Fee-only financial advisor and fiduciary for all clients at all times
As a fee-only financial advisor and a fiduciary for all clients at all times, we eliminate the most pervasive conflict of interest in financial services…receiving compensation from third parties. This fosters trust, something we need more of these days.
Wow! That was quite an election.
Candidates at many levels of government have been running negative campaigns for centuries but this one felt particularly nasty.
We have come to expect the respective campaigns will claim that no one from the other party can be trusted. However, there has always been people we could rely on for a more objective viewpoint. It wasn’t that long ago when a TV anchorman was regarded as the most trusted man in America. In this election, with even more messages being thrust at us, it was hard to feel confident that anything we read or heard was accurate.
We miss you, Walter Cronkite.
One of the consequences of all this noise that we hope will gain momentum is a renewed attention on trustworthiness. Reliable sources of information and analysis are as important, but harder to find, then ever.
This year, the Department of Labor finalized a new “Conflicts of Interest” (COI) rule requiring people who give advice to retirement plan participants and IRA owners to act as fiduciaries and put the interests of those they advise first. We have worked exclusively as fee-only fiduciaries for years but most of the financial services industry does not. Brokerage, insurance, and banking interests have been lobbying hard and filing lawsuits to stop the rule from taking effect in April. The issue was politicized and its future is in doubt.
This is a shame because every credible study done on the matter shows the public cannot tell who is acting in a fiduciary capacity for them – legally obligated to put their interests first – and who are regulated as salespeople for financial firms under a lower standard of “suitability” or the even lower caveat emptor (buyer beware). Everyone seems to market themselves as “advisors.”
We don’t know what will happen to the DOL rule. (Note: The 5th Circuit Court struck down this rule in early 2018 after brokerage firms proved their representatives were only salespeople and did NOT give advice despite using the title “financial advisor.”) If it stays on the books, it doesn’t apply to non-retirement accounts so it is only a partial step in a good direction anyway. Confusion should still reign as firms advertise their fiduciary status for retirement accounts and leave out the part where they were against the rule and are only subjected to fiduciary duty because they have been forced to change, partially.
What we do know is we don’t have to wait for Washington to get its consumer protection act together.
Fee-only fiduciary, always.
As we said, we at Moisand Fitzgerald Tamayo, LLC have been operating exclusively as fee-only financial advisors and fiduciaries, legally obligated to place our clients’ interest first for well over a decade. We only work in a fee-only fiduciary capacity and never “switch hats” to become sales people. We have no mechanism in place to receive compensation from anyone other than our clients directly. “We work for you” isn’t a slogan, it is a legal fact.
We have no mechanism in place to receive compensation from anyone other than our clients directly. “We work for you” isn’t a slogan, it is a legal fact.
Further, to make crystal clear our undivided loyalty to our clients and to make it easy for our clients to maintain their confidence that we are advising them solely in their best interests, we are pleased to announce we have become one of the very first firms in the country to subscribe to the Institute for the Fiduciary Standard’s Best Practices affirmation program. (Updated and renamed the Real Fiduciary™ Practices in 2019) These practices are a public, written declaration of our undivided loyalty and how we demonstrate such loyalty.
So how do we show our undivided loyalty to our clients? We make commitments others will not and put those commitments in writing for all to see.
Per the Institute for the Fiduciary Standard, “There is a gap in federal regulatory compliance and advisor group codes of conduct. This gap has left too many investors receiving questionable product recommendations under the guise of fiduciary advice.”
The complete list and explanation of the 12 practices can be found below but the first practice sets the stage for the rest:
“1. Affirm the fiduciary standard under the Advisers Act of 1940, common law and, if applicable,
ERISA and DOL’s COI Rule, govern all professional advisory client relationships at all times.”
The word “all” is a key difference between how we serve our clients and how most of the financial industry conducts their business.We are paid only by you to serve only you and never “switch hats” to sell you something or be accountable to a lower standard.
The word “all” is a key difference between how we serve our clients and how most of the financial industry conducts their business. We are fee-only financial advisors, paid only by you to serve only you and never “switch hats” to sell you something or be accountable to a lower standard.
Real Fiduciary™ Practices
Professional Conduct Guidance for Advisors
As of February 22, 2019
The Institute for the Fiduciary Standard’s Real Fiduciary™ Practices describe how conscientious and competent advisors serve clients today. The practices reflect principles that underlie fiduciary law and focus on the three overriding advisory duties of Loyalty, Due Care and Utmost Good Faith. The Institute defines these terms as follows:
Loyalty means steadfast and uncompromising devotion to a client’s best interest.
Due care means following a prudent process and applying the necessary professional skills as evidenced by appropriate education, expertise and experience.
Utmost good faith means acting at all times with honesty, integrity and transparency.
Many advisors and brokers talk like a fiduciary, though relatively few act like one. These Real Fiduciary™ Practices provide guidance for advisors. They also help investors distinguish advisors who work for and are paid only by clients—from sales representatives who work for and are paid by firms to distribute products. That is, these practices help separate brokers and advisors who merely talk like a fiduciary from advisors who really act like one.
