A Registered Investment Advisor

Many of you know that prior to going “independent” I worked at Wells Fargo Advisors. I must admit, I’ve breathed many sighs of relief over the last few weeks that I’m not in the position of trying to explain the big bank’s highly publicized fraud issues. I’m not going to point any fingers, but I will at least mention that one of the benefits of leaving Wells that I have stated often is that I’m no longer under constant pressure to grow the business (add clients and assets). Of course nearly all businesses strive to grow, but it should not be at the expense of service quality to existing clients. The payout structures for financial advisers at all the big banks and investment firms are intentionally geared towards rewarding those who bring in more clients and punishing those who don’t. This represents a clear conflict of interest for advisers who wish to maintain a size of business that is manageable. It also helps to explain the environment that partially caused the massive breach of ethics that Wells Fargo is now dealing with.


At the heart of recent sweeping changes being implemented by the Department of Labor (DOL) regarding those who give advice related to retirement plans, is the protection of individual investors from potentially unethical practices. The new rules mandate that advisers uphold the fiduciary standard. This standard, in simplest terms, calls on professionals in any field to act in the best interest of their clients – putting client interests ahead of their own interests. Fiduciary is a scary word. It carries legal and financial ramifications that large investment firms and banks have long avoided.

The fiduciary role has always been a requirement for those who hold the CERTIFIED FINANCIAL PLANNER™ (CFP®) designation. Shortly after I became a CFP®, it was rumored that my investment firm was considering not allowing advisers to advertise to the public that they had the designation. It seems that long before this DOL ruling, firms were uncomfortable with the legal responsibility that accompanies the fiduciary status. Knowing first hand of their fear of having their advisers take on this responsibility, I was not surprised by all of the push-back from firms regarding this new DOL ruling. I’m hopeful that these firms are not nervous about attempting to put client’s interests ahead of their own, but only about the potential ramifications if their advisers fall short. Still, it’s a little sad that the financial bottom line may have been driving opposition to a rule that calls financial advisers to a higher ethical standard, one that could greatly benefit the general public.

Maybe the best thing that will come from the Wells Fargo debacle will be a fresh emphasis on ethical practices and a wider embracing of the call to act as fiduciaries. But unless advisers and firms address motives, rather than just putting rules in-place to attempt to control behavior, putting clients’ interests ahead of their own will be impossible.

Stay tuned for Part Two of this commentary which will address the biggest obstacle for all financial advisers who attempt to act as fiduciaries.