The Illusion of Protection - "I'm a fiduciary, but, but, but ...."

A. Introduction.

Over and over again at conferences I hear, and over and over again in various articles I read: "Avoid conflicts of interest if you are a fiduciary. But if you don't avoid the conflict, then properly manage the conflict by disclosing it."

Sounds fair. But is it? Is this all the fiduciary standard requires? Mere disclosure of conflicts of interest?

I think not. In my view, based upon the research I've done, under the common law a bona fide fiduciary standard requires not just disclosure of conflicts of interest that are not avoided, but much more. Disclosure must be undertaken in a manner which is ensures client understanding. This means that the less the sophistication of the client, the greater the discussion which must occur around the conflict of interest. Also, the informed consent of the client must be obtained. And, even with disclosure, the proposed transaction must be substantively fair to the client. Courts set aside transactions by clients of fiduciaries when a transaction is not fair, either by casting it as an "substantively unfair" transaction to the client or by noting the client understanding and informed consent was not obtained. In summary, courts doubt that clients would ever consent to be harmed.

Yet, it appears that the SEC has failed to enforce the fiduciary standard correctly (as I have previously written about). And it also appears that many large Wall Street firms are putting themselves (and their advisors) at risk, by relying upon "mere disclosure" as the means of "managing the conflict of interest." The evidence of these practices is found in the SEC disclosure document required of these firms, which are publicly available documents.

B. Let's Examine the Morgan Stanley Private Wealth Management SEC Disclosure Document (Generally). 

As an example of what is taking place in the marketplace today, let's take a few minutes to examine the Form ADV, Part 2A (SEC-mandated disclosure document, which must be given to every client of an investment adviser) of a large, dually registered firm. While it is not my desire to pick upon any firm, I'll choose, more or less at random, the first firm that comes to mind - Morgan Stanley Private Wealth Management, a Division of Morgan Stanley Smith Barney LLC. The Form ADV, Part 2A is for its "PWM Wealth Management Services." This Form ADV, Part 2A, dated July 26, 2013, is accessible through the SEC's web site (via IAPD).

  1. Morgan Stanley's "Dual Registration" Status. 

Morgan Stanley Smith Barney LLC ("MSSB") is both a registered investment adviser (firm) and a registered broker-dealer (firm), among other registrations and memberships. It is likely that most of the "investment adviser representatives" of Morgan Stanley are "dual registrants." In other words, they are licensed both as registered representatives (sales representatives) of a broker-dealer firm and as investment adviser representatives (fiduciaries).  In some instances, the "Private Wealth Advisors" (also sometimes referred to as "Financial Advisors") of MSSB, as they are referred to, may also possess licensure as an insurance agent (thereby enabling the recommendation and sale of insurance products, such as variable annuities and variable life insurance products). The Form ADV, Part 2A makes no mention of this fact, but it would likely be found in each individual Private Wealth Advisers Form ADV, Part 2B (individual disclosure document).

   2. Client-Paid Advisory Fees to MSSB.

For its advisory services for its "Private Wealth Management Services" MSSB may charge a maximum advisory fee, paid directly by its clients (or deducted, with client consent, from the client's accounts, which is typical) of 2.0% annually. There is no doubt that many clients have negotiated annual advisory fees lower than 2.0%, however.

C. What About the Other Fees and Costs that Clients are Paying to MSSB, or In Connection with the Products Recommended? 

The main questions I seek to ascertain, through this analysis, are: (1) What other fees and costs the clients may be paying to MSSB, directly or indirectly, under this program? (2) Are such additional fees and costs adequately disclosed? (3) Are conflicts of interest, and their impact upon the clients, clearly and candidly disclosed?

Let's look through Form ADV, Part 2A, to see if we can determine these other fees and costs, how they are disclosed to clients of the firm in this disclosure document, and whether such disclosures are meaningful to clients.

   1. Payment for Shelf Space. There is a common practice in many broker-dealer firms, called "payment for shelf space." In essence, mutual fund companies pay the broker-dealer firms revenue-sharing payments, in order to secure preferred treatment. Here's how the Consumer Federation of America's Travis Plunkett, in testimony to Congress, described these arrangements:

• "Payments for shelf space are another form of revenue sharing payment used to promote distribution. In this case, the fund’s investment adviser makes cash payments to the broker- dealer in return for “increased access to their sales staff, or for ‘shelf space.' The SEC, in its examination sweep, found that payments vary considerably, from 5 to 40 basis points on sales and from 0 to 25 basis points on assets that remain invested through the broker-dealer. Fourteen of 15 broker-dealers examined as part of the SEC sweep received such cash payments."

(Testimony of Travis Plunkett, Legislative Director, Consumer Federation of America, Before the Senate Governmental Affairs Subcommittee On Financial Management, the Budget, and International Security Regarding Mutual Funds: Hidden Fees, Misgovernance and Other Practices that Harm Investors; citing  “SEC Revenue Sharing Examination Findings” email provided to reporters by SEC Tuesday, January 13, 2004.)

The Consumer Federation of America notes that payments for shelf space do not come directly out of shareholder's (customer's) pockets, but rather are paid out of other fund company revenues. In many instances these costs are, in essence, paid indirectly by fund shareholders, as they are paid from the management fees paid to the fund's investment adviser. It might be reasonable to conclude, all things being equal, that if payments for shelf space were not made, it is likely that the management fees of such funds would be lower.

Let's now examine MSSB's core disclosures, in its Form ADV Part 2A, to its clients regarding such payments:

•  Payments from Mutual Funds. For Clients who chose to custody their assets at MSSB, MSSB receives payments from mutual fund companies whose open-end mutual funds are offered through the programs described in this brochure, of up to 0.16% of the assets of such Mutual Funds that are held by MSSB clients at MSSB (referred to as a “participation fee”). As described in greater detail below, the participation fee is paid by fund companies primarily to compensate us for providing services that the fund company would otherwise have to provide itself. However, a portion of the participation fee may be considered as “revenue sharing.” These payments are separate from, and do not impact, the fee that clients pay to us. They are paid directly from the mutual fund or its advisor or distributor to MSSB. Moreover, MSSB Private Wealth Advisors do not receive any additional compensation as a result of these payments.

• A substantial portion of the participation fee compensates us for services that we perform on behalf of the fund sponsor or company. These services are generally sub-accounting and recordkeeping functions such as aggregating and processing purchases, redemptions and exchanges of fund shares; delivery of disclosure documents; processing of dividend distributions; tax reporting and other shareholder or administrative services.

