless of the saver’s net worth. After a lifetime of saving for retirement, these individuals are left holding the bag. Congress could not have intended this result when they passed ERISA almost 50 years ago.

Let me give you two specific examples of what I have seen in working with clients.

I have a client who used to work in corporate America but is now a teacher. A financial professional came to her school to discuss what do to with her previous retirement plan. She was in her 30s when this discussion took place. The professional recommended an annuity with a 14-year surrender period. That means if she changed her mind the first year, she would pay a penalty of 18% that first year. And for 13 more years she would surrender a significant part of her account. In addition, the funds in the annuity are not diversified and come with high annual administrative fees. This account has her handcuffed and limits the long-term growth of her retirement account. Also, this financial professional has not spoken to her since selling this annuity. No financial plan or support outside of selling this annuity.

I have another client who went to a large firm with money to invest for retirement. The fund recommended has an upfront commission of 2% and then an ongoing expense ratio, not a financial planning fee, of over 1%. So, before she truly invests in a product, 3% is gone from the top. This is not a private equity investment, venture capital or other complex investment but a high fee investment that is eroding her retirement savings. Also, this investment includes no financial plan, retirement analysis, etc. This cannot be in the client’s best interest.

DOL wants to require financial professionals to act in their clients’ best interests when providing retirement investment advice. This won’t cause firms to abandon moderate-income clients. My firm isn’t the only firm that serves these clients; there are firms all over America serving retirement savers of more modest means with best interest advice.

Look at this also from the consumer’s perspective. The reason consumers often have a negative view of financial professionals is because in many circumstances they aren’t required to act in their clients’ best interests. What we see too often in resilient communities — because of their own experiences and those of family and friends — is that they don’t trust most financial advisors. Instead, they turn to Tik Tok and other social media platforms and get highly questionable and flat-out wrong advice. We need to build the trust and confidence that those in communities of color have in professional financial advisors. The proposed DOL rule will help with that. The public will have more confidence in financial advisors if they know that their advisor is required to serve in their best interests.

Thank you. I am happy to take any questions.”