Can You Be a Part-Time Fiduciary? – What the fiduciary standard means and why the structure behind financial advice matters.
Marcus Schafer (00:17)
Welcome to episode 36 of the Decision Dividend with Pat Collins and Marcus Schafer Pat, the topic today that I want to talk about is fiduciary. What is it? Why does it matter? And how can investors kind of understand what this means and the implications for advisors and other professionals that kind of follow under these higher standards of care? We’ll explain what that means. So that’ll be the topic for today.
Pat Collins (00:46)
I love how when we were talking before this that you said, I think this is gonna be a short episode. It’s just about fiduciary. And little did you know that this is a passion of mine and it kind of stems all the way back from the foundings of Greenspring. So so it we may not be as short as as you think, but I am excited to get into this. ⁓ I think it is a while there is a little bit of inside baseball industry talk, it matters so much for consumers and for clients and for anybody that’s working with a financial professional. So
Our hope is this is going to be really educational and hopefully help you to decide if you if you’re working with an advisor, you’re thinking about working with advisor, gives you some tools to evaluate which type of advisor should I be working with.
When the Label Is Not Enough – How a self-described fiduciary relationship can still lead to commission-based product recommendations.
Marcus Schafer (01:29)
Yeah, it’s a phrase that’s thrown around and it’s it’s good, right? Hey, you want to be looking for somebody that’s a fiduciary. I’ll give you I was having a conversation with somebody that was seeking some some advice. And here’s what they they said essentially, hey, I I have this fiduciary advisor. And then you go in and you start asking, Hey, is your
Well, why are you talking to me if you have a fiduciary advisor? And it’s like, well, they don’t help with like thoughtful retirement income strategies. And then there’s this big annuity in the account. And you and I know annuities in fiduciary don’t tend to go together. So how in the world can somebody represent themselves as a fiduciary advisor and this end up being being the case?
Every Advice Model Has Conflicts – Why no compensation model is conflict-free, but some structures reduce conflicts more effectively than others.
Pat Collins (02:21)
We’re probably gonna talk a lot about different models of how people work with clients and and whatnot. And and the thing I always hear from everybody in the industry, and and there is truth to this, it’s that no perfect model exists. There’s conflicts that happen everywhere. So if you’re selling products like annuities and life insurance for a commission, there’s clearly a conflict there. You wanna sell more of that stuff. ⁓ but even on our side, there can be conflicts that exist, ⁓ whether it be
Somebody comes to us and says, you know what, I’m thinking about giving half of my money away to charity. We have a conflict there because we get typically paid a percentage of the assets that we’re managing for clients. And that can create a conflict. I like to kind of think about it more on a continuum. There’s nothing on the far, you know, one side that’s perfection. But when you have professionals that are selling their main job is selling products for a commission, it is a different playing field from a fiduciary standpoint.
And one of the issues that’s come up, I think, just because regulators, politicians have become a little bit more wise on, hey, we should probably have some sort of standard for people that are giving investment advice. They’ve tried to introduce these fiduciary concepts that I’m sure we’ll get into across all the different regulatory bodies. And when kind of the the the groups that are really advocating for people, you know, to be able to continue to sell products.
they step in and it it’s been watered down and I think that’s something that you you we need to understand. But I think that’s maybe a first start is to say there’s no perfect model, but there are models that are better than others, in my in my opinion.
Where Fiduciary Comes From (1, 2) – How a word rooted in trust developed through Roman law, medieval estate arrangements, and English trust law.
Marcus Schafer (03:59)
Yeah, the history of fiduciary. I’m gonna get a little geeky here, Pat, for two reasons. One, because I’m a little history geek. And two, because you’re going to Italy. So you’ll see some of this correction, but we’re not gonna test your your Latin. I don’t think you picked that up on vacation. But if you think about fiduciary, it is a Latin term and it’s kind of this historical, you know, it’s this sense of duty of putting somebody else’s interest ahead of your own.
Goes all the way back to Babylonian times, but it was really established in ⁓ in ancient Rome. And it’s kind of this fiducia. It means trust, confidence, reliance to trust. So it’s this concept of trust. And then you kind of take it to the next level. There’s a lot of thought that if you go back to kind of the crusade time, when somebody would go to the crusades, they would need somebody to watch over their stuff while they’re gone.