• MSSB considers the portion of the fee that exceeds the amount that the fund company would otherwise charge internally for such services to be revenue sharing. Revenue sharing payments are generally paid out of the fund’s investment advisor’s or other affiliate’s revenues or profits and are not made from fund assets. However, fund affiliate revenues or profits may be in part derived from fees earned for services provided to and paid for by the fund. No portion of these revenue-sharing payments are made by means of brokerage commissions generated by the fund.

• As a general matter, MSSB requires mutual fund companies to pay the participation fee to enable the fund company’s funds to be made available through our advisory programs. There are limited exceptions in which fund companies pay us a participation fee of less than 0.16%. These exceptions create a potential conflict of interest in that MSSB could have an incentive to recommend a mutual fund from a family that pays the full participation fee. As noted above, Private Wealth Advisors do not share in this fee and these payments do not increase the fees that clients pay to us.

• Mutual fund companies that do not agree to make these payments do not receive the same level of access to our firm.

So, related to the foregoing disclosures, let's ask some questions.

How Much of the "Participation fee" is "Revenue-Sharing"? Can't This Be Quantified and Should It Not Be Disclosed?

I simply don't have any clear information to determine how much of the "participation fee" is, indeed, "revenue-sharing."

Let's look at this issue - i.e., the cost of the services provided by MSSB which replace the services which would have been provided by the fund companies themselves - by comparing the fees charged by one mutual fund complex. The "administrative costs" of mutual funds, which are part of each fund's "annual expense ratio," can vary substantially from fund to fund. They can be just a few basis points (as in the case of Vanguard's ETFs and open-end mutual funds, where administrative costs of a fund can often be 0.02% to 0.03% a year. At mutual fund companies which do not enjoy such economies of scale, or who do not provide the services paid by such administrative costs "at cost," such "administrative costs" can be much higher.

Let's look at this issue from the standpoint of the costs of similar services provided by large discount brokerage firms. There are many discount brokerage firms which provide services to independent registered investment advisers. These brokerage firms are paid under a variety of methods, but one of the main methods is through transaction fees. Each purchase or sale of a mutual fund initiated by the independent investment adviser through the discount brokerage firm (custodian) might trigger the payment of a transaction fee, which might be in the range of $20 to $100 per transaction, depending upon the brokerage firm utilized. If trading is infrequent, then these fees become quite low, as a percentage of an investor's account. And, to my knowledge, no "participation fees" are paid by some of the mutual fund companies (such as Vanguard, Dimensional Funds Advisors) to these discount brokerage firms. Yet, these discount brokerage firms still provide the same services, as a custodian, to customers that MSSB does.

Hence, it might be fair to say that, given economies of scale present in a large broker-dealer firm, the costs of providing the services indicated by MSSB is likely only a few basis points (0.02% or higher). This is especially true given the aid of computerized record-keeping and reporting services today, including electronic and largely automated delivery of trade confirmations, tax reports, monthly statements, and prospectuses/annual reports and other fund information. If the cost is much greater than this, one would need to question why some large providers of such services are able to provide similar services at lower cost.

Why is the amount of the participation fee, which is in the nature of revenue sharing, not quantified for the advisory client?

We can only speculate as to what the "revenue sharing" payment is, for such data would have to be quantified by MSSB from its own data. But why is it not quantified - as an average for all of its clients? Is not such data reasonably available? Is it not material to the client? Would not a client desire to know how much the participation fees average, and what portion of the participation fees are (at least on average) paid to compensate for services, versus revenue sharing payments?

Does the participation fee really compensate primarily for services, and not primarily revenue sharing payments?

Regarding this aspect of MSSB's disclosure: "the participation fee is paid by fund companies primarily to compensate us for providing services that the fund company would otherwise have to provide itself. However, a portion of the participation fee may be considered as “'revenue sharing.'"  Is this disclosure accurate? Given that a large fund complex, such as Vanguard, can deliver the services listed to its customers for only a few basis points, or that large discount brokerage firms appear to also be able to deliver such services at seemingly very low costs, what amount of the "participation fee" is truly payment for such services, and which part is truly "revenue sharing"?

One would hope that the SEC is examining this issue, in order to verify the statement that the "participation fee" is paid primarily to pay for such services, and not primarily for "revenue-sharing" instead.

Here's a related question. Should the average costs of shareholder servicing, by all funds, be disclosed? One would assume this information is available from the SEC's database of fund information, if it is not already compiled by some other firm or organization (such as the Investment Company Institute, Morningstar, etc.). And, if the average costs incurred by MSSB to provide such services exceed the average, should disclosure be made of this fact?

Is the conflict of interest disclosure relating to the participation fee adequate?

Certainly the receipt of other compensation, in the form of revenue-sharing payments, is a material fact that must be disclosed to the client of a fiduciary. Another question I possess relates to the adequacy of disclosure of these payments as creating a conflict of interest for MSSB and its "Private Wealth Managers."

In the fourth paragraph above, MSSB does state that, when firms pay less than the full 0.16% participation fee, this may create a conflict of interest for MSSB to recommend firms that pay the full participation fee. But this is not a disclosure of the conflict of interest itself.

To find the main disclosure of the conflict of interest requires looking to at prior paragraphs in the same section of Form ADV, Part 2A, where is contained a more general statement of the conflict of interest disclosure:

• "MSSB and its affiliates provide investment advisory, prime brokerage, trading, execution and other services to each other, to managers, pooled investment vehicles, and other clients, and receive compensation for such services."

• "MSSB may choose to recommend managers or investment products for which MSSB or one or more of its affiliates serve as broker, prime broker, counterparty, administrator or other service provider, including investment banking, placement agent or secured lender and with respect to which MSSB and/or its affiliates receives fees, interest and/or other compensation. MSSB, in the course of these activities, including its prime broker and secured or margin lending activities, may take actions that are adverse to the interest of its advisory client, such as foreclosing upon collateral comprised of assets of an investment product pledged with respect to a loan."

Digging deep here, this main conflict of interest disclosure states, in pertinent part: "MSSB may choose to recommend ... investment products for which MSSB ... serve[s] as ... service provider ... and with respect to which MSB ... receives fees, interest and/or other compensation. MSSB ... may take actions that are adverse to the interests of its advisory client ..."

Do you think clients understand the conflict of interest that is inherent in recommending only funds that pay revenue-sharing payments?

Is the use of the language "may take actions that are adverse" appropriate? Should the disclosure instead state: "often takes actions that are adverse" to the best interests of the client?

