Willing Fiduciary

With whom do you work?

Category: Fiduciary Responsibility (Page 2 of 2)

A Robo-advisor is not a Fiduciary

A robo-advisor cannot put “its client’s interests before their own” because it has no interests.

Goals are determined by a series of questions and responses are driven by algorithms. It is algorithmic suitability.

There is no subject master expertise, insights or wisdom, and there is certainly nothing proactively propulsive with regards to future market activities and/or change preemption.  There is no behavioral coaching.

Trust is a perception based on rational reflections about the future. Can a Robo-advisor have rational reflections about the future or just statistic generalities?

There is nothing wrong with a Robo-advisor.  However, before getting what you pay for you have to know what to pay for.


Fiduciary vs. Proxy vs. Advocate: For whom are they biased?

A proxy is a person authorized to act for another.

An advocate is a person who publicly supports or recommends a particular cause or policy.

Both can create a funding bias by creating a tendency for originating studies and conclusions that support the interests of the study’s financial sponsor. The reciprocity trait in human nature can sometimes fuel this further by compelling a person to return favors.

Aside from a trustee, the only person who maintains an ethical and legal relationship bound by trust who prudently takes care of assets for another person or entity is a fiduciary.

Are your partners proxies for someone other than you?

Are your partners advocates for a firm or industry that compensates them?

Is your partner a legal fiduciary or are they biased toward another’s goals?

Fiduciary Avoidance Through Mixed Messages

The public at large has been inundated with marketing messages that herald individualized advice that is highly personalized and based on the client’s interest. However, when this message is substantiated in a mutual agreement it is completely disclaimed in the form of a footnote so that it doesn’t serve as the primary basis for investment decisions.

Other times advisors clearly receive compensation for recommending specific products though that guidance is considered “general education.” Confused by mixed messages and the regulatory structures that govern retirement assets?

Internal Revenue Code provisions state that any person paid to provide advice on the investment of IRA assets is a Fiduciary. The rulemaking authority is the Department of Labor and the enforcement authority is the IRS.

ERISA pertains to Retirement Plans and states that any person paid
directly or indirectly to provide plan officials or participants with
advice on the investment plan assets is a fiduciary. Both the
rulemaking and enforcement authority is the Department of Labor.

Are these messages mixed?

Retirement Plan Fiduciaries: A Storm On the Horizon

It seems Retirement Plan Sponsors should be taking their Fiduciary Duties more seriously or the legal community will.

The decision, in itself, to select an Investment Advisor, Record-keeper, Administrator, etc. is a fiduciary action. While the Financial Service Industry is focused on fees, commissions, exemptions, and conflicts of interest, the Fiduciary Responsibility of oversight seems to be lost in the equation.

Sometimes, the evidence of history can be seen in our courts. As of now the fear focus seems to be on allegations of excessive fees, commissions, and conflicts of interests. However, Retirement Plan Sponsors should be focusing their concerns on allegations of oversight and/or lack of prudence. Litigation storm clouds are gathering over the documented plan Fiduciaries for not monitoring either the investment options via analytic evidence or for not monitoring the performance of those parties assisting the Fiduciary for monitoring the investment options. If the correct facts and allegations supporting propositions directed at the proper defendent trend, expect a “cloud burst” of legal activity against Retirement Plan Sponsors.

Fiduciary Responsibility and Constitutionality: Identical in Spirit

The Founding Fathers were consciously aware of human nature and how it manifested itself in behaviors evidenced throughout history. They believed that an enumerated guideline curbing the self destructive behavior of human nature while unleashing its incredible potential was required to achieve and maintain a sustainable Republic. The point of regulation is to do the same: to inspire an environment of opportunity leading to prosperity, not one of fear and arbitrary constraint.

A Fiduciary Duty is one that in action and intent places someone else’s interest before yours and it is an oath that requires diligence and oversight. It is either safeguarded and bound by statute via visible regulation that heightens awareness or it is reduced by human nature and behaviors that masks its true purpose. It should be coveted and upheld instead of blurred by interpretation with intent to usurp.

In spirit, Fiduciary Responsibility and Constitutionality come from the same hallowed ground. This is a qualified preference that seems to be more consistent with the rights of the enumerated sovereign.

Fiduciary Simplicity

“Under ERISA and the Code, a person is a fiduciary to a plan or IRA to the extent that the person engages in specified plan activities, including rendering ‘‘investment advice for a fee or other compensation, direct or in direct, with respect to any moneys or other property of such plan.”

“In particular, under this standards-based approach, the Adviser and Financial Institution must give prudent advice that is in the customer’s best interest, avoid misleading statements, and receive no more than reasonable compensation.”

Is there any reason why a person seeking retirement guidance, from someone receiving compensation for providing that guidance, should have some other expectation?

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