If you want to hear the latest buzzword in the financial community, look no further.  I’m convinced I’ve heard that word at least 6,000,000 times just in the last month or so (ok, perhaps I exaggerate a bit but you get the point).

Let’s start with the dictionary definition of the word.  According to Merriam-Webster, the definition is: of, relating to, or involving a confidence or trust: such as

a: held or founded in trust or confidence a fiduciary relationship a bank’s fiduciary obligations

b: holding in trust

c: depending on public confidence for value or currency

fiduciary fiat money

If you notice, until the examples are given, nowhere does it mention anything about money.  The key word in my opinion is “trust”. 

So, how did the financial industry take this word and make it their own?  Well, the answer is pretty simple in my opinion.  If you don’t trust the people who are working with your money, it will never be a good relationship. 

There have been a lot of corrupt financial professionals that have really hurt the reputation of our industry.  Our business has been hurt in multiple ways including brokers and/or advisors stealing money, churning brokerage accounts for commission, selling inappropriate investment products for high commissions, the list goes on.

Since I am a fee based advisor, this leads me to why I am fee based. 

I started in the business about 20 years ago as a “financial service representative” with MetLife.  In this office, I was a “registered representative”.  That means that I was “commission based”.  In other words, if I didn’t sell, I didn’t eat.  While the people at MetLife were amazing, and the training I got was second to none, I felt like there was something missing.

MetLife did allow their reps to sell other products (other company’s annuities, mutual funds, etc.), but they based their compensation on how much product you sold from MetLife.  At that point in time, I was not acting as a fiduciary.  Don’t get me wrong, I was very honest with people, and they knew what they were getting into when working with me, but I still felt there was a better way of doing things.

I then passed my series 65 test.  That is the test that allows me to become a fee-based advisor.  MetLife had a program for that at the time, but it was still typically more beneficial to sell MetLife products.  I left MetLife shortly thereafter.

Before I talk about my life as a fiduciary, I want to make something perfectly clear.  It is totally possible to be honest, ethical, and act in the client’s best interest and still be a commission based rep.  I’m not trying to say anything bad about that.  I just want to explain why I chose the fee based route.

Eventually, when I started my career as an independent advisor, I got something that was very important to me.  I could have discretion on accounts.  That meant that I could place whatever trade I wanted at what ever time.  Don’t get me wrong, I never did anything that the client wasn’t expecting in some way (I keep a very open dialogue with my clients), but it was nice to not be bound by a specific insurance product or mutual fund.

I love being fee based because I feel it puts myself and the client on the same side of the table.   If they make more money, I get a raise.  If they lose money, I get a cut in pay.  It makes absolutely no difference what investment they are in.  I’m financially motivated to do the best for my clients. 

The other part about it that I love is that I have an existing book of business that pays my bills.  So, I don’t have to be pressured to sell another financial product.  I can use the fees from my current clients to pay my bills.  Don’t get me wrong, I wouldn’t mind having more clients, and I do still actively market, but I could get no new clients the rest of my life and I would still be able to survive.

While it was hard in the beginning, I’m glad I was able to be totally fee-based when I went independent in 2009.  It was one of the best professional decisions I ever made.

If you would like more information on our services, feel free to email me at mtosaw@rcmfs.com.