I Acknowledge … (On the Necessity of Fiduciary Investment and Financial Advice)

I acknowledge that my clients know far less than I do about investments, taxes, retirement planning, and so much more.

I acknowledge that this vast knowledge asymmetry cannot be cured by financial literacy efforts, due to the inherent complexity of the capital markets, the many products which confront investors today, the opaque disclosures found with such products.

I acknowledge that both plan sponsors and individual investors are challenged to discern an investment product’s true “total fees and costs,” investment characteristics, and risks, given the inherent complexity of pooled investment vehicles and the creative manner in which Wall Street extracts rents from these vehicles – usually with little understanding by the consumer.

I acknowledge that it would be unreasonable to expect that ordinary American will transform themselves into wholly knowledgeable consumers of financial products and services, just as I acknowledge that I cannot expect the average American to perform brain surgery.

I acknowledge that even if my clients could become literate, due to behavioral biases they possess I would still be able to take advantage of them.

I acknowledge that I received substantial training from consultants on who to build a relationship of trust and confidence with my clients, in order that I can sell them my services or products.

I acknowledge that, given the inadequate knowledge my clients possess, I could easily take advantage of them if I chose, and benefit me through additional forms of compensation.

I acknowledge that, given the sophisticated nature of modern financial markets and the ever-more-complex array of investment products, it is not just the uneducated that are placed at a substantial disadvantage – it is nearly all of our fellow Americans.

I acknowledge that disclosure is not effective as a means of dealing with the vast information asymmetry present in the world of financial services.

I acknowledge that disclosures, while important, can lead to perverse results – i.e., worse advice is provided if the advisor, following disclosure, feels unconstrained by the application of the fiduciary standard of conduct.

I acknowledge that consumers both need and desire to place trust and confidence in their personal investment and financial advisors.

I acknowledge that, unfortunately, 90% of more of the individuals who call themselves “financial advisors” or “financial consultants” or “wealth managers” or “estate planners” (or other titles implying relationships of trust and confidence) cannot be trusted.

I acknowledge that those consumers who are left without a bona fide fiduciary advisor pay, on average, 30% to 80% more in total fees and costs than those who are served by fiduciary advisors.

I acknowledge the strong academic evidence which leads to the compelling conclusion that higher fees and costs result in lower investment returns for the consumer, especially over longer periods of time.

I acknowledge that fiduciary obligations serve as a counter to opportunism and serve to prevent abuse of power.

I acknowledge that as society has evolved, greater and greater specialization has occurred, and that I am an expert in my field and hence a specialist, and that it is right and proper that my greater expertise should be applied to benefit my clients.

I acknowledge that, as a fiduciary, I represent my client (the purchaser of a product), and that any duty or obligation (real or perceived) that I may possess to either my employer or the manufacturer/provider of a product is subservient at all times and in all ways to the duties and obligations which I owe to my client.

I acknowledge that courts, applying state common law, have concluded that the use of such titles is an important factor in determining whether fiduciary status attaches to the relationship between the consumer and the advisor.

I acknowledge that to hold out as a trusted advisor, but then to deny the fiduciary obligations that arise therefrom, is tantamount to fraud.

I acknowledge that consumers are unable to distinguish between true, bona-fide fiduciaries, who eschew additional compensation (beyond that agreed-to-in-advance) and conflicts of interest, and all of the others who are “pretend fiduciaries” and “pretend advisors.”

I acknowledge that the law does provide a way to ensure morality and integrity – by the application of fiduciary principles and their proper enforcement.

I acknowledge that the U.S. Securities and Exchange Commission has, over the past four decades, permitted the fiduciary standard to not be applied (under its rules) in advisory relationships, and that in recent years it has sought to eviscerate the fiduciary standard from its high ideals, and that it has refused to enforce fiduciary standards of conduct against those to whom it does apply.

I acknowledge that consumers are not protected by government, when both the U.S. Congress and our government agencies have largely been captured by Wall Street through massive campaign contributions and insidious conflicts of interest arising from an intentionally supported revolving door.

