What Do Stewardship and the Fiduciary Standard Have in Common?
First Rate was pleased to participate in last week’s Tiburon CEO Summit in New York. The event included close to three hundred CEOs, presidents and C-level executives within the financial services industry. To our delight, stewardship was a hot topic throughout and many different firms were discussing how they are striving to position themselves as stewards of client wealth. Stewardship is a concept near and dear to First Rate and is even included in our purpose statement. First Rate exists to be more than just a business by encouraging our wealth manager clients to become wealth stewards. See Be a Wealth Steward, Not a Wealth Manager.
forbes.com.
As the debate rages about the Fiduciary Standard (see Uniform Fiduciary Standard Ignites Fierce Debate), the idea of stewardship in relation to the standard is clear. One of the CEOs at the event likened it to a pendulum of a sales culture on one end and a stewardship culture on another. On the sales side, advisors are primarily incentivized to “push” or “sell” particular products which generate optimal revenue and commissions for their firm or themselves.
On the stewardship side, advisors are encouraged to know what their client’s goals, objectives, and preferences are and to provide the best-recommended investment solutions with only the client’s best interest in mind. More than just providing “suitable” investment products, a steward becomes the trusted advisor of the client.
The same CEO likened it to the suitability standard currently applied to the brokerage industry as the lowest bar, while the fiduciary standard as proposed and applied to SEC-registered firms is a medium level requirement and a stewardship standard is the highest and most radically client-centric standard – one standard that would truly set wealth managers apart from the competition who only do the minimum requirements set by the fiduciary standard.
We at First Rate couldn’t agree more. We firmly believe that wealth managers can best position themselves for success by acting radically in the client’s best interest in all cases. First Rate is working diligently to provide our clients with tools to aid them in this effort such as:
- Utilizing a goals-based investment process. See Three Pillars of Goals Based Investing.
- Reporting client progress towards their financial goals. See What Makes a Technology Company’s President Smile.
- Managing investment risk and communicating it in terms that clients understand, in addition to the modern portfolio theory risk statistics. See Risk From a Client’s Perspective.
Marshall Smith CIPM, EVP of Services, has been with First Rate since 2006. You can follow Marshall on Twitter @MarshallCSmith, or connect via LinkedIn.