And so it was this concept of, you’re gonna have to have somebody to watch your estates on your behalf. But then when you come back, right, like, hey, give it back. And then that led to English common law, which is kind of codifying some of this stuff, right? And a lot of our laws here in America is based upon English common law. And then so that kind of gets to this next level where we start having these legal definitions of
what this concept of fiduciary means. So maybe just talk a little bit about what is a fiduciary, just to level set before we jump in further.
Duty of Loyalty and Duty of Care (3, 5) – Why putting clients first requires both aligned interests and the competence, diligence, and judgment to give sound advice.
Pat Collins (05:37)
Well, I think you’ve touched on it, which is it’s it’s this idea of putting others’ interests ahead of your own and always having that mindset. ⁓ I think there is a couple of things I want to mention on this. There’s the legal theory, which I think you’re getting into some of the history of it. I think there’s another element to it because as you get into the legal implications of it, there it it gets so difficult to understand based on how you’re working with a client. But I think there’s a bigger thing, which is just a an overall mindset of what does it mean to be a fiduciary.
And I I truly do you know believe that it’s the idea of putting others ahead of yourself. There are two kind of pillars to being a fiduciary. So one is a duty of loyalty, and the other is a duty of care. So you tend to see that as part of kind of the concept of a fiduciary. And I think it’s important to understand what that looks like. So first, from a duty of loyalty, it’s pretty simple. It means do the right thing all the time.
So, you know, most of us know what the right thing is to do. And being a fiduciary means doing it, even at at a cost that might be a cost to yourself. So I think that’s number one. And I think that’s how most people think about being a fiduciary is I have to do the right thing for the client. I think this duty of care is something that doesn’t get brought up enough because I do think it’s an element of being a really good ⁓ fiduciary. So
I’ll give you just a quick story. When I started in this industry, I started a big brokerage firm. They would call them wirehouses. These are the biggest firms in the in the industry. ⁓ I was given three months to get my licenses that allowed me to give advice or be able to sell products. And then at in month three, I was expected to go out and start bringing clients in and selling them these products. And if you kind of go back to a fiduciary, I was supposed to, if I was a fiduciary, which I wasn’t at the time, but
I’m supposed to have a duty of care. How can you as a firm ⁓ or an industry say in three months, we believe that we are putting the best people in front of our clients that have three months of experience? So I think this idea of duty of care is really important. Is do you have the expertise? Do you have the credibility? Do you have the knowledge to be able to give really good advice?
because that’s important in being a fiduciary. Being a fiduciary is not just a legal term, in my opinion. It’s it’s a mindset and it’s a ⁓ stance that you have to take. And with that comes work and ⁓ structure that you have to put in place so that you are able to give good advice to clients.
Marcus Schafer (08:11)
What you’re saying is there’s kind of like these two components to evaluating if somebody’s gonna be able to put your interests ahead of their own. And one of those is just like, hey, technical competency, right? Do you have things like the CFP? Do you have extra credentials? Do you have experience? You know, you kind of think about what it takes to be an advisor at Greenspring. Like, yeah, you have to have technical competence.
Competency, you gotta have the CFP, you gotta have these time working with clients where you can build up that’s expertise. And then the second component is do you just have that philosophical mindset, which I imagine is really hard for people to judge because I think charisma gets confused a lot with care. Do you just have this philosophy where you’re going about and you understand that?
This profession should be one of the most revered professions. That’s the history lesson I was trying to teach. Is this a revered position to be the most trusted person, the root word of fiduciary? And you go look at the different ⁓ Latin words, it’s like trusted companion. Do you have what it takes to be that person? And how can somebody kind of unpack that to figure it out?
And those are there is legal definitions and there’s these like philosophical definitions about those those two.
Pat Collins (09:39)
Yeah, I think we’ll talk about some of the implications or the legal parts of it in a bit. But I do want to touch on this for a minute, this idea of duty of loyalty, duty of care. I think one, it’s a mindset, but I think organizations needs to need to put some scaffolding around this to make sure that their advisors, their the people that work at that company are acting in a fiduciary capacity. So to give you an idea, I’ll talk a little bit about Greenspring and
Build the Firm Around the Standard – How compensation, training, client capacity, and team structure can reinforce fiduciary behavior.
kind of how we’ve been ⁓ set up to try to really try to act in our client’s best interest at all times. ⁓ so number one, this idea of duty of care, we believe, and we’ll talk a little bit about compensation methods and things like that, but we believe that when you get paid by your client, you have a ⁓ higher level of independence and objectivity than if you get paid by a product.
