Fiduciary is one of those terms spoken so often in financial circles that its meaning has become worn and thin. Digging down to the roots of the word though, we find the central element of all human culture: trust. Fiduciary derives from the latin fiducia which means trust or reliance, bringing the technical definition to “to hold something in trust.”
A short term for fiduciary, then, might be the “trust standard.” The trust standard that speaks of relationship rather than transaction, of loyalty over obligation.
Contrast this with the suitability standard, which is the other approach often used by financial managers. This standard holds advisors only to offer what is “suitable” – a notoriously difficult term to define concretely. These “suitable” financial products and decisions are too often tied to commissions and kickbacks for the advisor, which can distract them from your bottom line to their own.
The fiduciary relationship – “to hold something in trust” – is based instead on a transparent, flat fee, not on a commission for selling you a certain product. Your advisor, then, bases insights and recommendations on what looks good for you, not for them.
Take this scenario. You find yourself in London with a surprise party to attend, and nothing to wear. You arrive in Savile Row with a need for the best threads, and only so much time to get them. The tailor at Gieves and Hawkes meets you with a manicured smile and an expert eye.
After fitting you in painstaking detail in front of those famous mirrors, he says, “I know the perfect suit (or dress) for your build and physique!”
“Perfect!” You say, “That party is tonight!”
“Excellent.” He strokes his moustache and smiles, “Kilgour, just a block west of here, will have the perfect piece for you. I’ll make a call straight away!” And with that, he disappears into the backroom and you’re left wondering what happened. One of the most famous clothiers in England recommends his competition!
This famous Savile Row tailor has your best interests in mind, not his own inventory. As far-fetched as this metaphor may seem – clothiers are usually shrewd capitalists as well! – this is similar to an advisor who works by the fiduciary standard. The fee is paid, and the advisor works for you, no one else – including him/herself. In other words, the suit/dress salesperson isn’t working for a commission, but instead recommending the best clothing that best suits you.
The Fiduciary Standard – A Short History
The fiduciary standard was first laid out in the Investment Advisors Act of 1940, passed by congress as a response to the stock market crash and Great Depression of the decade before. The heart of the fiduciary standard described there is that advisors will put the needs of their clients above their own. Shady dealings and lack of regulation in finance had brought the country into a disaster on every level. As the smoke cleared, the country regrouped and healed together, and out of this the fiduciary standard was born.
Like the Hippocratic Oath or the Oath of Enlistment for the US Armed Forces, the fiduciary standard holds advisors to the highest bar – ethically and professionally. Those you hire should be working for you – free of conflict, self-interest, and outside loyalties. There’s a generic joke about weather used in many cities across the country: “If you don’t like it, just wait fifteen minutes and it will change!” The market can change just as quickly, and only an advisor who packs light and moves quickly can stay ahead of it.
Financial Advising: True the Wheel
To true a wheel is to make sure the weight is balanced and simple, holding equal tension throughout and remaining straight. This vital action is the work of any mechanic or craftsman—an untrue wheel will ruin a car, an untrue grind wheel will make your tools dull rather than sharp. It’s more of an art than a science, but the principles are timeless: keep it simple, keep it true.
At Pleasant Street Wealth Advisors, we are truing the wheels for the journey. We are making sure our work is balanced, simple, and approachable – ready to ride with you for the long haul. We keep our terms simple and our word trustworthy; we do what we say we will, and when you call, we answer. In short, we true the financial wheel and aim to keep it that way.
The financial industry has a tendency to use complex language to explain simple things. At Pleasant Street Wealth Advisors, we believe in using words people understand – no matter how complicated the subject, we believe in saying what we mean and doing what we say. Keep it simple, keep it true.
To true the wheel in this industry, we shape our commitment around five areas of focus:
- We are obsessed with your success. Every step of our process is designed with you in mind. In concert with you, we are able to make high velocity decisions and offer expert guidance to help keep your wheels spinning true.
- We believe in personalized solutions. There are as many portfolios out there as there people. The one-size-fits-all approach doesn’t work in any industry, especially in financial services. From the discovery session to implementation, we hone our approach to be true to you – your needs, as well as your hopes and vision for your family’s future.
- We are open and accessible. Relationships are built on communication. More deals are closed and fiduciary partnerships sealed over the lunch table than the conference table. Everyday success – the kind that matters most, is celebrated more often with coffee at the cafe than champagne on the yacht. Our open and accessible approach means we want our clients to feel like family, because that’s how we see them.
- We are wired for this. We are artisans who have been long at the craft. Our founders come from established finance and investment organizations, and their combined experience and expertise is the DNA of our firm. We value clear communication, trust, and collective responsibility.
- We are independent, objective, and accountable. With his trademark Midwestern wisdom, Warren Buffett said, “Honesty is a very expensive gift. Don’t expect it from cheap people.” At Pleasant Street Wealth Advisors, we believe that honesty is priceless. Many financial managers work on a suitability standard that incentivizes them to sell you certain financial products rather than looking out for your best interests – tempting them to line their own pockets rather than guard your portfolio. We hold a fiduciary standard – a flat, transparent fee that frees us up to look after your best interests, like the Savile Row tailor above.
Our journey is just beginning. We are truing the wheels, recalibrating our instruments – constantly focused on bringing more innovation to our clients. We are looking forward to a long successful journey on the road ahead, and invite you to join us today.