The Importance of a True Fiduciary

Acting as a fiduciary is the highest legal duty and standard of care in which to interact with someone.  As a fiduciary for all my clients at Bluewater Investment Strategies, I am always legally bound to act ethically, in their best interests, and put their needs ahead of my own.  I have always found this term and the fact it is needed in the financial world interesting as this is the way I would interact with my clients whether there was a law about this or not.  The unfortunate reason why this is needed is because there are some bad apples both on the individual and firm level who would seek to exploit others.

There has been a mass exodus of financial advisors leaving the large wirehouse firms in recent years to enter the independent advisory business[1].  One of the reasons is due to how each side handles being a fiduciary.  In my 13 years at a large wirehouse firm I acted in the fiduciary capacity for most of my clients (and still acted that way even when I was not legally required to do so).  Even when I was acting in a fiduciary capacity, I was still subject to my firm’s own internal rules and regulations.  As I worked for a publicly traded company whose number one goal is to maximize shareholder profits, I would sometimes run into firm rules as a fiduciary that were not beneficial to clients.  On more than one occasion I had expressed my concern to management that I was bound to act as a fiduciary for clients but the firm rules were prohibiting me from doing so.  In each of these instances firm management admitted to me that the rules were not in my client’s best interest but even with that being the case they would refuse to change them.

Being a fiduciary now not affiliated with a publicly traded company has been a welcome change.  From better execution on client trades to commonsense policies, I have been able to work with my clients to truly do what is in their best interests without having to deal with the egos and unending layers of corporate bureaucracy of a large company.  Also, I now no longer receive pressure to try to sell clients mortgages and other investment products that do not serve their needs.

Many financial advisors will say they are fiduciaries and while technically being correct about that I have found that there is a big difference in being a fiduciary in the context of a large publicly traded company and a fiduciary as an independent financial advisor.  So the next time your financial advisor tells you that he or she is a fiduciary it is a good idea to probe that statement with a few more questions, especially if that is in the context of working within a publicly traded company.


Robert David

Portfolio Manager & Financial Advisor
Bluewater Investment Strategies, a member of Advisory Services Network, LLC

All views/opinions expressed are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.