And I hopefully that makes sense to most people. If I get paid by a product, my goal is to sell more products. That’s how I get more compensation. If I get paid by my client, irrespective of what they do, which products they buy, then I work for them and I hopefully I’m going to give advice in an objective, unbiased way. So that’s number one, have some sort of structure. Our advisors are not able to sell a product and make a commission. They don’t have the licenses to do that. They’re not allowed to hold a license to do that. The second part of
Duty of care. ⁓ one is does your advisory friendly worker, do they have some sort of training or career path that advisors are going through to really become experts at what they do? But there’s another element that we put in place early on at Greenspring, which is we limit the number of clients that any one advisor can work with. And that’s really important. We feel like that is part of this duty of care, is that if we limit the number of clients our our advisors can work with, that they have more time to spend with them, that they can.
focus on their their issues. So I bring that up as an example of how firms can kind of embrace this fiduciary mindset. We’re not the only ones. There’s other firms that do this. But I think those are the types of things if you are thinking about working with advisor, you’re already working with one and you’re trying to figure out, do they have my best interest, these are the types of things I would be asking them to try to get to the root cause of, yeah, they may say they’re a fiduciary, but are they taking all the steps
necessary to make sure that everybody’s acting in the in the right capacity.
Marcus Schafer (12:03)
One of the things I hear is like the somebody repeating this because it’s pretty, pretty technical, but when we work with physicians, a lot of times, it’s kind of like you’re a teaching hospital. And that’s I think some of the mentality that ⁓ yeah, you you should see multiple people in a in a meeting trying to understand what’s going on with your situation. Some of the people are there to learn how you’re you’re working.
Pat Collins (12:30)
I I think it’s a great example. And ⁓ I think at least our clients and others have have come to understand and really like the team model because you know, you kind of you kinda always have a senior and a junior or you have different people that are getting involved and understanding the client’s situation. But it it again, it comes back to this idea of duty of care, is that as an industry, we shouldn’t be putting people in front of clients that don’t know what they’re doing. They should have some level of expertise, experience.
credentials, things like that. So it might make sense to take a few minutes just to talk about how confusing this is in the industry. Because if I were a consumer and I wasn’t on our side, I would have no idea what’s going on. And I don’t know after they after we get through this podcast, if anybody listens to this through the whole thing, if they’re still going to know what’s going on, because it’s not easy to understand it. But maybe we can go through some of the
SEC, FINRA, and Part-Time Fiduciaries (3, 4) – How investment advisers, broker-dealers, and hybrid advisors can operate under different standards and forms of oversight.
regulatory bodies and how you might think about this if you’re either working with an advisor or hiring an advisor. So starting out, you have the SEC, the Securities and Exchange Commission, is one of the biggest bodies that regulates advisors. In most cases, when they are regulating a firm like Green Spring or others like ours, ⁓ they are going to hold all of those advisors to a true fiduciary standard. You have to act in the client’s best interest. You can’t accept commissions to sell products.
It’s probably, in my opinion, the purest form of a fiduciary. And how do you find out if my firm is registered with the SEC? You can go to SEC.gov. You can, there’s a button that says check out, you know, check out my investment professional. And you can put in a firm and you can learn, are they registered with the SEC? It’s probably, in my opinion, one of the best places to start.
Marcus Schafer (14:21)
Yeah. And that’s kind of the other thing that I think should be comforting is this is a highly regulated industry. And so there are these different checks and balances. The problem with any legislation, the problem with any ⁓ legal document is it’s still confusing to like figure it out. ‘Cause now you have to read a standardized government form to figure out exactly what’s what’s going on. Yeah.
Pat Collins (14:50)
Yeah, no doubt. ⁓ and this kind of and and if you were to kind of add up all the advisors to people that call themselves financial advisor in the industry, I don’t have the exact number, but a fairly small percentage are only registered with the SEC. Most people have multiple registrations, which we’ll talk about in a minute here. ⁓ which which kind of gets to this second part. So ⁓ the next part is you could be a broker dealer.