I acknowledge that, nevertheless, fiduciary duties are essential to the regulation of relationships between professional service providers and their clients.

I acknowledge that, under state common law, fiduciary duties are applied to relationships of trust and confidence, and that numerous court decisions have applied state law fiduciary status to relationships between investment and financial advisors, irrespective of federal and state statutes and regulations.

I acknowledge that imposition of fiduciary status is not a matter of selection by the advisor and/or client, but rather that fiduciary obligations are imposed by law, notwithstanding the written agreements between the parties, when a relationship of trust and confidence exists between the investment or financial advisor and his or her client.

I acknowledge that, once a relationship of trust and confidence is achieved with my client, my client will consent to almost anything I suggest.

I acknowledge that, as a fiduciary, I should never seek to relieve myself of my fiduciary obligations.

I acknowledge that no truly knowledgeable client would ever consent to the lifting of fiduciary obligations from me, if I were to continue to advise the client.

I acknowledge that even the most sophisticated clients, if they were truly sophisticated, would insist that their investment or financial advisor possess fiduciary status.

I acknowledge that core fiduciary duties are rarely subject to waiver by the client, as the concepts of estoppel and waiver have limited application when fiduciary status has attached to the relationship.

I acknowledge that I possess certain mandatory duties which a client in receipt of my professional services cannot waive.

I acknowledge that no knowing client would ever waive fiduciary obligations where advice is to continue to be provide, and so eschew the important protections thereby granted.

I acknowledge that no truly knowledgeable, informed client would ever consent to be harmed.

I acknowledge that my fiduciary obligations extend, under the common law, to the entirety of my relationship with the client; I cannot wear two hats with the same client.

I acknowledge the fundamental premise, as old as the law itself, that no fiduciary can wear two hats, one a fiduciary, and one a non-fiduciary.

I acknowledge that I possess a deep, unwavering duty of loyalty to my clients, as a fiduciary advisor to them.

I acknowledge that loyalty, like justice, calls upon the fiduciary to suppress greed.

I acknowledge that the ends of my client are adopted by me as my own; that I stand in my client’s shoes and must provide only that advice which is in my client’s best interest – as if I were giving it to myself.

I acknowledge that my fiduciary duty of loyalty takes precedence over my own good, save for the fact that I am entitled to professional-level compensation commensurate with my expert knowledge and abilities, the level of such compensation which is agreed-to-in-advance.

I acknowledge that my fiduciary duties include, at their core, the duty to put neither myself nor my firm in a position which may conflict with the interests of my client.

I acknowledge that, pursuant to my fiduciary duty of loyalty, I possess the duty to avoid conflicts of interest wherever possible.

I acknowledge that, regardless of my efforts, on rare occasion conflicts of interest will arise, and when such occurs that I must fully and affirmatively disclose the conflict of interest including all of its potential ramifications, that I must myself ensure client understanding, that I must seek the informed consent of my client, and that even then I must manage the conflict of interest in order that the client’s best interests remain paramount.

I acknowledge that my fiduciary duty of loyalty provides a way to minimize agency costs, while still retaining the benefits of the relationship, through prohibitions on self-dealing.

I acknowledge that fiduciary obligations of an investment and financial advisor are not derived solely from the law of agency, but also are substantially derived from trust law, tort law, and to a very limited degree from contract law.

I acknowledge that, although fiduciary law varies to fit the variances in principal-agent problems, that strict fiduciary duties under the “best interests” or “sole interests” (when ERISA applies) apply to me, given the vast disparity in knowledge and power inherent in the relationship between an investment and financial advisor and his or her client.

I acknowledge that I should not seek to water down my fiduciary obligations.

I acknowledge that my relationship with my client is built upon a foundation of trust, which should never be violated.

I acknowledge that I am a bona fide fiduciary, possessing of the expertise my clients expect, and owing to my clients the broad duties of due care, loyalty, and utmost good faith.

I acknowledge … THE POWER OF TRUST.