Communicating Fiduciary Advice

Resource Advisory Services has been proud to be a fiduciary since its founding. In 2016, we subscribed to The Institute for the Fiduciary Standard Best Practices, which are a clear code of conduct for what you should expect from your advisor. Recently we used 401(k) to IRA Rollovers, to illustrate the importance of these Best Practices for one type of transaction, where non-fiduciary advice costs consumers a great deal in unnecessary expense. That blog is one example of the broader standards you should expect in fiduciary commitment to your best interest whenever you get advice for any financial matters.  The second and third Best Practices further describes the experience you should get from your advisor. What to Expect, on the tab above, follows our typical relationships from your initial interest in being our client through an ongoing relationship. There, you can see how these next two Best Practices are woven throughout our work:

2.  Establish and document a “reasonable basis” for advice in the best interest of the client. Advice is given on a “reasonable basis” and a summary of this “reasonable basis” will be provided by your advisor, in writing, upon request.

3.  Communicate clearly and truthfully, both orally and in writing. Do not mislead. Make all disclosures and important agreements in writing. All important client agreements and disclosures are put in writing and no written or verbal statements are misleading.

For us, routine written delivery of the basis for our advice is a part of our workflow – not just on request. Before my earliest experience as a financial advisor, I understood that writing forces a very high level of discipline.  It helps develop and communicate the reasons our advice is the best advice we can give.  Writing enhances clarity for us advisors as much as it documents the basis for our recommendations.  If we cannot articulate our reasons in text, the advice probably needs more work to be sure it is in the best interest of our client. At the beginning of each relationship, we write specifically for each individual client’s situations in a Recommendations Reports, using language tailored specifically to their situation and ability to understand. Our Quarterly Reports continue by building a written diary for ongoing relationships.

Often, we want couples to discuss our advice in private, before a meeting with us. This gives an opportunity to consider the need for clarification in the meeting.  When we sit down together, they usually have an understanding of the issues and have done much of the work for both to be comfortable with the decisions made.  Then, we and our clients can revisit what was understood years after decisions were made.

Things don’t always go as expected. This gets to Best Practice Number 3.  When we are giving advice or reporting results, we know we must be very careful to avoid anything that might be misleading or misunderstood.  With our style of writing, we are forced to look for language that might unintentionally mislead.  As we monitor clients’ relationships, we have documents to compare what was expected with what actually happens.  It is easy to imagine things are on track when they are not.  Knowing we have written about our expectations holds us accountable to the things we said in giving advice.  If things are going off track, we and our clients are more likely to recognize when an adjustment is needed, instead of that uneasy feeling when we are not quite sure we remember what was said a few months ago.  The documents can reassure us, pinpoint why there is misunderstanding about what we expected and help find the best resolution if a change is needed.

The development of these Best Practices promises to be a reliable way people can know whether their advisor is truly acting in their best interest – A FIDUCIARY.

J. David Lewis, Principal

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