The Landmine List: When products blow up, how can your firm stay out of the mine field?

We are not talking about the universe of products that currently exist. We are only talking about those products that currently exist in the accounts of your clients and reside on your product platform.

The key, as you already know, is to be proactive and move the Landmines out of your clients’ accounts and off your platform so that when they blow up, your firm, Advisors and clients avoid financial and reputational damage.

So how do you act proactively regarding your Landmine List?

First, it’s useful to understand how products land on your firm’s Books and Records. We have found that there are three common ways that landmines end up on your firm’s platform. 

3 Common Ways Landmines End Up on Your Firm’s Platform:

1. Legacy Products: Those products sold to clients years and years ago and slipped past supervision teams during more lenient regulatory times.
2. ACATS Transfers: Those products that were transferred into your firm as part of onboarding an Advisor’s book of business or the onboarding of an individual client’s assets.
3. Products Gone Bad: Even good products go bad. When they do they go bad (or preferably before), you want to move quickly to put those landmines on the Landmine List.

Second, you need to have policies and procedures that codify for everyone on your team how you managed the risk of your Landmine List. We call it your Landmine Risk Mitigation Strategy.

The DDW Landmine Risk Mitigation Strategy:

Regardless of how Landmines end up on your platform, the key is to be proactive in how you manage the risk they present and the damage they could cause. After working with dozens of firms, we have refined our “Landmine Mitigation Process” into 6 steps.

1. 1. Identification: Identify both specific products and categories of products that belong on The Landmine List.
   2. Risk Assessment. Rate each product according to DEFCON level. DEFCON Level 1 (highest) thru DEFCON Level 5 (lowest).
   3. Product Mapping. Map each landmine to a specific product or suite of products that are appropriate replacements for the Advisor and Client to consider.
   4. Tactical Plan. Develop a tactical, granular plan that will be implemented when either the product blows up or the Product Committee decides it is time to implement the plan (ideally before the product blows up).
   5. Measure and Monitor. Measure and monitor the Landmine List by cycling through Steps 1 through 4.
   6. Plan Implementation. This is the execution phase where the Tactical Plan is implemented.

The primary lesson we take away from our experience working with firms on their Landmines Lists is to be proactive. (Note: Please forgive the bromides that follow.) You can’t put your head in the sand and ignore the problem. That’s when landmines become their most damaging. The Landmines List is one of those responsibilities where an ounce of prevention is worth a pound of cure.

If you would like to learn more about how DDW can bring it’s experience and expertise to assist your firm in managing your Landmine List, please reach out to Kevin Hughes at (973) 422-6545 or kevin.hughes@duediligenceworks.com.