Boss Blog: March 8, 2017
Fiduciary Responsibility – John Oliver and Financial Advisors
fi·du·ci·ar·y
A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.
One of my favorite TV shows is “Last Week Tonight” with John Oliver. In my opinion, he is one funny dude. For the most part, he touches on the hot political topic of the day. #dumptrump. Sometimes he does branch out and touches on other interesting topics. One particularly fascinating episode he speaks on financial advisors. He describes the difference between being a “fiduciary” and not. John had some pretty scathing points about “non-fiduciaries.” I would have to say I agree with pretty much everything he said. In this post, I will describe my take on fiduciaries.
Investopedia defines fiduciaries duties as both ethical and legal. “When a party knowingly accepts a fiduciary duty on behalf of another party, he or she is required to act in the best interest of the principal, the party whose assets they are managing.” In simple words, don’t screw people over. You have to make sure your recommendations are in line with your clients’ best interests. That sounds pretty obvious to me. It’s hard for me to imagine an advisor that doesn’t do this. Sadly it does happen.
It is crucial for financial professionals to have your best interests at heart. Well, that begs the question: “How do I know if someone has my best interest at heart?” How I feel about this is simple. It is actually the key to any relationship, financial or otherwise. TRANSPARENCY, TRANSPARENCY, TRANSPARENCY. Show me what you got. Even more, show me what you make. Explain the benefits of the product to the client, but also the advisor. My whole life I feel like I have been underpaid so explaining what I make should be no issue. If your advisor can’t do the same then dump him/her like a prom night mistake. If only our government worked this way!
The financial service industry can be complex. The problem with it is that some people make it more confusing than it should be. In my opinion, the goals are simple. Home ownership, comfortable retirement, protecting your family, etc. The products are simple as well. RRSP’s, TFSA’s and insurance can be explained easily. So then the question then needs to be asked: where does the confusion occur? People get lost when they don’t have all the facts. Not knowing all the information breeds mistrust. Mistrust breeds disillusionment. Disillusionment is why being a fiduciary is necessary in the first place.
I come from the service industry so this concept seems simple to me. I have worked at restaurants that sold entrees for $25 and it was a total rip off. I’ve also worked at other places that sold a burger for $5 that tasted like garbage. Price should never be the main issue. True value is what every consumer seeks. Do you stand behind your product? Do you stand behind your service? Where I come from having a great product and a great service are both important. Is something as small as your retirement or your family’s security any different?
As I have grown in life I have noticed certain things. One is that sometimes the simplest things can get convoluted. It’s kind of sad when you think about it. The name says it all: Financial Advisor. You give financial advice. Does anyone expect you to work for free? No. The point is that you should be able to justify your paycheque. If you cannot then maybe the financial services industry is not for you. Personally, I am proud of my designation. I practice what I preach. Being a fiduciary comes with where my heart has been all along. The world is full of shady people. I think John Oliver’s point was that make sure your financial advisor is not one of them.
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Joseph James Francis is a Financial Advisor (and a Fiduciary). You can find him on various social media platforms and at www.budgetboss.ca.