Episode 14 What Can a Fiduciary Do for Me?


Welcome to the retirement guy. Fudd cash with Gary older from the king or investment group in this podcast, we educate people in or near retirement. So they can make informed decisions and bridge, the confidence gap we're in how to mitigate risk and retirement. So you don't want out of money before you run out of new join Gary Oldman and explore strategies on how to live a stress free retire. Hello and welcome to the retirement guy with Gary Alden from kingwood investment group today. We're going to be talking about fiduciaries. And I think is gonna take us through the basic of what do -ciary really is. Good morning, Gary. How are you just fine? How're you doing today, sir? Doing fantastic. All right. We are talking about fiduciaries. But before we get started the trivia question for me. Yes. I do this actually came up conversation. I'm not really sure why can't remember the context? But the question is how many bones or in your body? And there's actually two answers. Well, I'm going to guess part of it. I think bone your body the two answers would be like when you're younger, and when you're older because the changes in the body, and I'm just going to throw out a number two hundred and forty okay does issue. Don't. So that's my guess that's two hundred forty ish. We'll go with that. All right. So I'm sure we'll get the answer later. So let's let's talk about fiduciaries. What do we learn to Gary? Well, we're kinda cover eight bullet points today. Eric, I is what is do Sherry? Why should I or a why should someone work with one a background on the fiduciary rule? What is the in ACF? That's a national association of certified financial fiduciaries. What is a certified financial fiduciary? What is the code of conduct? What are the qualifications to have a CF designation? Number seven. What's the future of the best interest rule and number eight or to me the three key questions that everyone when they're looking for a potential financial advisers to me three key questions? They should always be asking. All right. A lot of information where we starting. Well, we're starting is what is the do. And why would I want to work with all right in this kind of goes back to federal law, and it encompasses the federal pension and tax laws, and they are set up to protect you and me and all investors by imposing fundamental standards on their investment advisors and individual and firms that are held to these standards or call to-do shears into apartment of labor state set fiduciaries or required to act him harshly provide advice that is in their clients best interests and not in the best interest of the adviser of the words, you put your client. I. And the department of labor states have fiduciary to act impartially like I said and additionally fiduciaries are not permitted to receive payments that could cause a conflict of interest in the less they comply with certain conditions, for the exception. And also disclosed that to the client if there is a potential conflict of interest. So that's basically what a producer is kind of bottom line someone it's going to act in your best interest. Eric to give you a little bit of background in this years and years ago when I four one K plan for setup back in the nineteen eighties. The department of labor has jurisdiction on four one K plans in other words, employer plans and one of the rules on player plans is that employers and the providers up those four when K plans act in the client's best interest while several years ago, the -partment of labor decided to. To extend past four one K plans into IRA accounts, and they announced in advanced several years events that I Ray providers. We're going to have to start acting in the best interest of clients. The kinda give you some background when I became a financial adviser back in nineteen ninety four the standard in and it still is true today that if I get a new client, let's say, Rick, your my new client is I need to get to know you understand how much risk you wanna take when you wanna retire. Everything about you know, the words no your client, and then make a suitable recommendation that was the standard actually still is the standard to this day, whether department of labor came out, and they said for retirement accounts that financial adviser should be held a higher standard initial be acting in the client's best interest, which is a higher standard than acting are giving you a. Suitable recommendation the part of labor roses rule several years ago, lots of comet back and forth, virtually every form on Wall Street redid their platforms came new programs to comply with the new rule. And then guess what happened last year in twenty Eric? I have no idea. Well, what happened last year was this law or this rule that the department of labor was trying to impose was not down by the federal courts really in. Basically what the federal court said is the department of labor had over stepped their boundaries. And they did not really have a thority to impose his rule on the financial services industry really should have been up to the securities and exchange the DOL rule, if you read anything about it on the internet, if you've been reading anything paper, it's been not down by the courts. But now the securities and Exchange Commission, they are working on a best interest standard that will be put in place sometime down the road. Now one thing complicating this since the department of labor rule was not down several individuals states have come. With their own best interest rule for residents of that state. In fact, I was just a couple of days ago in the Wall Street Journal, Maryland state of Maryland now has a best interest rule for their particular state and several other states now have censorship rules in that really could create a little quagmire at there because you've got fifty states with