It is not whether your financial professional is your fiduciary or not - it's how their fiduciary status actually works (and when).
A Valentine's Day Poem:
Roses are red.
Violets are blue.
Does "fiduciary" really mean they're acting for you?
Start with a Fiduciary
When Joe Hollen, MD, CFP® opened our doors to the public in 2004, as Fee-Only fiduciaries we felt that we were unique in Reno and relatively rare in the United States. These days, it seems like everyone claims to be a fiduciary.
Our competitors know you want a financial partner that is on your side - a fiduciary. Yet, we believe that the word 'fiduciary' has become a marketing term - a shiny lure with which to capture customers. While these new 'fiduciaries' market their new fiduciary status, if you dig a bit deeper, you might find that their business models have not changed much in the last few decades.
Despite their new 'fiduciary' label, it's still buyer beware!
Open Window is a Seven-Way Fiduciary
The last time we checked, we were considered to be a fiduciary under as many as seven separate laws and codes:
- As CFP Professionals
- As a CEFEX-certified advisor
- As a NAPFA-member firm
- As Accredited Investment Fiduciaries (AIF)
- Under the federal Investment Advisors Act of 1940
- Under the State of Nevada's SB 383
- Under the federal Acts of ERISA and/or UPMIFA
Many of these fiduciary standards apply at all times. However, some apply sometimes. Be careful of advisors that claim fiduciary status under a code that applies part-time.
That's why we call Open Window a "Full-Time" Fiduciary. We try to apply our fiduciary status full-time, even if the law or code does not apply.
Don't just take our word for it:
Our fiduciary practices are certified annually by the independent fiduciary standard-setting organization, The Centre for Fiduciary Excellence (CEFEX).
CEFEX-certified firms adhere to the highest fiduciary practices in the industry. CEFEX offers independent assurance that a certified firm places its clients' interests first.
Open Window is the first firm in Nevada, and the only firm based in Reno, to meet the elite fiduciary standards set and reconfirmed annually in a fiduciary review process.
We believe that most advisors will claim to act as a fiduciary, but they still have something to sell you first. We believe their practices narrowly fit the letter of these new laws, but not the intended spirit of a 'fiduciary'.
Next, Continue with a Fee-Only Advisor
Similar confusion surrounds the difference between Fee-Based and Fee-Only Advisors.
If your financial professional works in a fee-based firm, they can say they don't work on commission. But they still might. What you likely want is a Fee-Only firm.
Beware of Common "Fiduciary" Conflicts of Interest:
Some business practices serve as warnings that your interests may not come first.
Selling insurance and investments - rather than solely providing advice.
Does the sale benefit you or the firm? Is the sale about the quality of the product, or the quantity sold?
Open Window is licensed to provide advice, not to sell products.
Operating as a broker and as an investment advisor: "dually registered".
A broker's first obligation is to their firm - not to you, the client.
Open Window is licensed as an advisor, not a broker.
Using paid referrals, known as kickbacks.
Is the referral based on expertise and trust, or in return for compensation?
Open Window neither pays nor receives referral fees.
Mandating Fiduciary "Ethics" is Impossible
No law can truly compel ethical behavior. While laws can and do influence behavior, the full spirit of a fiduciary - much like love - can only be achieved of one's own free will.
Open Window has chosen a different model for clients.
As Full-Time, Fee-Only Fiduciaries, it's the same model we've instructed in our Will for our family to pursue after we're gone.
This article was inspired by: Sonnet 43 - How Do I Love Thee?
Elizabeth Barrett Browning - 1806-1861
How do I love thee? Let me count the ways.
I love thee to the depth and breadth and height
My soul can reach, when feeling out of sight
For the ends of being and ideal grace.
I love thee to the level of every day's
Most quiet need, by sun and candle-light.
I love thee freely, as men strive for right.
I love thee purely, as they turn from praise.
I love thee with the passion put to use
In my old griefs, and with my childhood's faith.
I love thee with a love I seemed to lose
With my lost saints. I love thee with the breath,
Smiles, tears, of all my life; and, if God choose,
I shall but love thee better after death.
We admit that it's a bit much to compare our fiduciary duty for clients to Elizabeth Barrett Browning's poem that describes her pure, selfless, and eternal love for her husband. Yet, the more we put the comparison under a microscope, the more we identified common ground between her perfect love and our fiduciary duty to clients.
One of the important lessons of this poem is not whether the speaker loves her husband or not – it's how their love actually works. The same can be said of a fiduciary. It is not whether your financial professional is your fiduciary or not - it's how their fiduciary status actually works (and when).