Should it be disclosed that fund companies which provide extremely low-cost funds (such as Vanguard, as one example) typically don't pay "participation fees" or any form of "revenue sharing" payments?

Should the impact of payment of revenue-sharing payments, and the non-use of many lower-cost funds on this MSSB investment advisory platform, be disclosed? For example, where is it disclosed that lower-cost mutual funds typically have higher returns, over the long run, all other things being equal (which conclusion results from the substantial amount of academic research in this area)?

Is the disclosure candid? Or does it seek, via the language utilized, to disguise the conflict? For example, examine the last sentence of the general disclosure set forth above. MSSB provides the example of "foreclosing upon collateral comprised of assets of an investment product pledged with respect to a loan." How often does this occur? For which clients? Is not the greater conflict of interest, applicable to all clients, the receipt of revenue-sharing payments, and why is that not provided as an example? In other words, by using an example which is rare and not applicable to all clients, is the client's attention directed away from the more severe (in my view conflicts of interest. Is this an example of "Plain English" writing? (I often point out to my students that long sentences, as exist in the disclosure above, are difficult for readers to understand.) It appears to this reader, in my opinion, that the general disclosure set forth above obfuscates the message which it otherwise should seek to convey.

   2. Disclosure of Possible Receipt of 12b-1 Fees.

MSSB also discloses that it may receive additional compensation from mutual funds in the form of 12b-1 fees. This disclosure states:

•  Morgan Stanley Distributors Inc. serves as distributor for these open-end investment companies, and has entered into selected dealer agreements with MSSB and affiliates. Morgan Stanley Distributors Inc. also may enter into selected dealer agreements with other dealers. Under these agreements, MSSB and affiliates, and other selected dealers, are compensated for sale of fund shares to clients on a brokerage basis, and for shareholder servicing (including pursuant to plans of distribution adopted by the investment companies pursuant to Rule 12b-l under the Investment Company Act of 1940).

Are 12b-1 fees actually paid by mutual funds to MSSB under the PWM Private Wealth Services program? If so, can't those payments be at least estimated, on average, for all clients of in the program? What are those payments, if they are made, utilized for - the same "shareholder servicing" which the "participation fees" are paid for, or are they just additional revenue to the brokerage firm?

If 12b-1 fees are paid:

1. Is the recommendation of funds influenced by the payment of such 12b-1 fees? If so, the general disclosure found for this section, discussed previously, seems to be the main disclosure of the conflict of interest which would result. But, again, is that disclosure adequate?
2. Does the disclosure mention that there are share classes, and entire mutual funds, that don't provide 12b-1 fees?
3. Does the disclosure indicate that payment of 12b-1 fees, if paid, result in higher fund costs for investors, which in turn lead to (on average) lower returns?

   3. Disclosure of Possible Use of Affiliated Products.

MSSB'S Form ADV, Part 2A states:

• "MSSB has related persons that are registered investment advisers in various investment advisory programs (including Morgan Stanley Investment Management Inc., Morgan Stanley Investment Advisors Inc. and Morgan Stanley Investment Management Limited). If you invest your assets and use an affiliated firm to manage your account, MSSB and its affiliates earn more money than if you use an unaffiliated firm. Generally, for ERISA or other retirement accounts, MSSB rebates or offsets fees so that MSSB complies with IRS and Department of Labor rules and regulations ..."

• "Where clients select to invest in mutual funds where the investment adviser is a MSSB affiliate, in addition to the program fee paid by clients, MSSB and its affiliates may also receive investment management fees and related administrative fees. Since the affiliated sponsor or manager receives additional investment management fees and other fees, MSSB has a conflict to recommend MSSB affiliated Funds."

Again, the receipt of additional compensation, by recommending "affiliated" funds, creates an inherent conflict of interest. While the conflict of interest is clearly disclosed, is the impact of the conflict of interest, upon the client, clearly disclosed?

Additionally, one must ask why such additional compensation, if it occurs, is not quantified in some manner. Perhaps as a range of fees. Isn't this information readily available, and material, and hence should form part of a candid and forthright disclosure?

   4. Disclosure of MSSB's Proprietary Trading Activities.

Like many large Wall Street firms, MSSB trades on its own account, using its own cash. Trading also occurs between the firm and its client, particular for "principal trades" when individual stocks, bonds or certain other securities are sold to the client directly from MSSB's accounts. Here is MSSB's conflict of interest disclosure relating thereto, as found in its Form ADV, Part 2A:

• "Trading or Issuing Securities in, or Linked to Securities in, Client Accounts. MSSB, MS&Co., and their affiliates may provide bids and offers, and may act as principal market maker, in respect of the same securities held in client accounts. MSSB, the investment managers in its programs, MS&Co., and their affiliates and employees may hold a position (long or short) in the same securities held in client accounts. MS&Co., MSSB, and/or their affiliates are regular issuers of traded financial instruments linked to securities that may be purchased in client accounts. From time to time,  MSSB(or an affiliate’s) trading – both for its proprietary account and for client accounts – may be detrimental to securities held by a client and thus create a conflict of interest. We address this conflict by disclosing it to you."

The last sentence is the key. Disclosure is made of the conflict of interest. But nothing is said about otherwise managing the conflict of interest.

Is any disclosure made of the impact of such conflict of interest upon the client? What additional fees and costs might the client incur as a result? Could lower-cost investments be secured on an agency (broker) basis, rather than by MSSB engaging as a principal (dealer) in a transaction with its client? Can such fees and costs be quantified?

Should disclosure also be made of the fact that the principal trading of activities of the major Wall Street firms, in using their own cash, usually are profitable nearly every day of every quarter, regardless of whether the market moves up or down? Isn't this information the client would want to know? And why are not the same trading strategies made available to every client of the firm?

   5. Disclosure of Fees and Costs of Funds.

In a different section of MSSB's Form ADV, Part 2A for this program, it states:

• "Investing in Funds is more expensive than other investment options. In addition to our fees, you pay the fees and expenses of the Funds in which your accounts are invested. Fund fees and expenses are charged directly to the pool of assets the Fund invests in and are reflected in each Fund’s share price or NAV. These fees and expenses are an additional cost to you and are not included in the fee amount in your account statements. Each Mutual Fund and ETF expense ratio (the total amount of fees and expenses charged by the Fund) is stated in its prospectus. The expense ratio generally reflects the costs incurred by shareholders during the Mutual Fund’s or ETF’s most recent fiscal reporting period. Current and future expenses may differ from those stated in the prospectus. You do not pay any sales charges for Mutual Funds in the programs described on this brochure. However, some Mutual Funds may charge, and not waive, a redemption fee on certain transaction activity in accordance with their prospectuses."

