It’s a bird. It’s a plane. It’s a fiduciary advisor?





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Part of the inspiration for this article came from watching superhero movies with my sons. You know the ones where the protagonist is leaping across rooftops or hiding the shadows, waiting for the right moment to save the day.

Unfortunately, what I’ve come to realize is that the conversation about being a fiduciary isn’t wrapped in glory or heroics, but is one about diligence, process, transparency and fighting battles that our clients don’t even know they should be fighting.

With Hollywood giving us titles such as “Wall Street,” “Boiler Room,” “Wolf of Wall Street” and “The Big Short,” the investment management and financial services industries hasn’t garnered the best reputation amongst the American public. It’s time for that to change.

The term “fiduciary” is best defined at an ethical choice wherein the individual assumes the duty (and loyalty) to uphold the best interests of another. Within the financial advice industry it means, simply put, that the compensation of the advisor cannot be more important than the best interests of the client.

A leading accreditation organization in this space, FI360 Global Fiduciary Insights, recently wrote that there is an “asymmetry of knowledge between professionals and their clients that creates inherent vulnerability.” They point out “the distinction between fiduciary advice as a professional endeavor and product distribution as a sales endeavor is neither recognized nor understood.”*

Advisors have long adopted different models to operate their respective businesses – commissions, fee for assets, fee for service, etc. – but to have a full conversation we, as consumers, must also ask that our advisors improve their process, increase transparency in the products used, and pursue a higher standard to which they will operate and have the industry operate. HBO’s John Oliver took up the issue of fiduciary duty noting “hidden fees are like termites – little and unseen, but can cause a lot of damage over time.”

The concept of fiduciary duty can seem obvious, but application to the industry has proven otherwise. The Department of Labor (DOL) participated in a multi-year regulatory implementation process, commonly referred to as the fiduciary rule, that was recently overturned by the United States Court of Appeals for the Fifth Circuit. For those reading this that belong to AARP, you know how strongly they support the DOL Rule and this month lost an appeal to see the Fifth Circuit ruling overturned.

In a 2014 whitepaper, AARP found that only 40 percent of retirement plan sponsors would “very likely” require this standard in the absence of a regulation or law.** Taking the torch, the Securities Exchange Commission (SEC) has outlined standards for licensed advisors that include the terms “best interest” and “conflicts of interest” for upcoming implementation.

Charlie Munger, vice chairman of Berkshire Hathaway and long-time partner to Warren Buffett, is famously quoted as saying, “Show me the incentive and I’ll show you the outcome.”

If we accept that there is an “asymmetry of knowledge” between financial companies and their clients the same way our doctors, mechanics and realtors have, it’s also the right time to start asking professionals and the industry to improve. Maybe they don’t wear capes or have superpowers, but fiduciary advisors do fight battles you don’t even know you should be fighting. •

Mark Law is the Chief Investment Officer for UICCU Wealth Management and a Wealth Advisor with Commonwealth Financial Network. Mark holds FINRA Series 6, 7, 24, 31, 53, 62, 63, and 65 licenses as well as a State of Iowa Life, Health, Accidental Death and Dismemberment Insurance license. Mark completed his Level 2 Certified Investment Management Analyst (CIMA®) designation at the Wharton School of Business, is a Certified Mutual Fund Consultant (CMFC®), and holds the Accredited Investment Fiduciary Analyst (AIFA®) accreditation with FI360 Global Fiduciary Insights. Mark is also a 2005 graduate of the Iowa City Community Leadership Program.

*”Fiduciary Conduct and Your Reputation: What’s Trust Worth as an Investment Advisor?” 2018, Blain Aikin, AIFA®, CFA, CFP®

**”Fiduciary Duty and Investment Advice: Attitudes of Plan Sponsors”, March 2014, AARP Research, S. Kathi Brown, Jennifer Leslie.

Securities and advisory services offered through Commonwealth Financial Network®, member. FINRA/SIPC, a Registered Investment Adviser. 825 Mormon Trek Blvd. Iowa City, IA 52246 (319) 248-7200

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