fifty different sets of rules, just create a minefield that there. So we really need to federal government to step in security and Exchange Commission and establish one standard this going to be level across all fifty states. We've got to sit back and see what happens on that Gary. When somebody is a fiduciary what happens if they don't follow through on those rules. What what kind of consequences are there for an adviser who doesn't follow the rules? Well, one of the things is if you hold yourself out to be a juicer. Now the words I say, hey, Gary, all I'm a fiduciary. I've now open myself up to litigating if I don't follow through on that. Now, if you just keep your mouth shut, and you don't say your fiduciary, and you just say, hey, I'm going to act then give you suitable recommendations, you're not held to that standard. But one of these days all financial advisers if the SEC comes through with the rule, and again, we have not seen rule yet. Every financial visor in the country were presuming it's if the SEC comes up somewhere to whatever the deal was going to propose we will all s financial buys IRS. We will all be held to a higher stain. And I think that's a good thing. I don't think there's any profession out there. I don't think anybody would argue that each professions should be working in the best interest of their client. You'd certainly want your doctor to work in your best interest. And not there's you want your mechanic to work in your best interest. And not there's just kind of a no brainer to me. Yep. Yep. You're absolutely right. So because of really the deal. Coming down with this rule and saying, hey, financial advisers, you're going to have to start acting as the do Sherry and act in the client's best interests versus doing suitable interest. An organization was formed called the national association of certified financial fiduciaries. And it's an organization set up created to help provide financial professionals such as myself with information tools resources needed to make sure I am complying with the department of labor Orissa fiduciary rules guidelines, and they've taken that a step further by providing a extremely comprehensive fiduciary training program, and then a certification process. So last year, I went through that program flew to Chicago spent a couple of days up. There you go through a class, and they send you home. And there's a lot of home study to do. And then you have a one hundred question test. Have to score seventy five or better, and then agreed to the follow the standards set forth by that organization. We are set up to do that. And I just want to kind of a click off some of the code of conduct in some of this is really kinda neat. When I go through this code of conduct. Gary, you really kinda hope your financial advisor has been doing this all along absolately some I'm sure there are some financial visors who've done this. But I'll betcha there's a lot who have. But. The three key components of the code of conduct to be a certified financial fiduciary. Number one is practice. The duty of loyalty. Should be Jing first and foremost to always put my clients best interest. First number two, the practice the duty of good faith, and that is my fundamental obligation to treat all clients fairly and in number three practice the duty of good care, and that is my fundamental obligation to exercise the skill of an expert in the only advise my clients in those areas were I really have the expert skill level to do. So let's just say I didn't know much about alternative investments. Well, if I really don't know much about I'll turn investments, I need to tell my client that up front in don't try to wing it. And just say, I don't really know about that. I should not be advising you'll net. If you're considering an alternative invest having said that I'm up to speed, turn even vestments. I was using that as an example in addition to the. The three bullet points that we just went through. Also, it's my obligation to educate my clients, I need to provide. And I do think I provide comprehensive and unbiased education clients ensuring they have a firm grasp of the subject matter prior to them making a specific investment based on my advice. Also, we do a holistic approach we consider all aspects and factors that affect a plan prior to making what are the investment decisions are and then give advice about any part of the client's financial plan or circumstance. In other words, we really drilled down the really get to know the client. I'll give you an example here few years ago. A guy came one of my workshops, and he called me up. He said, Gary relax your workshop. He said, I've got one hundred thousand just laying around what would you recommend a do with that money? And I had the Tele gossip I don't know you from bug. I don't know risk tolerance. What you wanna do? And I. Basically totally I couldn't make a recommendation and he shot back. Don't you have a hot stock ideal? Hot enough. I had to come back and telling we have some ideas. But again, I'm not about so recommend something to you. Because I don't know you though, we take a holistic approach we get to know the client. Yeah. The only recommendation there is don't leave Atlanta around. The next point is full disclosure. We always divulge all fees or forking on a commission. We always divulged that as well as close any potential conflicts of interest. Another thing that we are required to do as certified financial new Sherry is to provide. Comparisons of all suggested products with the tail explanation of why we are say recommending this product over another product. Then of course, couple of things you would kind of just expect one is confidentiality. Protect and keep all clients information, confidential and securely stored and in the last point is professional practice management as a CF designate. I must agree to run my practice