"Fiduciary issues in a transition to independent Financial Advisor" by David L. Lawrence, AIF There is a debate going on in the financial services profession over whether or not a practitioner is acting as a fiduciary in the delivery of advice and services to his/her clients. Let us address this issue briefly and then move on to the bigger issue of how to deal with this once you determine that you are, in fact, acting as a fiduciary. (And, you probably are) In an effort to define a fiduciary, it might be as simple as describing it as – a person who has legal and/or moral responsibility for managing someone else’s money. If we accept this broad definition, then most every financial advisor would be considered a fiduciary, including wirehouse-type brokers. The Registered Investment Advisor (RIA) is always a fiduciary; for the dually registered Broker/advisor, one would need to study the client services agreement to determine whether a fiduciary relationship exists. An investment consultant could be deemed a fiduciary: When the consultant has discretion over a client’s assets When the client is dependent upon the consultant’s advice When the consultant is providing a client comprehensive and continuous investment advice When the consultant is providing an ERISA client investment advice, and is receiving a fee When the consultant is a registered investment advisor (RIA)   A specific example related to advice might be in the preparation of a written financial plan, do you? Offer considerations (different choices for the client to choose from without specifically influencing the client’s decision over which choice)? Or: Do you make specific recommendations related to the client’s situation and needs? (using words such as “we recommend…” or “Invest in…” or similar words) One caution is to avoid getting too caught up in the semantics of fiduciary status. You may be deemed to have a fiduciary relationship with a client regardless of how you word your financial plan if you are otherwise acting on behalf of the client in a fiduciary manner.   Evaluating and/or choosing investments for your clients could enter a new dimension with the added issues of fiduciary standards of care. With the standards of care, the practitioner will need to look beyond just a strategic asset allocation based on client risk factors, investment performance or even Monte Carlo simulations and investigate such things as range of expense ratios (with mutual funds), Manager structures (with mutual funds, separate accounts, etc.) and performance differentials (published performance contrasted with individual client results).   Another fiduciary consideration in the investment selection and/or monitoring process is best execution. In seeking best execution, money managers should take into consideration: •        commission expenses •        strike price of the security •        the quality and reliability of the trade There is no requirement that the fiduciary seek the lowest commission, but he/she must justify paying up for a service. Having these additional considerations is an advantage as it standardizes the investment selection process with the first consideration of protecting the client.   Embracing your role as a fiduciary may not only provide your clients with value, it could also result in lower costs, lessen risk and produce greater practice efficiency.   David Lawrence, AIF®  (Accredited Investment Fiduciary™) is a practice efficiency consultant and is President of David Lawrence and Associates, a practice-consulting firm based in Lutz, Florida. (www.efficientpractice.com) David Lawrence and Associates offers a variety of consulting services including technology consulting related to the financial planning process and investment management.   **** Since our inception we have helped over 400 financial consultants make the move to independence. "I cannot express to you the joy and the increase in quality of life that I have found since leaving the wirehouse world." Shane Merritt, Branch Manager Merritt Capital Management Here Are A Few of the Benefits of "Going Independent": Payouts on all your business, including fee based accounts of 90% plus. The opportunity to build substantial equity in your business and sell it at an attractive multiple when you desire. The opportunity for you, not someone at the home office, to control your bottom line and the profitability of your practice. The opportunity to build related businesses such as insurance, qualified plans, or trust companies, and keep those revenues. The opportunity to eliminate your clients’ perceptions of conflicts of interest with research departments and corporate finance groups – TRUE OBJECTIVITY. The opportunity to charge and keep substantial fee income for planning, analysis and other services to your clients. The availability of technology that is as good or better than anything you have now. The list goes on… **For a FREE "Guide to Moving Your Book", please visit: www.goingindependent.net. This Month's Registered Representative Opportunity: Since 1986, this Broker-dealer has been committed to giving independent financial advisors the leverage they need for achieving success. Today, it is one of the most progressive broker-dealer firms in the country with more than 1,000 independent professionals around the U.S. and over 250 support staff in its Florida headquarters. This B/D provides independent financial advisors support and flexibility to assist them in finding their customers the right investments for more of the life they want to live. Because their executive team and board of directors were all once and currently are full-service reps, they understand the business and the fact that their customers are you, the reps. Regardless of your specific model, whether you are a transactional equity rep, a planner, a fee-based rep, insurance rep or traditional broker, they have the people and infrastructure in place to help you succeed. They believe they have the tools to help you elevate your business and reach your professional and personal goals. If you want a career move that will take you to new heights, thisB/D may be the right place to be. At this Broker-dealer, the entrepreneurial spirit is on. The intense corporate pressure is off. With no incentives to sell proprietary products, you have the flexibility to advise your clients what you believe is in their best interest. If you want it, they have a support team that will scour the industry for you looking for new products and services, to keep you and your clients one step ahead in this fast-changing market. Their approach gives you freedom to do what you do best. They have built a platform that can transform any existing platform, whether you are currently working as a lender, an insurance agent, or a registered rep. You have access to the same resources of any traditional Wall Street firm, as well as multiple clearing arrangements always at your fingertips. With that comes the flexibility to manage business and clients your way, and a payout rate that truly recognizes your talents and abilities. Technology - Their technology department is diligent when it comes to making your tools easy to implement, easy to understand, and easy to use. They have an innovative infrastructure to keep your practice operating at its peak efficiency. And most importantly, their home-office experts are here to help you with your transition and provide ongoing support anytime you need them. Payouts - They recognize your talents and expertise, and feel strongly that you should be highly rewarded. At this B/D, independent financial advisors typically enjoy 70-90% payouts, one of the most rewarding plans in the industry. However, payouts are flexible and often depend on the financial advisors performance and volume. A recruitment consultant works closely with you to determine a beneficial arrangement based on your individual business model. Volume benefits and discounts - When you join this B/D, you will immediately benefit from the full-scale of benefits associated with a large organization. You gain the best of both worlds: independence with total access to a multitude of volume advantages. Because they function as a collective group with more than 1,000 advisors nationwide, they are able to contain costs and help you keep fixed expenses as low as possible.   If you know someone who might be interested in the above opportunity or who might be ready to go Independent, please have them contact Jason Burke directly at 727-725-8876.

Here's some additional information from Turning Point, Inc...

www.BrokerBestPractices.com
www.BankBrokerBestPractices.com
www.IndependentRepBestPractices.com (*Sept 2005 REPORT AVAILABLE!)
www.FABestPractices.com (Financial Advisors)
www.InsuranceAgentBestPractices.com

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