This is the typical form of disclosure all investment advisory firms make, when they recommend mutual funds to their clients. And yet I wonder if this form of disclosure is adequate.

There is a heavy emphasis on the "annual expense ratio" of mutual funds. Yet, many costs incurred by fund shareholders are not included in the annual expense ratio. These include commissions and other transaction costs incurred as a result of trading within the fund. Soft dollar payments by fund complexes to the brokerage firms they utilize (in return for "research") can result in higher commission costs than would normally be paid by the fund. Also of note are other costs incurred indirectly by fund shareholders, such as bid-ask spreads, market impact costs, opportunity costs due to canceled or delayed trades, opportunity costs due to cash holdings, returns lost due to arbitrage (by other firms predicting which stocks might be added to an index) or resulting from pre-announcement of index changes (often resulting in price changes ahead of the periodic reconstitution of index funds). I wonder why such fees and costs, which are often quite large (and in some cases can exceed the annual expense ratio of a fund) are not at least mentioned in Form ADV, Part 2A.

    6. Summary, MSSB's Disclosure Practices.

I have not set forth all of the conflicts of interest disclosed in MSSB's Form ADV, Part 2A. I would encourage all of the readers of this blog post to download it (via the www.sec.gov web site, by checking out investment advisers under the "Education" tab) and review it in its entirety.

Again, it is not my intent to single out Morgan Stanley. If one looks at the Form ADV, Part 2A of other dual registrant firms, similar disclosures (or lack thereof) occur.

But I do question whether the Form ADV, Part 2A are adequate, in several instances. I note, as well, that certain business practices (receipt of additional compensation, in many cases) appears to me to be contrary to the requirements of a bona fide fiduciary standard.

D. Do Clients Understand Disclosures?

If, as many in financial services now seem to think, disclosures are all that is required when a conflict of interest takes place for the client of a fiduciary, one must ask if disclosures are understood by clients?

While this singular topic could fill an entire volume, let me summarize by stating that academic researchers have long known that emotional biases limit consumers’ ability to close the knowledge gap between advisors and their clients. And recent insights from behavioral science further call into substantial doubt some cherished pro-regulatory strategies, including the view that if regulators force delivery of better disclosures and transparency to investors that this information can be used effectively. This is in large part due to many behavioral biases which

Note as well that “instead of leading investors away from their behavioral biases, financial professionals may prey upon investors’ behavioral quirks … Having placed their trust in their brokers, investors may give them substantial leeway, opening the door to opportunistic behavior by brokers, who may steer investors toward poor or inappropriate investments.”  [Robert Prentice, “Contract-Based Defenses In Securities Fraud Litigation: A Behavioral Analysis,” 2003 U.Ill.L.Rev. 337, 343-4 (2003), citing Jon D. Hanson & Douglas A. Kysar, “Taking Behavioralism Seriously: The Problem of Market Manipulation,” 74 N.Y.U.L.REV. 630 (1999) and citing Jon D. Hanson & Douglas A. Kysar, “Taking Behavioralism Seriously: Some Evidence of Market Manipulation,” 112 Harv.L.Rev. 1420 (1999).]

Moreover, as observed by Professors Stephen J. Choi and A.C. Pritchard, “not only can marketers who are familiar with behavioral research manipulate consumers by taking advantage of weaknesses in human cognition, but … competitive pressures almost guarantee that they will do so.” [Stephen J. Choi and A.C. Pritchard, “Behavioral Economics and the SEC” (2003), at p.18.]

As a result, much of the training of registered representatives involves how to establish a relationship of trust and confidence with the client. Once a relationship of trust is formed, customers will generally accede to the recommendations made by the registered representative, even when that recommendation is adverse to the customers’ best interests.

E. Because Disclosures are Ineffective, the Fiduciary Standard of Conduct is Imposed. Conflicts of Interest Must be Properly Managed - Not Just via Disclosure Alone.

There are substantial public policy reasons, including those stated above, for imposition of the fiduciary standard upon all who provide investment advice.

I must emphasize, however, that a bona fide fiduciary standard requires disclosure of all material facts to the client. And fees and costs incurred by clients, and conflicts of interest between the investment adviser and the client, are all material facts. In essence, these are the types of facts that matter to the client.

Wall Street’s lobbyists often suggest that court precedent exists for the proposition that disclosure alone is all that is required to meet the fiduciary standard when a conflict of interest is present. These lobbyists are either engaged in wishful thinking or mistaken. This argument often relies upon language found in the U.S. Supreme Court’s seminal 1963 decision applying the Advisers Act, SEC vs. Capital Gains Research Bureau. However, a correct construction of this case reveals that investment advisers are required to do much more than merely disclose conflicts.  This follows centuries of common law applying the fiduciary standard, including application of the time-honored phrase, “no man can serve two masters.” Indeed, acting under the fiduciary duty of loyalty requires active avoidance of conflicts of interest. Conflicts of interest which cannot be reasonably be avoided are then subject to the multi-step process to ensure that the conflict of interest does not harm the client in any manner.

Unfortunately, the SEC has, likely due to regulatory capture by the Wall Street firms it regulates, apparently acceded to this incorrect notion that conflicts of interest between fiduciaries and their clients are somehow "properly managed" by mere disclosure of the conflict of interest, alone. This is a dangerous notion.

F. In Conclusion.

I post a number of questions above, for which I don't possess clear answers. It is possible that disclosures are found in other documents (such as fund prospectuses, SAIs, and annual reports), or are made by other means by dual registrant firms. But, in my experience, clients don't read all of these additional disclosure documents. (Indeed, the duty to read is circumscribed when the client has a fiduciary advisor.)

I question the non-disclosure of many material facts in Form ADV, Part 2A, which I believe should be disclosed.

Of greater import, I challenge the ill-advised notion that disclosure alone can negate the fiduciary duty of loyalty. It appears to me that clients, due to conflicted practices, are paying much higher fees and costs than they would otherwise pay. And, from my own experience in meetings with hundreds of clients and potential clients, I would observe that 95% or more of these clients don't understand the fees and costs they are paying, nor their impact upon the client's investment returns.