with the utmost professionalism, using documentation and procedures set forth by all relevant government bodies, including the securities and Exchange Commission and department of life. That's kind of we went through a whole bunch of stuff there. But those are the key points on the code of conduct that I am sworn to uphold on now. The next point. I wanted to cover is qualifications to even get a CF designation. And of course, one is the pass that test, but also to even be able to walk into door and go through the training. The candidate must have at least ten years of relevant work experience or five years experience and a relevant bashers degree or higher. Gotcha. That's good. Most exemplify high standards of morals ethics and fiduciary standards of service. Again, we must successfully complete training and certification process and pass at one hundred question test with a score of seventy five percent or better. And then we have of course, go through a full background check and be in good standing with all state and federal licensing requirements. Are there any is there any additional education that you need to attend or or do in order to keep that designating? Yes, every year we have there are continuing education requirements. Just like you have an, you know, most fields of expertise good just after do for my securities licensing every I think it's actually every other year same way if you have an insure. Licensor continuing education the same way with the national association of certified financial do Sheri's. There will be continue education required. The stay in good standing, I think that that's so important for people to hear because I don't know that a lot of the audience would know that that there's now you're always studying, and you're always learning about new opportunities. New investments new strategies things like that. Just because you want to be the best visor, you can know that about you, Gary. But I don't think a lot of the audience knows that there's actually organizations that require you to take specific courses specific continuing education. So that you can remain certified that you can remain and you can continue to have those designations. That's just something that I don't think the general public knows that you you actually go to school every year. That's just like right now, I've got a go online and take a four hour class on Medicare. Oh, well, things we advise clients on his Medicare. And they're always changing the rules. And there's new stuff coming out. I've got a log online and take up for our course, I know on to do it. It's just finding that four hours out of my life to go do it. But I'm literally got to do that with the next couple of days. All right. How fun so. And then also has nothing to do with what we're talking about today. But I'm running a social security class year shortly, and I've got an eight and a half hour course, I've got a complete within the next ten days because the eight and a half hour. Online course covers the change. Just the changes to social security back in twenty fifty. No, I wanna be up to speed wanna do the social security class. Oh, somebody raises their hand. And ask me a question. I want to make sure I'm giving them the correct answer based on the current rules and regs on social security not the rules rags back in twenty twelve twenty thirteen twenty four and just to be clear. Your the one attending that eight and a half hour class your social security class for your for your clients is not enough hours. No, no, an hour and ten minutes. Perfect. I don't look stupid in that class. I need to get up to speed on social security perfect. And again really about I won't say every year. But bet every other year, I'll go to a class hell by lane Floyd on social security. She lives in the Seattle area. And she is probably the best expert on so security outside the United States government Duran's nice. So Eric the last point I want to cover today in this is the three key questions. I think every potential. Client should ask their potential financial advisor. I'm meet literally probably one hundred hundred fifty people per year that come in. They've come to one of my workshops, and they've asked for a complimentary consultation, my office and easier the three questions, I think they should be asking if a client Doug Nessie SRI questions, I bring them up because sometimes I think people may be afraid maybe they're afraid to kinda ask some questions. And hey, ask me a question. I'm an angel do Sherry, and you know, I wanna act in your best interest. Everything is open and above board. But to me, these are the three key questions. I want to ask somebody number one. What's your background? What certifications you have? How long have you been in the business, you know, etc? Set are you wanna get the know this person that they're not the client's not going to be my clients? I climb. So what what's the background of financial advisor? What designations they hold? What is their level expertise? So number two, Eric the second question that I would ask if I were client interviewing a potential financial advisor is higher. They paid higher. They often cited. Yep. Most financial advisers these days probably were if they hold themselves out to be the do, Sherry and acting in the client's best interest. They don't charge commissions. They work on a flat fee. Oh, that's pretty well how we work with most of our clients is let's say I charge a one percent the to manage somebody's account. So I've vis interest in account doing well because at the account does. Well, I do well if the account doesn't do well, I don't do that will. Because again, I'm working on a percent of the value of the account. So the bay account goes down my compensation coast out goes up. My compensation goes up and dollars percents stays the same. But the dollars goes up. And then the third