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Category: Fiduciary Awareness (Page 2 of 3)

Fiduciary Herein Granted

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On September 9, 2016

In Current Events, Fiduciary, Fiduciary Awareness, Fiduciary Responsibility

Is there any doubt what the Founding Fathers intended in the very first Article and Section of our Constitution?

“All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.”

HEREIN GRANTED which indicates possessing only specified or enumerated powers whereby the stated body CAN NOT claim an unlimited, inherit, or elastic authority to legislate. Our government wields only such power as the people ENTRUST to it.

As to entrust and to accept, a specified office or Fiduciary Duty involving trust. In matters of right, sovereignty, legality, and crucial advice should anyone accept anything less than Fiduciary Herein Granted? Could accountable Fiduciary Relationships be the brick and mortar to the sustainability of a relationship? Company? Nation? Herein Granted!

Fiduciary Oversight

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On July 27, 2016

In Department of Labor, ERISA, Fiduciary, Fiduciary Awareness, Fiduciary Oversight, Fiduciary Responsibility, Retirement Plan Design

Establishing a Retirement Plan, in itself, is not a fiduciary action but a business decision. However, by implementing a plan one is acting on behalf of the plan and in these actions one may be a fiduciary. For example, hiring a service provider in and of itself is a fiduciary function.

Acting prudently with regards to oversight is a critical responsibility under ERISA but not engrained in the culture of Employer Sponsored Retirement Plans and the Investment/Brokerage business. The culture has been compensation and product spread driven for decades. In fact, it doesn’t seem as if fiduciaries are aware of others who serve as fiduciaries which can leave them vulnerable to participate in another fiduciary’s breach of responsibility.

Oversight can be demonstrated by following and documenting a formal review process visible through technology. This is what the regulatory authorities are asking for.

Fiduciary Virtuosity

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On July 19, 2016

In Fiduciary, Fiduciary Awareness, Fiduciary Responsibility, Financial Planning

Fulfilling a Fiduciary Obligation is not a solitary achievement but one that is habitually executed. It can only be defined as a virtuous act of both trust and accountability made visible when someone has placed their client’s goals before their own. But is it also a virtuous expectation?

Many professions have to be practiced with standards of excellence that originate through evidence based evaluation of judgment. It is reasonable to conclude that a client of someone calling themselves a Financial Advisor would expect that these moral and virtuous standards are executed by putting their interests in the forefront. Who else’s goal is to be actualized?!

Is there really any other way to help people reach their goals and/or another expectation that a client should have?

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

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On July 5, 2016

In Fiduciary, Fiduciary Awareness, Fiduciary Responsibility

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

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On June 29, 2016

In Department of Labor, ERISA, Fiduciary, Fiduciary Awareness, Fiduciary Responsibility, Regulatory

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

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On June 16, 2016

In Business Planning, Department of Labor, Fiduciary Awareness, Fiduciary Oversight, Fiduciary Responsibility, Retirement Plan Design

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

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On June 13, 2016

In Fiduciary, Fiduciary Awareness, Fiduciary Responsibility, Regulatory

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

By

On June 11, 2016

In Department of Labor, ERISA, Fiduciary Awareness, Fiduciary Oversight, Fiduciary Responsibility, Retirement Plan Design

“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?

Why The DOL Fiduciary Regulation Was Revised

By

On June 9, 2016

In Department of Labor, ERISA, Fiduciary, Fiduciary Awareness, Regulatory, Retirement Plan Design

The Employee Retirement Income Security Act of 1974 (ERISA) was established as a federal law. One of its intents was to provide a sense of Fiduciary Responsibility for those designated as Fiduciaries defined, in action, as those who have a role in managing and controlling Retirement/Pension Plan assets. It also defined a plan Fiduciary to include anyone who gives investment advice for a fee.

In 1975, the Department of Labor (DOL) looked to elaborate on “investment advice” and issued a 5-part regulatory test that provided some structure to the meaning. About 40 years later, the DOL started to recognize that it actually enabled Financial Advisors, Brokers, Consultants, and Valuation Firms to:

. Avoid Fiduciary Status
. Disregard Fiduciary Obligations
. Disregard prohibitions on “disloyal and conflicted transactions”.

In effect, Employer Sponsored Retirement Plans became a platform for Financial Advisors, Brokers, Consultants, and Valuation Firms, to steer Retirement Plan Participants to investments based on their own self-interest. This type of intent is prohibited by ERISA.

These advisors represent a whole generation of people who have no idea as to what the spirit of these laws are, no Fiduciary awareness, and no fear of accountability under ERISA. This is what the Department of Labor is trying to remedy.

The FinTech Fiduciary

By

On June 6, 2016

In Department of Labor, Fiduciary, Fiduciary Awareness, Fiduciary Oversight, FinTech, Regulatory, Reporting

Many participants in the financial services industry utilize FinTech for financial planning, analytics, client reporting, portfolio management, etc. All technology, however, leaves a footprint of evidence as to how it’s being applied. If one is in the business of giving impartial and transparent advice, then there is no better median of making the evidence visible than FinTech.

Being committed to providing advice in a client’s best interest is one facet of having the legal responsibility of a Fiduciary. Often overlooked is the matter of oversight of service providers. The supervision of partners in the Fiduciary process can be evident if financial technology is properly applied to the process. Insofar as applying technology to satisfy the DOL’s Fiduciary Duty Rule, that may mean identifying the roles, actions, and strategies of Record-keepers, Administrators, Auditors, Investment Advisors, and Attorneys by ledgering all interactions.

A FinTech Fiduciary with optimized FinTech has an elevated cognizance of oversight.

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