However, I must state that it is my belief that fiduciaries deserve to be well-paid. Fiduciaries possess a duty of care, required of an expert, and must possess the skill and knowledge to discharge that obligation. Good advisors can add a great deal of value in dealing with individual clients. Hence, fiduciary expert advisors deserve professional-level compensation. Yet, they should not be permitted to extract excessive rents, as I believe is now occurring as to the portfolios of many clients of dual registrant firms, when such firms "double-dip," "triple-dip," and "quadruple-dip" through the receipt of additional compensation from the providers of investment products they recommend, and through other means. A true fiduciary seeks to establish a fixed amount (either as a flat or hourly fee, or percentage of assets under management) with a client, and eschews arrangements which would later increase the compensation of the fiduciary. In other words, bona fide fiduciaries seek to avoid, whenever possible, variable compensation arrangements.

In essence, we have the situation where many firms are advertising and promoting their services as "fiduciary" - yet, they then seek to merely disclose aways conflicts of interest in order to receive additional compensation. Through disclosures, and conflict of interest waivers signed by clients (which are ineffective in most instances - the subject of a future blog post), the fiduciary relationship is transformed back into a sales-customer relationship. The relationship becomes an "arms-length relationship" again, and the principle of "caveat emptor" applies. This is not a fiduciary relationship at all!

In essence, through registration as an investment adviser, but through non-adherence to bona fide fiduciary principles, the essential protections afforded to clients by the status of their advisor as a fiduciary are eroded, and often negated. The client is often, due to behavioral biases and other factors, unable to discern this transformation from trusted advisor to salesperson, especially since fiduciary status still exists under the law. As a result, the illusion of protection occurs for the client of firms which operate in this basis.

Pull up the Form ADV, Part 2A of your investment adviser. Does it say ...

    "I am your fiduciary. I act in your best interests. I am your trusted advisor.
            BUT ...
            BUT ...
            BUT ...
            BUT ...
            BUT ...
            BUT ..."

Too many "buts" (or "butts") makes for a stinky mess!

In essence, with each conflict of interest which is permitted, and with each receipt of additional compensation, and with each disclaimer of fiduciary obligations, the relationship of trust between the client and the advisor is slowly and irrevocably dissolved. In essence ...

         TRUST
         becomes
         TRUST
         which then becomes
         Trust
         when then becomes
         trust
         which then becomes
         trust
         which then becomes
          ... nothing.

Clients of all financial services providers - whether they are fiduciaries or non-fiduciaries - will need to ask tough questions. And they should get the answers to those questions in writing. See my previous blog post about this, found at http://scholarfp.blogspot.com/2013/05/how-to-choose-financialinvestment.html.

Does SEC Chair Mary Jo White Possess Courage? Do We?

With SEC Chair Mary Jo White informing the financial services industry that a decision on whether, and how, to move forward with the fiduciary standard is due by the end of this year, the outlook for the fiduciary standard remains cloudy, at best.

From my discussions with Washington insiders, in all likelihood there are two commissioners in favor with moving forward with the Dodd Frank Act's authorization under Sect. 913 to impose, by rule, fiduciary standards on brokers providing investment advice, and two commissioners are opposed (and favor enhancing disclosures, only). SEC Chair Mary Jo White has been keeping her own views on the fiduciary standard very close to the vest, at least when speaking publicly or in private conversations with pro-fiduciary advocates. While some fiduciary advocates believe that the SEC Chair is opposed to fiduciary standards, there is no concrete evidence of such a stance.

There are many possible outcomes by the end of this year.

First, the SEC may delay acting for years, and hence may not take any action in 2014. Such is not an unusual outcome in Washington, DC.

Second, many pro-fiduciary advocates fear a watered-down "new federal fiduciary standard" which would impose only enhanced disclosure obligations and in which clients could easily waive fiduciary protections. Of course, the fiduciary standard requires much more than disclosure of conflicts of interest; a true fiduciary standard requires the fiduciary to ensure any action taken is substantively fair to the client, for no client would ever provide informed consent to be harmed. Additionally, core fiduciary obligations cannot be waived easily under the common law, as Wall Street would like to have the SEC believe, and as the SEC OCIE turns a blind eye to now. (All they have to do is look at a dual registrant's Form ADV, Part 2A and client relationship agreements - and the forced waiver by clients of fiduciary obligations is all right there, in plain sight.)

By way of further explanation, there is an old adage in the law - a fiduciary cannot wear two hats. Yet, that's what Wall Street desires with its proposed "new federal fiduciary standard" - i.e., being called a fiduciary, but being permitted to essentially engage in all of the corrupt business practices which engender consumer harm presently. Wall Street touts its "new federal fiduciary standard" - but it's not a fiduciary standard at all, nor anything close to it!

The late Justice Benjamin Cardoza long ago warned against the "denigration" of the fiduciary standard through particular exceptions. This is what pro-fiduciary advocates fear the most, as the revolving doors of the SEC have long led to "regulatory capture" of the agency by Wall Street. We have seen over the past three decades the SEC retreat from the enforcement of true fiduciary standards, as it has permitted Wall Street to twist the fiduciary standard. It has been a long time since the SEC has stood up and said "no" to Wall Street's business practices.

There are billions and billions of dollars a month at stake - excessive fees and costs that Wall Street and the insurance companies make – that substantially detract from the returns of the capital markets which should, instead, flow more to investors. Because of the money at stake, Wall Street will do whatever it takes to ensure that the SEC remains Wall Street-friendly. In essence, the SEC lacks the courage to tackle Wall Street's perverse business practices. Where is Joseph P. Kennedy (the Chair of the SEC in its early days, who banned many of the practices he himself participated in back in the 1930's), when you need him? Hopefully his legacy will live on in the current SEC Chair.

Third, it is possible that the SEC will vote to take no action under Sect. 913, as to applying fiduciary standard by rule. In this case brokers may still be held to be fiduciaries, applying state common law (which dictates in many, but not all, states that brokers are fiduciaries when they are in a relationship of trust and confidence with their clients). But FINRA arbitration has diminished this threat, as most arbitrators have been led to believe that fiduciary duties can be waived (they cannot), that customer agreements which denote the nature of the account as "advisory" or "brokerage" control (they do not), and all that is required when a conflict of interest is present is its disclosure (much more is required). Of course, FINRA's discharge of some arbitrators who don't adhere to FINRA's anti-fiduciary stance is just another colossal FINRA failure, and further evidence of the fact that FINRA exists not to serve the public, but rather to protect broker-dealers.