thing I would ask a potential financial visor is will you act and my best interest in even know it's not law of the land yet. It probably soon will be I still would like to know even though it's not the law. Are you going to be acting in my best interest in? Are you holding yourself out to be a financial fiduciary? Yeah. And I think that that's so important because we've had this conversation before you I've talked about this. And you've you've mentioned on other podcasts as well. If you ask that question, you say will you act in my best interest? There's really one or two ways that answer is going to go. It's either going to be. Yeah. Yeah. Yeah. Yeah. Yeah. I got you. Sure. Not a problem. That's probably not someone you want to continue to work with. But if they answer the question, No, absolutely definitely will act in your best interest. I'm a fiduciary, and I am held by a standard, and I have to act in your best interest. There's your answer. That's that's what you're looking for. If if it's just kind of a head on awaken. Yeah. Yeah. I got you. Yeah. That's that's not a good. Not a good answer in my opinion. Now, good answer. And I would get it in writing. Like, we have a real nice brochure that explains what if the do she is in really covers really the bullet points and things we covered in today's podcast at it written out black and white hand clients. So they know exactly where we're coming from. And what we're going to be doing for them. And really again, what a real financial fiduciary is pave. Somebody's listening to this podcast right now. Gary, and they want to share that information with their spouse. How did they get that? Besides sharing the podcast with them. How do they get that brochure that document from you? Oh, just give us a call. We got I've got literally several hundred these here in the office. We can just we can drop one in the mail to you in a minute perfect. All right. It's a quick easy read. Then of course, you always people go on the internet and find stuff, and we will know, Eric if it's on the internet. It has to be. Yeah. That's not a rule of thumb. I wanna live by any more. So I think we pretty well covered. What a fiduciary supposed to be doing to me the code of conduct. And in the bullet points went through. Here's what if someone is holding cells to be a financial fiduciary. Here's what they're going to be doing for. You are should be doing behind the scenes to make sure they really live up to that standard. Absolutely. No. I think it's great information. Gary, thank you so much. We you got to you got to answer the trivia question. Now when my even close. Yeah. And you're pretty good because I did I actually always I look around on the internet actually every once while a friend who who's a big trivia buff. And he'll give me a piece of trivia. And I'll use it on our podcast. But I went out and looked and you really had the correct answer when we're born. Yeah. Everage baby. And of course, it's going to vary from child Challe has roughly around give or take around three hundred bones in your body. That's when you're born, but time, they reach adulthood. That numbers drop to around two hundred six ish because a law the bones that were born with a fused together as Grosso, you actually have less bones as you get older. So the answer the question round three hundred or so when you're born and again, when you reach adulthood give or take around two hundred six because as my doctor was telling me one day, he says some people have twelve ribs on each side. He says sometimes somebody's got fourteen ribs on each. Wow. Wow. That's a lot of rips all exact up. Yeah. Yeah. Because I mean, here's the thing. If if babies didn't have multiple bones in their skull. They wouldn't be squishy enough to you know, make the journey out. So I know that the skull itself has a lot of bones when you're first born, and then obviously wanted to solidify into one, you know, basic basic skull, so yeah, yeah. That's very interesting. But I didn't know that drastic though, three hundred two hundred six that's that's quite a quite a difference. Yeah. It is. All right. Well, thank you for your time. And thank you for all the great information about fiduciaries. And if anybody has those questions, and they wanna get a brochure. They just want to talk to you can you give us the number real quick to eight one three five nine seven nine zero zero two eight one three five nine seventy nine hundred perfect. Thank you so much for your time again. And thank you for listening to the retirement guy podcast with Gary Alden. If you've not subscribe to the podcast yet. Please click the subscribe now button below this way. When Gary comes out with a new podcast, it'll show up directly on you're listening to vice this makes it much easier to share these podcasts with your friends and family. Again. Thank you for listening today for everyone at kingwood investment group. This is Eric Johnson reminding you to leave your best day every day, and we'll see next time. Thank you. For listening to the retirement guy podcast. Click the subscription button below to be notified when new episodes become available. The inflammation covered posted represents the views and opinions of the guest and does not necessarily represent the views or Figgins of kingwood investment group. The content has been made available for information and education purposes, only the content is not intended to be a substitute for professional. Investing advice, always seek the advice of your financial advisor or other qualified financial service provider with any questions that you may have regarding your investment, planning kingwood investment group is independent of exponential grouping securities and investment advisory services offered through next financial group Inc. Member if I n RA slashes IPC.

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