So you work at a company that’s a broker dealer. That is regulated by an ⁓ a governing body called FINRA. ⁓ and so that’s kind of the next step. Now, where most people fall, most advisors, is what are called hybrid advisors, meaning that they have an SEC registration and they have a FINRA registration. Now, what does that mean? If you’re registered with a broker dealer under FINRA, you can sell products for a commission. You do not have to act as a fiduciary at all times.
⁓ and we’ll talk about what their standard of care is. It’s a little bit different. In my opinion, the people that are solely selling products, that’s all they do. Sometimes these are insurance salesmen, sometimes they’re selling one product or a group of products. Those are fairly easy for the cons like the public to understand, in my opinion. I go to them, I know I’m getting sold an insurance policy. Like I’m there’s no trickery here. Nobody’s acting like this person is like, you know, really acting in my best interest.
They’re going to sell me an insurance policy and they’re going to get a commission. I think most people deep down understand that. They understand the conflict exists. Great. The problem is, in my opinion, is where almost everybody lies in the industry, which is a hybrid between an SEC advisor and a FINRA broker dealer, is that they can do both now. So they can act as a fiduciary or they can sell you a product for a commission and maybe not be a fiduciary at the time.
And it’s this part-time fiduciary that’s a problem because you don’t know what hat your advisor’s wearing when they’re talking to you. So sometimes they’re acting as a fiduciary, they’re selling you, you know, or talking about some sort of investment or strategy that they is regulated by the SEC, that they have to act as an in a fiduciary capacity. And then in the next sentence, they could be selling you an insurance policy that they don’t have to be a fiduciary to sell you and they’re going to make a big commission if you buy it.
And that’s really the hard part as a as a public is understanding, wait, am I getting a fiduciary advice here or am I getting a sales, a product pitch at this point? And when s people go back and forth, that’s where it’s really hard. And people now are calling themselves fiduciaries, even though maybe they’re only acting as a fiduciary part time.
Marcus Schafer (17:35)
That’s the the example I gave earlier, which was, hey, I have this this fiduciary advisor, and I end up with an annuity. Well, how could that possibly be the case? Is because at that moment that they they said, Hey, I’m no this is where it’s difficult, right? Because I’m sure there’s a form that indicates that, but it’s along 10 other signatures, and it’s saying, Essentially, hey, now
My job is to represent this particular product as the recommendation. And I’m trying to understand if this product is right for you. And that’s a different standard than putting your best interest first. That’s what you’re that’s what you’re saying, Pat.
Pat Collins (18:20)
Yep, exactly. And y you you kind of insinuated that, yeah, ⁓ when I do sell you a product, I have to kind of have you sign all these forms basically. And that’s the whole concept of disclosure. So if you have a conflict, you need to disclose it. ⁓ my opinion, disclosure does not work. Clients, you know, I I recently bought a new car and
The Limits of Disclosure – Why signing another form may not help investors recognize or understand a conflict of interest.
I sat there at the dealership and must have signed, you know, 30 or 30 to 50 places on a form. They were all disclosures that I was supposed to read. In reality, I glanced at them. I if if there was something buried in there, which there probably was, I’m never gonna see it. And I think a lot of people approach their finances the same way. There’s these are ⁓ reams of paper of documents that you’re signing and it discloses everything that you know around why you know maybe they’re not responsible or why this may not be the best product for you.
So I I I really think that trying to find a structure is way more that that is truly a fiduciary is way more important than finding somebody that goes back and forth but tells you or discloses to you when they’re not a fiduciary. I I’ve have not found that to be very effective for the for the public.
Marcus Schafer (19:33)
Yeah. And I guess there’s ⁓ you know, there’s certain instances where for for right or for wrong, you almost have to go to non fiduciaries to do certain things that you just need to do in life. So it’s and it’s not a question about should those exist in that way or not. But like the truth is that in a lot of cases we haven’t figured out a better model. So sometimes you have to go to this.
And it just makes it difficult because you’re kind of trading convenience in some instances with this uncertainty of is this really the best thing for me, given my whole given my whole picture.