Fourth, it is possible that legislation would emerge from Congress which would impose new economic analysis requirements upon the SEC before proceeding under Section 913. Last year Wall Street lobbied extensively for such legislation, and the result was a substantial delay in the DOL's rule-making efforts. Even now, Wall Street and the insurance companies are pouring money into the re-election campaigns of many a Senator and Representative, to try to get such legislation enacted this year. And the visits to the halls of the Senate and House office buildings by Wall Street and their many lobbyists and proxies far outnumber, by perhaps 20 to 1 (or much worse), visits by consumer advocates.

Fifth, the SEC may take another route entirely. As suggested by former Asst. Director of the SEC’s Division of Investment Management, Bob Plaze, a “best interests” standard could be enacted for brokers under the ’34 Act. I personally don’t see the benefit of proceeding down this compromise path – it just seems to muddy the waters, further. This would, I believe, be just the "compromise" Wall Street desires. They will continue to represent to the world that they act in the "best interests" of their customers, yet remain free to disclaim away their duties and engage in the same business practices they do today which cause so much harm to their customers.

Sixth, the SEC could adopt a different interpretation of the “solely incidental” exception for broker-dealers from the application of the Advisers Act, as few can argue that the main business of brokers today is not trade execution, but rather the delivery of advice. And/or the SEC could dictate, as would seem logical, that receipt by brokers of 12b-1 fees (which, in my view, are “advisory fees in drag”) amount to “special compensation” which trigger the application of the Advisors Act and its fiduciary duties.

Lastly, it is also possible that a true, bona fide fiduciary standard will be imposed, by rule, by the SEC, upon brokers who provide personalized investment advice, pursuant to one of the different paths created for the SEC under Section 913 of the Dodd Frank Act.

What would imposing a bona fide fiduciary standard mean, for brokers?

At its core the fiduciary standard constrains greed. This will require the business practices of brokers to change. For example, variable compensation arrangements (i.e., getting paid more to sell one product over another) might be eliminated pursuant to the authority granted the SEC under Section 913. The SEC could prohibit other forms of compensation of fiduciaries, such as payment for shelf space and other "revenue-sharing' arrangements. It could impose a bevy of restrictions, such as those imposed in countries such as Australia and the United Kingdom.

Of course, the brokers won’t like this. They will say that any rule the SEC should adopt should be “business model neutral.” That the fiduciary standard should adapt to current business practices. This is an evil notion, which would denigrate a standard of conduct that is thousands of years old. The business practices of brokers must evolve to fit the fiduciary standard, not vice versa.

I would note that this is not a battle between competing business models, as some suggest. It is not a battle between RIAs and BDs, as some at the SEC have long believed.

Indeed, personally I would much rather that brokers remain brokers. Why? It is so easy for knowledgeable fee-only investment advisers to gain clients from the major Wall Street firms, given the high total fees and costs, tax-inefficient portfolios, and poor asset allocations that the vast majority of the clients of Wall Street's major broker-dealer firms endure.

But the harm caused to tens of millions of my fellow Americans by the ill-designed suitability standard do not relegate the RIA community to silence. Rather, we would prefer to see the fiduciary standard more broadly imposed, even if it means losing a competitive advantage over brokers.

The SEC must recognize that the world has changed. Once commissions were deregulated in 1975, most consumers did not want to pay high fees to brokers for trade execution. Over the past four decades, with the demise of pension plans and the rise of defined contribution plans and IRAs, the growth in the type and sheer number of investment alternatives, and the ever-more-complex tax laws, the financial world which individual investors were thrust into required a great deal of advice. Hence, brokers changed their business model, and advice became predominate, and trade execution services became ancillary to the advice. But, under intense lobbying pressure from Wall Street, the SEC did not impose fiduciary standards upon broker’s advisory activities. It took the Dodd Frank Act to point out to the SEC its folly, and to suggest and provide an avenue for the SEC to act correctly.

If brokers are going to hold out as advisors (a development that occurred over the past 30 years, which the SEC did not stop, even though it cautioned against it in the early '40's and early '60's), and/or if brokers are going to provide personalized investment advice (more than just describing the products that they sell), then they have crossed the line and have acquired fiduciary status. In other words, by their actions and words brokers have consented to the imposition of fiduciary obligations. (This is the manner in which brokers find themselves as fiduciaries, applying state common law.) Moreover, consumers have a reasonable expectation that they can trust their "financial consultant." In such event, the full range of fiduciary obligations - designed to protect the client - should apply. Brokers, in such event, should not be shielded by FINRA's inherently low suitability standard, which essentially was designed to protect brokerage firms when they engaged in trade execution services for a customer. Nor should they be shielded by mere disclosure requirements, since substantial academic evidence confirms what we all know - consumers don't read, and don't understand, disclosures.

There are many battles over the fiduciary standard taking place - the DOL, state courts, FINRA arbitration, OCC (for bank trust departments), CFTC, and ... the SEC.  The battle for SEC Chair Mary Jo White's vote, for the future financial security of hundreds of millions of Americans, and - indeed - for the future economic growth and prosperity of America itself (endangered by the sludge of Wall Street, no longer an oil that greases the wheels of capitalism, due to Wall Street’s excessive extraction of rents) - all of these remain in the balance. Only time will tell if Mary Jo White has the courage to stand up to Wall Street, or whether she will be just another in a long string of SEC Chairpersons who have taken their marching orders from Wall Street's oligarchy.

If I had to place my bet, I would have to, at this time, "follow the money." Wall Street and the insurance companies are pouring many, many millions of dollars into Washington, DC this year to stop the DOL and the SEC from moving ahead with regulatory extension of the fiduciary standard of conduct. In fact, I have heard that Wall Street firms, in collaboration with each other, have committed huge sums of money to “do whatever it takes” to stop the fiduciary standard from being applied. SIFMA, FSI and the many hired guns of Wall Street firms and insurance firms are besieging Washington, and will continue to do so.

Brokers will also continue to support FINRA's quiet lobbying to become the SRO over RIAs, which would be a death knell for the fiduciary standard and the end, over time, of most small RIA firms.

What could change this from happening? Only a concerted, active educational effort by investment advisers, consumer advocates, and the various financial planning groups. At present, only a few consumer groups - AARP, Consumer Federation of America, Americans for Financial Reform, among others - are actively engaged in the battles in Washington, D.C. Much more support is required, especially from the independent investment adviser and financial planner communities.

For an example of action which could be taken, many RIAs could plan now to join the Investment Adviser Association's day of Congressional visits, typically held in May or June. (Email info@investmentadviser.org for specific information about any upcoming events planned.) Even more advisors could ask to meet with their Senators and Representatives back in the local offices, to educate them on these issues (such visits are very powerful). We must all recognize that 2014 could well be the pivotal year for the fiduciary standard, and - as a result - the definitive year as to whether financial planning will ever arise to the level of a true profession.

