13 Feb February 2017: Acting In Your Best Interest
In the first few weeks of the new administration there has been much discussion around financial de-regulation and a return to the principles of Reagan-era unrestricted free-market policy or “Reaganomics”. Of particular focus is repealing or easing many of the laws enacted after the 2008 financial crisis, laws intended to prevent such a future occurrence. It is not our intention to opine on the costs versus benefits of such regulation; we’ll save that for Congress and the talking heads. However, a particular headline struck us this week: Administration Targets Rule Requiring Advisors to Act in Their Client’s Best Interest – a reference to delaying or quashing altogether the Department of Labor’s (DOL) “Fiduciary Rule”: While a provocative headline, it raises the question: What does it mean to act in your best interest?
Visitors to our newly designed website GreenwoodGearhart.com are greeted with a very different headline: An Investment Advisory Firm Designed with the Client at the Center of Everything. In meetings with clients or prospective clients, we often discuss this topic and how our firm is different. We harken back to our firm’s earliest beginnings when our founder, Mary Ann Greenwood, set out to build a firm in her vision. Mary Ann was a pioneer. Not only as a woman in the south, in 1982, in a male-dominated industry (she had her doubters), but also in the way she prioritized the values of a firm that was way ahead of its time.
Although we are glad to see the rest of the industry “join the club” with the DOL rule, the rule itself, if implemented, won’t impact Greenwood Gearhart. Why? Because the central tenet of our firm – since 1982 – is that we are fiduciaries in the management of our clients’ wealth. For thirty-five years we have been, we are currently, and we always will be acting in our client’s best interests. We are not stock brokers, who under current law may sell products deemed “suitable” regardless of whether it’s in the client’s best interest. This arrangement, deemed the suitability standard, is far less rigorous than the fiduciary standard and is, in our opinion, riddled with potential for conflicts of interest. Chief among them is the opportunity for the broker to sell high-commission products: they may be suitable, but their high costs aren’t necessarily in the client’s best interest, especially if alternative options exist. In contrast, Greenwood Gearhart’s model, where fees are based on a percentage of portfolio value, largely reduces or eliminates the potential for conflict. We do not “sell” our clients anything or accept commissions in any form. This is one of our key distinctions as an SEC Registered Investment Advisor (RIA). Further, as Charter Financial Analyst (CFA) charterholders, we abide by a code of ethics that, among other standards, requires us to “place the integrity of the investment profession and the interest of clients above our own personal interests.” The DOL rule won’t impact our already client-centric approach. It is simply welcoming others to the fiduciary table. We were way ahead of the game.
We recently went through a strategic planning session with our partners at Charles Schwab. Our entire team participated, those with thirty-plus years with the firm and those with three. As part of this two-day process, we formalized our firm’s core values, each of which is rooted in our founding. Collectively, we believe they answer the question of what it means to act first in our client’s best interest. We want to share these values with you.
Service to Our Clients, Our Community, and Each Other
• Clients are paramount and their needs eclipse all else.
• We give back to our community and the community of our clients.
• As colleagues, we support each other in our common purpose of providing peace-of-mind for our clients.
Alignment and Transparency of Our Interests
• We are fiduciaries and must act in our client’s best interests before our own.
• Our personal investments are invested alongside our client’s – what you own, we own.
• We are compensated based on fees only – we make money when our clients make money.
• Our clients know exactly what they own and exactly what they pay us for stewarding their financial resources.
Fanatical Attention to Detail
• We produce accurate, timely, and reliable work for our clients.
• Everything that leaves our office is reviewed with multiple sets of eyes. Revisions are encouraged.
• There is no pride of authorship in an effort to produce the strongest possible end work product.
Personal and Professional Fulfillment
• We believe that when our team is fulfilled both personally and professionally, the client benefits.
• We promote a flexible work environment.
• We work hard, but not at the expense of our families and personal lives. Lifelong Learning
• The constant pursuit of knowledge influences all we do.
• We seek to educate our clients – and ourselves – to obtain the deepest understanding possible of our approach to wealth and investment management.
• We seek continuous improvement as individuals, investors, and partners with our clients.
There are both bad and good actors in the financial services industry – in every industry. At Greenwood Gearhart, our firm is designed with the client at the center of everything. We don’t always get everything right, but our clients and partners can rest easy knowing their hard-earned wealth is being stewarded by capable, dedicated, and fully-aligned professionals. It’s the only way to do business.
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