Pat Collins (20:14)
Maybe another example from when I was kind of in my my f the first job I had in this career, I was working at a ⁓ a big brokerage firm and they offered banking services as well as investment services to all of their clients. And I personally was buying we were buying our first house and I decided to use the mortgage product that they had at this brokerage firm. ⁓ and it was the worst experience I ever went through. It was we almost didn’t weren’t able to close on our house because the financing was just
A real pain. I think most people have been through bad experiences sometimes with getting a mortgage or whatnot. Anyways, I fast forward a few months later. ⁓ one of the things that they did at this firm was when you sent letters to clients, this back in the day when we sent actual paper letters sometimes, you had you couldn’t seal the envelopes before you sent them out because you had to keep them unsealed so that the manager or the compliance officer could go read whatever you were sending to your client.
Which is fine. That’s you know, we we kind of have similar things here. We we can go and monitor ⁓ our advisors’ activities. But I got kind of called down to my manager’s office and ⁓ they said, Hey, we notice here that you sent this letter to the client and you recommended a mortgage service, not at our company. Do you know that we offer mortgages? I said, No, I actually do know. I went through it myself. It was horrific. I don’t ever want to put a client through that. I had this other
Referral source that I think really would be much better for this client for all of these reasons. You know, I’ll never forget they said, don’t ever do that again. You never take money out of the firm’s pocket and move it somewhere else. And that to me is a pretty good sign that they didn’t have a fiduciary mindset. They weren’t thinking about what’s best for this client. They were thinking about what’s best for this company. And so I think it’s just another example of what is the mindset that you take. You can put all the regulations in place.
And my guess is they were following the law with whatever they were, you know, telling me to do. But at the end of the day, if you don’t have that mindset, it it doesn’t really work in practice.
Marcus Schafer (22:19)
And there is a cost to convenience, right? I shop too much at Amazon. There is a cost to that. You Amazon no longer like represents themselves as having the lowest prices out there because they do get outcompeted on price a lot. What they represent is we are the most convenient option for you. And so you you genuinely have to weigh what is the what is the cost of
that convenience. And then, you know, our our perspective is can we deliver advice that’s better suited or more likely to be in your best interest? And then how do we figure out how to match it with amazing convenience? And to your point, like that seemed convenient and it wasn’t.
CFP and Retirement Advice Rules (5, 6) – What CFP standards require, why retirement advice rules keep changing, and why the regulatory landscape remains difficult to follow.
Pat Collins (23:08)
Absolutely. ⁓ So so we talked a little about investment advisors that are regulated by the SEC. We’ve got brokers that are regulated by, you know, FINRA, they’re broker dealers. I think there’s a few other, you know, I guess types of professionals that could be subsets of these. but one is CFPs. So we see this all the time. They’ve done they’ve done a great marketing campaign on you know if you see commercials about CFPs, you and I are both CFPs, certified financial planners. ⁓ and
They have a very interesting kind of dilemma. First off, they’re not a legal body. They are just basically self-governing. and it’s more of a professional organization, if you will. ⁓ but they have this real challenge, which is the majority of CFPs still reside at broker dealers, so or have some sort of broker dealer affiliation. So they can’t say you have to be a fiduciary, no matter what. You can never, you know, turn take a commission or things like that.
That would alienate the majority of their members. So they’ve kind of gone to this thing where you have to be a fiduciary when you give advice. But now there’s kind of a question of what really is advice. Maybe I was just educating my client on this insurance policy. And if they decide to buy it, it wasn’t really a recommendation. I was just giving them education. And therefore, I can accept the commission on that. So I think the CFP is doing some really great work. And I understand the
challenges that they have of trying to make a full, pure fiduciary kind of standard would be, would be alienating to a lot of their members. But I think as a consumer, just recognize that just because somebody has the CFP designation doesn’t mean that they’re always acting in your best interests. There can be situations where they’re acting in their own or their firm’s best interest.
Stack the Signals (3, 5) – Why investors should consider compensation, registration, credentials, experience, and firm structure together.
Marcus Schafer (24:59)
There’s kind of exceptions to the rule, right? But you kind of look at these situations and as you start to stack these different points of interest, right? You’re, hey, let me okay, you’re just registered with the SEC. That’s a good that helps you. Okay, the odds are gonna be a little bit better in my favor. Okay, you’re a CFP. Hey, at least that tells me that you’re willing to essentially do kind of another six months to a year of school and pass.