We’ve been involved in the fiduciary “debate” for well over a decade. Chances are you may be one who is “tired” of all these issues. That is part of Wall Street’s strategy – seek delays, and wear out the pro-fiduciary advocates. Yet, now, 2014 could well be a pivotal year. If we care about these issues, this is our time to take action in some fashion. Now - not a year from now. And each one of us in his or her fashion – not just the “others” who have been actively involved to date.

We must recognize that, even with increased engagement by the independent RIAs and financial planners in the halls of Washington, DC, the outcome is uncertain. Mary Jo White's courage - to take on the mighty power of Wall Street oligarch's - or her lack of courage - may well be the deciding factor as to whether bona fide fiduciary standards will rightly be imposed upon all who provide personalized investment advice to our fellow Americans. Let us all hope that the SEC Chair possesses such courage, as well as the wisdom to proceed down the right path and toward a better America.

Let us also hope that we, ourselves, will persevere, and continue to seek to edu.cate and inform policy makers, despite the deluge seen from the anti-fiduciary crowd. Let us hope that we will have the courage to endure, and press on, for the benefit of all of our fellow Americans, and America itself.

Ron A. Rhoades, JD, CFP(r) serves as Chair of the Steering Group for The Committee for the Fiduciary Standard, a group of volunteer leaders of the financial planning profession dedicated to advancing the fiduciary standard of conduct for all investment and financial advisory activities. Ron also serves as Program Chair for the Financial Planning Program at Alfred State College, Alfred, New York, where he provides instruction in Investment Planning, Retirement Planning, Insurance and Risk Management, Employee Benefit Planning, the Personal Financial Planning Capstone Course, and Business Law. To contact Ron, please e-mail him at RhoadeRA@AlfredState.edu. Thank you.

Never Underestimate the College Youth of Today ... Meet Jane

Again and again I read articles, often written by older faculty members at distant universities, that the college students of today are under-motivated and ill-prepared for college. That "this generation" is not as good as generations before. To that I say ... "Baloney!"

Today I had the unique experience of visiting with a student, who took my Business Law I class a year and a half ago, during her second semester of college. I will call her "Jane," although that is not her real name. A very good student, she excelled in my class, and others that semester.  During that semester I saw the beginnings of a transformation - from a girl whose own fears sometimes put obstacles in her path, to a young woman who is, as Henry David Thoreau put it, ready to "suck all the marrow out of life."

I saw her briefly, today. How is she doing now?

First, Jane is looking forward to graduating in another year, with a B.B.A. degree and a 3.0 or above average. (Quite an achievement at our College, where grade inflation has never set it - only 0.1% of students last semester had a 4.0 average - for the semester).

And she will pursue her lifetime dream of owning a business someday, after she first gains some additional business experience. She plans to move across the entire country to Washington State, in pursuit of this dream. There she hopes to land a position with a company or firm in need of an energetic, talented young manager, salesperson, supervisor, or administrator.

Second, Jane is taking 16 credit hours this semester, and she's working three different jobs - 50 hours a week. Together with cobbling together student loans, she'll make it through college.

Third, even with her heavy workload, Jane is involved in at least two clubs on campus, and actively involved in their activities. She "makes time for her passions," as she calls them - including trips with Alfred State's Outdoor Recreation Club. She's even saving up for a cross-country road trip for six weeks this summer, including traveling the entire West Coast, camping along the way (all by herself!).

I'm so very proud of her. Especially since, when I had Jane as a student during her freshman year, Jane was at first not involved with activities on campus. She was, to a certain extent, full of worry and self-doubt. But with a little push, some shared "success tips" to get her thinking, and some guided self-reflection, she began to more fully explore life's many adventures, and to push herself out of her comfort zone. It didn't take much of a push from faculty members. Very soon she started pushing herself forward, again and again, gaining ever-greater confidence along the way. Today she excels at conversing with others, and I suspect she mentors quite a few younger students on our campus, and enables them to grow their own horizons. Success is contagious.

This is not to say Jane still doesn't have concerns when she graduates, such as paying off the student debt she has accumulated. And, of course, gaining a good job that will challenge her, and further develop her abilities. But what she also has is ... courage, resilience, and grit. With these traits she will overcome the challenges which arise along life's path.

As I reflect upon my own college experience, I see that students who enter college today are faced with different challenges than thirty years ago. There are many more distractions, such as online video games, hundreds of television channels, smart phones, social media sites, and so much more. Students also face the challenge of paying higher tuition costs, relative to what earlier generations paid, in large part because of withdrawal of state support over time for higher education (leading to higher tuition and other fees). College textbooks are often $200 to $350 each; I used to spend that amount for all of my books in one semester - and that was in law school, where textbooks were more expensive.

Due to these increased financial pressures, college students today are more likely to rely on student loans, as the size of grant programs has diminished over time. And they are far more likely to seek out employment while attending college full-time as a residential (on-campus) student, as student loans are not enough.

The new college student of today is also the product of a secondary school system that, for many students, placed far too little emphasis on development of critical thinking and math and writing skills. Instead (as many educators at high school often bemoan about) they learned as their instructors "taught to the test" (i.e., standardized state-wide, nationwide tests). I empathize with the high school teachers of today - very few of them are permitted to teach using the techniques and strategies they know will work best. (We need to return control of our primary and secondary schools to our communities, and eliminate both federal and state government interference - but that's the subject of another article.)

So how do we react when college students appear before us, as college professors, for the first time? As educators, I hope we are coming to terms with the challenges which exist for our students, and for us as well. I hope we react to these challenges not with dismay and dismissiveness. Rather, I hope we  take the students - as they appear before us - and then work with them to improve their socialization skills, writing skills, math skills, self-control and grit. I hope we find ways to assist students develop the ability to motivate themselves, to adopt good habits, and to minimize procrastination. I hope we guide our students in the adoption of S.M.A.R.T. Goals, including goals in which the students, themselves, will actively push themselves out of their comfort zones as they stretch their horizons and become even better persons.

Let me return to Jane. She is a treasure - a success story in the making. But she's not an exception. Rather, in my experience, she is the student of today. And she is the college graduate of tomorrow.

All it takes of us, as educators, is a little push here, a little caring there, and sharing of the means of self-motivation and adoption of the growth mindset. Then, like Jane, our students blossom, right before our eyes, become self-aware and, within a very short time, act to propel themselves forward and upward.