Real Fiduciary™ Advisors stand apart because they:
1. Act as a fiduciary at all times. Affirm this commitment to the client in writing.
Affirm that the fiduciary standard under common law and the Investment Advisers Act of 1940 (and when applicable, ERISA) governs all professional advisory client relationships at all times at both the advisor and the firm level.
2. Decline any sales-related compensation.
Accept compensation that is paid by the client in the form of a percentage of assets under management, retainers, fixed fees or hourly fees. Decline any compensation associated with transactions and product sales such as commissions, shelf space payments and 12b-1 fees.
3. Avoid conflicts of interest.
Understand that a conflict of interest occurs when the interests of the advisor or the advisor’s firm interfere with the advisor’s fiduciary duties to clients. A conflict is material when it could reasonably be deemed to affect how a client who understands the conflict decides to act. Material conflicts are inherently harmful. Eliminating or avoiding these conflicts when possible has been the cornerstone of fiduciary law for centuries.
4. Mitigate unavoidable conflicts.
Mitigating material conflicts means, at minimum, receiving appropriate client consent before executing the recommendation. The advisor will:
- Explain the conflict in sufficient detail, both orally and in writing, so the client fully understands the conflict. Disclosure of conflicts of interest is a well-established obligation of the Investment Advisers Act of 1940 and a key requirement of Form ADV.
- Ensure that the client understands the implications of the conflict. This includes the relative merits of options not recommended by the advisor and any additional compensation that may be earned by the advisor.
- Receive informed, intelligent and independent consent from the client in writing before any advice is implemented.
- Document and be prepared to demonstrate that the conflicted advice remains reasonable and fair and consistent with the client’s best interest.
ACT WITH DUE CARE
5. Maintain professional knowledge and competence.
Demonstrate baseline competence by holding a recognized designation which requires significant study and knowledge, experience and ongoing continuing education requirements, such as the CFP®, CPA/PFS or CFA designations. Decline to provide advice, regardless of its scope, unless the advisor possesses the appropriate expertise.
6. Explain agreements and disclosures clearly and truthfully, both orally and in writing.
Put all important client agreements and disclosures in writing. Do not make oral or written statements that are misleading. Client understanding of the advisor’s actions is important in relationships of trust and confidence.
7. Establish and document a reasonable basis for advice.
Document relevant facts and circumstances supporting the advisor’s advice in a manner that is appropriate for the scope and nature of the client engagement and for the client’s goals and overall circumstances. Upon client request, provide a brief summary written in plain language of each recommendation and its respective reasonable basis. Having a “reasonable basis” for investment advice is a well-established obligation of the Investment Advisers Act of 1940.
8. Follow and document a prudent due diligence process for rendering investment advice.
Research and analyze investment vehicles in a responsible manner. Use an investment policy statement that is based on a clear understanding of the client’s circumstances and preferences and that clearly specifies assumptions regarding objectives, risk, and performance. Report performance based on data supplied by an independent third party and calculated using industry standard methods.
ACT IN UTMOST GOOD FAITH
9. Decline gifts or entertainment or other benefits unless minimal in value, occasional in frequency, and consistent with the advisory firm’s gift and vendor relation policies.
Decline any gifts or third-party compensation or other benefits received by the advisor or the advisor’s firm that could impair advisor objectivity. Upon request, provide the firm’s policy on gifts and entertainment. Explain clearly, both orally and in writing, any ongoing benefits the advisor or the advisor’s firm receives from other entities.
10. Charge reasonable fees and incur reasonable investment costs. Disclose and fully explain.
Provide in writing at the outset of the advisory relationship, and upon request throughout the client engagement, a good faith description and estimate of anticipated fees, investment costs and tax implications. Have procedures to check that client expenses are reasonable. Be aware that controlling investment expenses does not require the least expensive alternative; it does require a reasonable basis for selecting a more expensive alternative.
Moisand Fitzgerald Tamayo, LLC is an Orlando, Tampa and Melbourne, Florida based fee-only financial planner serving central Florida and clients across the country. Moisand Fitzgerald Tamayo, LLC specializes in providing objective financial planning, retirement planning, and investment management to help clients build, manage, grow, and protect their assets through all phases of one’s life and the many transitions in between. If you have any questions or would like to discuss anything further, please give us a call or send us a note. If you are not a client and wish to receive emails notifying you of new posts – no more than once per month – fill out the subscription information in the sidebar to the right. For more frequent updates, follow us on Facebook, LinkedIn, or Twitter.
Important Additional Information & Disclosures
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Moisand Fitzgerald Tamayo, LLC-“MFT”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.
Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from MFT.
Please remember that if you are a MFT client, it remains your responsibility to advise MFT, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. MFT is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. Tax advice is given only to clients and only when agreed to by MFT. A copy of the MFT’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request.
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Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your MFT account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your MFT accounts; and, (3) a description of each comparative benchmark/index is available upon request.