Your Best Interests

Decades ago a brave few souls took a look at the financial services industry and decided there must be a better way. Huge firms, primarily concerned with their own profits, were deep in it for themselves and while the pitch, products, and pricing have evolved over time, not much has changed with regards to the way these firms do business and treat their clients.

Acting as a fiduciary simply means putting a client’s interests before those of the firm’s. This concept, acting only in a client’s best interests, was born from choosing to view a client’s life in a holistic fashion and a focusing on the best outcome for that client.

Finding a fiduciary (someone who puts a client’s interest before their own) is a critical factor to consider when searching for a financial advisor. This is not to say one can’t get good advice and service from someone who hasn’t committed to the fiduciary standard. There is a real chance any smart, experienced, and honest advisor will guide a client to a better result than the client might get on their own.

This is also not to say anyone committed to the fiduciary standard can offer the best solutions. This may be because their firm hasn’t been granted access to or won’t make money from the use of certain investment products. A fiduciary born and living in a large firm may have very limited knowledge of the best solutions because they use what’s available to them and the liability of their advice is ultimately on the firm.

An independent fiduciary with a passion for problem solving will likely have found and gained access to the best solutions available and it can make a big difference over time.

Let’s drill down a bit further. There are some very talented financial planning and wealth management firms (FPWMF) but the overwhelming majority of them choose to serve people who have already amassed a decent amount of wealth (over $2m). There are smaller FPWMF who do a wonderful job on the financial planning piece but have no passion for investing and thus outsource that “problem” to someone else.

These outsourced solutions can be adequate but are by definition generic and likely sub optimal. The client is being put in a pre-built box, probably leaning only slightly toward the baskets of securities with the greatest return potential over time. Outsourced solutions are also often more expensive than they should be, inducing the small FPWMF to charge the client more than they might if they had the time and expertise to manage the money in-house.

There’s a growing trend of people running independent financial planning practices that focus almost entirely on the planning function with little thought or expertise devoted to the investment side of the equation. If your returns are lower than needed the plan won’t work.

There’s an even rarer bread of small FPWMF where the fees are significantly below the industry average, money is managed in-house and the choice in life is simply to worker harder to help more people taking the fiduciary standard very deep indeed.