This big test. And every two years you have to do these continuing compliance stuff that’s reminding you, hey, here are your standards. These are good signals that consumers should be picking up on. And then the challenge is there could just be people that are exceptions to the rule. And ⁓ but when you start to stack them, I think that’s where you really start to get the the understanding that these people are likely.
gonna be upholding the the highest fiduciary standard all the time.
Pat Collins (26:00)
I love that idea of stacking and not one of these things maybe doesn’t tell you a ton, but as you get more and more down the road and you realize, they they don’t earn, you know, they don’t accept commissions or they’re registered with the SEC, ⁓ they’ve taken they’ve taken all the coursework and have passed the CFP. That’s kind of that duty of care. Like they’ve taken that seriously. These are all really good signs that you’re narrowing in on an advisor that’s truly going to be have this fiduciary mindset. So I I think that’s great.
The the last one that’s been in the news a lot, at least in the industry news, ⁓ is now the Department of Labor has kind of weighed in on this debate as well because they’re the ones who regulate all of your 401ks at work and your pensions and your IRA, all your retirement accounts. So they’re kind of the regulator there. And they’ve have tried unsuccessfully, I would say, to kind of bring about this fiduciary standard for advice given on retirement plans. ⁓ and
That has kind of gone back and forth depending on the administration that’s in in place and some parts have been struck down. You know, it they’ve tried to make it more difficult to kind of for bad actors to sell bad products to people that are maybe rolling over their 401k into an IRA or into a bad product. Again, a lot of things where it comes back to is disclosure. ⁓ these advisors need to give disclosures to the client. It’s just more prominent, these disclosures. Here’s how much money we’re gonna make on this.
Here’s why we’re recommending it. There can be some audits of that, you know, by ⁓ regulators to come in. So there’s a little bit more teeth for whereas the CFP, if you violate the fiduciary standard with the CFP, the worst they can do is revoke your CFP, but you can still be an advisor. You kind of mess up with the D department of labor or the SEC, you may not be able to be an advisor anymore. There’s a true teeth and legal standards to that. So those are the ones that ⁓ you know.
They’re trying, but it’s it’s getting ⁓ tougher to get this stuff through in the courts, mostly because there’s so much ⁓ lobbying against a pure fiduciary standard. When you think about all of the money that could get left on the table, it’s really hard for regulators to get this stuff passed because there’s just so many people lobbying politicians on it.
Marcus Schafer (28:19)
What gives me hope is every single year we are continuing to learn and get a little bit better. That’s bringing us back to that original kind of predicament, which is, hey, I’m, you know, I’m gonna leave. Somebody has to watch my stuff. How do I find somebody to watch my stuff? That’s easier, it feels like 2000 years ago when somebody’s living in your neighborhood, when you can see their actions on a day-to-day basis.
And as we’ve kind of evolved, you could just think about, okay, well, now it’s harder to do that. So now we have to build in structures to do this. And one of those structures that was built in was fiduciary. But as that kind of gets watered down, you know, think about trying to stack some things like we were talking about. So stack fee only. All right. So you can’t take a commission. That’s gonna be a good sign. Fiduciary RIA. Okay, that’s a good sign.
CFP, that’s a good sign. There’s all these other credentials. I don’t even ⁓ I had to fill out a form today with a lot of the credentials. I don’t even know what a lot of these are, but I generally take it as a good s hey, at least it’s something.
Pat Collins (29:31)
Yeah, I I I think it’s all great comments. I think what we’re seeing in the industry, and I I share your optimism. So I I think there is good things happening. Twenty-two years ago when I started Greenspring, this was kind of a cottage industry. There were not many pure SEC, what we call registered investment advisors, kind of the pure no commission ⁓ type of advisor. If you look at where the growth has happened in our industry.
A Better Model for Advice – Why Pat believes clients and advisors are increasingly choosing firms built around independent advice.