In conclusion, the college youth of today are every bit as special as those of prior generations. Perhaps even more so in this highly technological, connected society of today. Jane is a living example of her generation - befuddled at bit at first, receptive to change, and then blossoming into a college graduate every employer would want to hire. All it takes is a bit of mentoring, a guiding hand, and an occasional push - and then you will find yourself astounded by what this new generation can accomplish.

And, by the way, if you are currently in business in Washington State, and if you desire to hire in about a year an exceptional, self-motivated, people-oriented, hard-working student as an assistant manager or supervisor, or in a sales role, or in a people-oriented administrative position, drop me a line. Because Jane might just astound you too. She will be visiting Washington State in the summer of 2014. And she will be an outstanding college graduate from Alfred State College, with a Bachelors in Business Administration, in May 2015.

Ron A. Rhoades, JD, CFP(r) is an Asst. Professor in the Business Department of Alfred State College, Alfred State, New York. With small class sizes, many faculty-student interactions, and with 80% of students residing on-campus (and the rest within a short drive), Alfred State offers the ideal environment to assist students in their personal growth. We pride on students "hitting the ground running" ... with the skills employers want to see, and with the grit to accomplish difficult tasks which employers may put before them. To contact Professor Rhoades, e-mail him at: RhoadeRA@AlfredState.edu. Thank you.

Will You Have Regrets? What Older Persons Can Teach Us ...

I tend not to dwell upon the past. Still, I tend to regret a few things, such as the few times in life I have said words which caused another person unnecessary sorrow. Perhaps another regret – not learning to overcome my fear of rejection, and shyness, much earlier in my life than I did.

However, I don’t have all that many regrets in my life, at this point. Perhaps that is because I’ve viewed each failure as a learning experience and a core part of whom I am today, which I would not change. Or perhaps it is because I still seek, each and every day, to accomplish my “bucket list” – whether it be adventures with family and friends, personal self-enrichment, or contributing in some small way to make the world a better place.

I suppose that I could regret not being provided with better looks, a more interesting personality, or greater athletic abilities. But limitations are what can make us strong. In fact, many leaders of major corporations and in government are dyslexic, possess other learning disabilities, suffered while young from shyness, or overcame physical handicaps. Perhaps the struggle to overcome such obstacles empowered them with the ability to overcome lesser obstacles which appeared later on their path to success.

We all have busy lives. Choosing our priorities, for how we spend the limited time we have, is one key to having a successful life.

When older persons are asked about their greatest regrets in life, the results are interesting. And we can learn from their shared wisdom. Here’s a “Top 12” list of such regrets. How many of them can you already relate to?

1. Not speaking up against bullies, when we had the chance.
2. Not having enough confidence in myself. Living a life of fear. Being scared to do things. Not asking that girl/boy out, due to fear.
3. Not realizing how beautiful each of us are. Caring too much about what other people think. Doubting ourselves.
4. Not trying harder at school and in college, whether it be in the classroom or getting involved in activities. (It’s not just that your grades play a role in determining where you end up in life. Eventually you’ll realize how neat it was to get to spend all day learning, both inside and outside the classroom, and you will wish you’d used your time – the one thing you can never replace – more wisely.)
5. Working so much at the expense of family and friendships. Here are some related regrets ... not turning off smart phones, and being “always available” to those with whom we worked. Not spending enough time with family and friends. Not traveling with family.
6. Not burying the hatchet with family members and old friends. A related regret – holding on to grudges, and not forgiving another for a harm endured..
7. Getting involved with the wrong crowd when we were younger. In other words, letting others pull us down.
8. Staying in bad relationships for far too long. And, not picking ourselves off the ground and moving on fast enough, afterward.
9. Not applying for our dream jobs. Accepting jobs that pay, over jobs that inspire. Not quitting terrible jobs.
10. Failing to make personal fitness a priority. Because health is so important.
11. Not expressing gratitude. Being afraid to say “I love you.”
12. Not stopping enough to fully appreciate the moment.

It's a nice list. I'm certain most of you have some of the regrets on the list above. And, perhaps, a few different regrets.

Funny ... in all my conversations with retirees (hundreds of times, over the years) in discussing their remaining goals, and regrets, I've never had anyone ever mention to me that they regretted not watching more television, or not playing more video games. Imagine what you could do with your time, if you turned off the t.v. and put the video games away in the closet.

Don’t possess regrets at the end of your life. Instead, live a life of passion, wonder, richness, and personal fulfillment.

You are only confined by the wall you build yourself. Learn to enhance your abilities to suck all the marrow out of life. Act, and never look back.

REMEMBER:

• Adopt a mindset of continual self-improvement and personal growth.
• Obtain 9 hours 15 minutes (on average) of sleep to become more productive and to increase your capacity to learn.
• When obstacles are presented, use your grit to persevere.
• Possess S.M.A.R.T. goals – and review them daily.
• Don’t let others’ views – or your own limiting views – define your future.
• Don’t lie down with dogs. Choose friends who also desire to be successful, and who work hard to be such!
• Ooze confidence! (If you lack confidence, fake it until you become it! It works!)
• Expand your “comfort zone” – do one thing each day that scares you!
• Choose to want to succeed as much as you want to breathe!
• Live one day at a time. Each day brings forth a new opportunity.
• Express gratitude to others, always.
• Practice kindness, compassion and empathy. 

And ...

• In a world filled with doubt, you must dare to dream.
• In a world filled with anger, you must dare to forgive.
• In a world filled with hate, you must dare to love.
• In a world filled with distrust, you must dare to believe.
• And once you do, you will find that power you once thought you lacked.

Believe in yourself. Seek continual self-improvement. Act today. And don't possess regrets near the end of your life, due to not engaging with the world today and tomorrow.

All my best. - Ron

Professor Ron A. Rhoades, JD, CFP(r) teaches Business Law, Retirement Planning, Investment Planning, Employee Benefits Planning, Money & Banking, Insurance & Risk Management, and the Personal Financial Planning Capstone courses at Alfred State College, Alfred, NY. He is an EPLP Mentor, C.R.E.A.T.E. program mentor, serves as advisor to Alfred State's Business Professionals of America club, and serves as academic advisor to dozens of students.

Professor Rhoades is the author of "CHOOSE TO SUCCEED IN COLLEGE AND IN LIFE: Continuously Improve, Persevere, and Enjoy the Journey," a 10-week program for success in college (available for $2.99 in Kindle store at Amazon.com, or in paperback for $6.99). Professor Rhoades may be reached by e-mail at: RhoadeRA@AlfredState.edu.