Fiduciaries: Adding Value with Fewer Headaches

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 Austin Lewis By: Austin Lewis

With all the media coverage of the DOL's proposed fiduciary rule, the term “fiduciary” has become increasingly ubiquitous in normal conversation. But what exactly is a fiduciary, and how does it reflect the changing culture of financial planning and advisement?

For starters, the advisor role is no longer solely investment-based. In addition to monetary value, clients now look to advisors to provide technical and emotional support related to complex estate, retirement, and other plans. A recent analysis by Russell Investments attempted to put a value at these added benefits and found the value of an advisor at approximately 4%.

Sounds great, right? But where does this added technical and emotional support come from? It all maps back to an advisor’s commitment to fiduciary and transparency standards, which include:

1. Next-Level Discipline and Trust

Fiduciaries, at the simplest definition, are professionals who are legally required to make decisions in a client’s best interest.

Whereas broker-dealers may be scrambling to get ahead of recent DOL rulings, fiduciaries, like Plancorp, have been holding themselves to the highest standard for some time. We volunteer for annual audits through the Centre for Fiduciary Excellence (CEFEX) to hold ourselves accountable. In fact, we were the first advisory firm in Missouri and one of the first globally to achieve these marks in 2007.

(For more, view this video on the benefits of working with a CEFEX-certified advisor.)

 

Individual investors, many times, make behavioral mistakes when uncertainty arises in the market. Acting as a fiduciary through practices like monthly portfolio rebalancing and regular client meetings make an enormous difference when forming trust with clients. At Plancorp, we are always looking out for products that are best suited for our clients. We are not obligated to any company.

2. Additional Service and Planning

Fee-only firms provide transparency. By eliminating the conflict of interest of selling proprietary products, firms provide value through positioning a portfolio with investments that make the most sense for the client. At Plancorp, the mutual funds we use have low internal expenses (on weighted average our portfolios expense ratios are generally between 20 and 30 basis points).  Keeping expenses low, we believe, provides significant value and improves investment return to our clients.

Unlike the traditional broker-dealer model, investing is only part of the services we provide at Plancorp. As fiduciaries, we take a deep dive into estate, tax, retirement, insurance, and education planning. It is important to create a comprehensive plan based on the client’s larger picture. We collectively consider a client’s specific charitable intents, marginal tax rates, generational gifting, and risk tolerance as we formulate their financial plan.

3. Deeper Understanding and Presence

The Certified Financial Planner designation is becoming a focal point of credibility in the evolving financial planning culture. Professionals holding these marks have been tested on and exposed to curriculum across all areas of planning. They adhere to fiduciary standards annually through continuing education courses and CFP Board reviews.

At Plancorp, on top of our long list of CFP®s, we have professionals from various lines of work including JDs, CPAs, and CFA®s. This brings quite a variety of business backgrounds to the table to holistically meet our client’s needs. We aren’t strictly money managers, and regardless of what’s happening in a client’s financial life, we have the right person to bring to the table.

In summary, the value you receive from your fiduciary advisor exceeds an annual fee. Not only is he or she providing advice, but also advocating on your behalf—ensuring every decision is made in your best interest.

 

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Austin graduated from the University of Missouri-Columbia with a BS in Personal Financial Planning. While in college, he volunteered at the campus financial counseling center, where he worked with fellow students and city residents on a range of financial issues. He brings that same passion for educating others to his role as a Planning Associate. More »