A lot of it has happened on the RIA side, this registered investment advisors, these pure fiduciaries. And why? Because I think as we talk about it, it’s just a better model. It’s better, it’s better for clients. And eventually they wise up and they start voting with their feet, basically. And ⁓ I think that’s the market kind of doing its job to some degree. If you’re kind of a free market person and you say, well, if you offer a crappy product, people are gonna leave and they’re gonna go somewhere else. That’s kind of what we’re starting to see. So
You know, I I think sometimes it’s harder to see it as an as a client. It gets shielded from you. But when you experience, like we have clients or prospective clients that will come to us and say things like, you know, I would get advice or recommendations from my advisor, and I wasn’t sure if they were in my best interest or if they were just trying to sell me something because they had to make their mortgage payment. those are the types of things when you go through that kind of experience and then you come across a firm that is going to truly
Give advice in your best interest and not get compensated if you do it or don’t do it. All of a sudden people start, we are kind of learning about that. You can see where wealthier people are putting their money. It is with firms like Green Spring and other that have these pure fiduciary standards. So I’m I’m hopeful that this could this trend will continue because I just think it’s a better model and clients will eventually find it.
Fiduciary as a Mindset – Why the strongest standard depends on people and organizations that see financial advice as a helping profession.
Marcus Schafer (31:18)
Yeah. And we we do a lot of things just staying in touch in the industry for people that are just like us. And that’s I find it really cool that you can have a group of like-minded people at different firms that technically they should be your competitor. But when you all kind of share these common traits, you’re all, hey, we’re doing this because we believe this is a better thing. To me, that’s that’s really inspiring where ⁓ people can find the right fit for them and they’re gonna have.
kind of the same baseline expectations of that technical competency and then that looking out for for your best interest.
Pat Collins (31:56)
Love that. It was so refreshing to when I started Greenspring to have this community of people that were there that were technically competitors, but they wanted to help you. And because we were there were such, there were so few of us. And we kind of figured, you know, when all when one of us wins, we all kind of win because the the message is getting out. There’s also this kind of really ⁓ almost ⁓ mission-driven type of approach for a lot of us that started in this industry. We were so fed up with the
way that it was operating at these big firms. And we just felt like there was this mission to do better and you know, to offer something better to clients. And I still see that today with a lot of people. The people that we attract at Greenspring and not just Greenspring, but these firms that are have this fiduciary mindset and are set up that way, they’re helpers. They’re people that like they when you talk to them, why did you join that firm or why did you get into the industry, they’ll say,
I did because I want to help people. I really believe in making the world a better place and helping people. It’s a very mission-driven type of thing versus I did it to make a lot of money because it’s there’s a lot of you know, a lot of wealth is created as a a broker or as a financial advisor. So again, this is kind of more of a conceptual theoretical type thing, but I think there’s something to the fiduciary mindset and this and these people that are are driven by helping others. It comes back to.
the person that went away to go fight in the war in the Crusades, they want somebody to be in charge, not that is looking to maximize their own health, but someone to be in charge that wants to help them and make sure that they’re gonna be taken care of. And I think that’s just a real it’s a really great point.
Marcus Schafer (33:35)
One last thing for you, Pat, to conclude this episode when you when you go on your vacation to Italy, see if you could find you know, try out some of these terms, see if they resonate in Italian.
Pat Collins (33:48)
I’m gonna work that into something I’m sure I’m sure I’ll get laughed at by ⁓ by some of the Italians, but but yes, I I will I’ll do my best. All right.
Marcus Schafer (33:57)
All right. Thanks, Pat.
Sources
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- Douglas Harper, “Fiduciary,” Online Etymology Dictionary.
https://www.etymonline.com/word/fiduciary - Irina Gvelesiani, “From the History of the Development of ‘Trust’ and Terminological Units Related to It,” Electronic International Interdisciplinary Conference, 2013.
https://www.researchgate.net/publication/286912647_From_the_History_of_the_Development_of_Trust_and_Terminological_Units_Related_to_it - U.S. Securities and Exchange Commission, “Commission Interpretation Regarding Standard of Conduct for Investment Advisers,” Release No. IA-5248, 2019.
https://www.federalregister.gov/d/2019-12208 - L4. U.S. Securities and Exchange Commission, “Regulation Best Interest: The Broker-Dealer Standard of Conduct,” Release No. 34-86031, 2019.
https://www.sec.gov/rules-regulations/2019/06/s7-07-18 - 5. CFP Board, “Code of Ethics and Standards of Conduct.”
https://www.cfp.net/ethics/code-of-ethics-and-standards-of-conduct - 6. Electronic Code of Federal Regulations, 29 CFR § 2510.3-21, “Definition of Fiduciary.”
https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-B/part-2510/section-2510.3-21
- Douglas Harper, “Fiduciary,” Online Etymology Dictionary.
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