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.

An Open Letter to Alfred State College Freshmen - From Their Peers

I am pleased to share with you this compilation, taken from compositions submitted by my students over the past few years. If you are currently starting college, or if you are already in college but not performing up to your own expectations, I hope you find wisdom in the advice these students share.

A Letter to an incoming freshman

From Your Fellow Students at Alfred State

As you approach “move-in day” here at Alfred State for the first time, we wanted to share with you our own thoughts about what it takes to succeed in college. Before we begin, we know that college life may seem overwhelming at times. We were there. Don’t worry if you find yourself overwhelmed – things will get better! And we – your fellow students here at Alfred State – are here to help!

Together we’ve compiled our best tips for you, as you prepare for your first semester at college. Please take a few moments to read - and digest - these guidelines. Choose to succeed.

Make the right friends, be social, and get involved.

We know that socialization in college can be hard at first, because we know that you may feel isolated.  But you should get out and socialize.

But don’t solidify your friends too fast. Take a few weeks to “try them on.” If you lie down with dogs, you’ll get up with fleas!

If you make the right friends, doing homework will be much easier. If you find friends who care about their grades, you will be motivated to do your work, too. If your friends party a lot, you will be tempted to do that, too.  So be careful in choosing friends.

Make friends with a group of students within your major. Your friends are an essential resource for you, as you can help each other out with homework problems, studying for tests, working on projects.  Having friends in class can also make the class more fun and enjoyable.

Keep your dorm room door open. Literally, just leave it open. You’ll get to know people you live with much better.

Smile, and say “hello” or “good morning” to those in your classes, or in your dorm. A smile shows that you are approachable, and a greeting can often lead to a good conversation.

Don’t know how to converse? Just be curious. Ask questions about the other person – such as where they are from, what they like most about the college, and what major they are studying. Ask for advice – almost everyone loves to give out tips.

We would like to let you know that there is no reason of being afraid, when it comes to socializing, especially with your fellow classmates. All of us make “socialization” mistakes from time to time. We are very friendly and forgiving of such mistakes … and if you run across someone who isn’t, just ignore that person.

Sometimes, it’s not what you know it’s whom you know. In business and in life, you will need to know how to talk to people. So practice and develop your social skills in college. 

Study with others! A few of us studied for hours – alone - only to find we learned nothing. And for some they would usually get confused and make matters worse. If you study with a group you will get to hear different interpretations of the concepts being studied. And teaching others is the best form of studying!

Get involved with clubs and organizations on campus – to make friends.

Clubs and organizations are the best way to make new friends, and these friends can potentially become a very good support system when you need them.

So visit a club meeting. If you don’t feel like it is for you, just move on and try another.

Get involved on campus. Being active and making connections with people while you are here will make college a much more enjoyable and fulfilling experience. The number one factor in staying at a college is the level of involvement you have on campus. If you want to stay in school, stay active!

20% of learning at college takes place in the classroom. The other 80% is learned from friends and organizations you are involved in! This is the time you will learn to be independent, responsible and in general your own person!  Make the best of it and grow as much as you can!

Understand the costs of being at college

There’s a lot of money being spent on your education, by you or your family. Make it worth your while.

But it’s not just money.  In fact, the most important cost of attending college is your time. Time you can never get back.

The years you spend in college are the most important years for your future. Make them count!

Make certain you are in the right major

Not everyone knows exactly what their career path will be when they enter college. And many who think they know discover different interests as they proceed through classes.

Most people are happy pursuing careers for which they possess a good aptitude. To discover your aptitudes, consider some of the “personality tests” that are usually free, from your campuses’ “career development center” or other area. These can be a great way to narrow your choices.

Then get out and explore. Discuss a career with a professor who has actually worked in that field. Attend a career fair and meet employers in that field, and discuss the types of jobs that are available to new graduates, and career paths thereafter. That’s right – even as a freshman, attend career fairs! (It’s great practice for later, too!)

What are your primary goals in being here?

Prioritize your goals. What is truly important to you? Sports? Partying? Girls? Boys? Drinking? Or to graduate with a degree so you can be successful in your chosen profession?

Do your best so you can obtain the best job after you graduate from college. If you want a good job, you will need to work hard. The best jobs usually go to those with the better cumulative grade point averages, and to those who are involved in clubs and organizations.

Your personal success is the result of the steps you undertake to achieve it. Ask yourself, “What should I do to make certain that you graduate from college?” The answer is typically, “Go to class and do the work.” Good answer, but actually doing these things is not always easy.  Learn how to persevere and accomplish your goals.

Understand the need for self-control and grit

One must possess self-control to succeed in life. Practice self-control always.

There will be many days when you would rather go hang out with your friends instead of doing your homework, but self-control will get your through this. Have “grit” – resilience and perseverance.

Your main priority should be your class work; everything else should be secondary. Don’t let your social life control you.  There are going to be times when you want to go hang out and party, but you know you have homework to do. Remember that school comes first.

Try studying in the library, preferably with friends who also need to study.  This way you can avoid some of the distractions you may encounter in the dorms.

Party in moderation

Don’t take your newly found freedom for granted. Spending all of your “free” time going to parties and drinking (especially when underage) is going to put you on a fast track to fail.

Try not to party too much, especially right before a test. There will always be parties; your academics come first, and realize that you are not the only one “staying in” to study, instead of going to a party.

Sure, it’s fun to go out and party. But you have invested so much time and money into your education; don’t waste it. Save parties and similar activities for the weekends. Once a week is plenty enough.  Clearing your mind of things one night a week is a great way to get you back on track for the stressful week ahead.

Drinking? Have a “designated friend”

Like it or not, date rape is a common occurrence on many college campuses today. Date rape is simply this – rape by an acquaintance. And, far more often than not, date rape occurs when alcohol has been consumed to excess.

Be aware that when the person you are with is intoxicated, she or he cannot consent to sex. In other words, if you have sex with a person who is drunk, you’re a rapist. And being drunk yourself does not excuse your actions, at all.

Here’s a rule of thumb. If you are with someone who is too drunk to drive, then that person is too drunk to consent to sex. If either of you is drunk, wait until the next day. If the feelings are really there, they will be present the next day, when you are both sober.

Most importantly - if you plan on drinking, go with a friend who is the “designated safe person” – whose job it is to look out after you and ensure you get back to your dorm room or apartment or home safely. And always get your own drink, and keep your drink in your hand always – yes, the stories about “roofies” are real, where someone might try to spike your drink with a drug in order to later rape you.

Don’t procrastinate

Don’t procrastinate. When you receive your assignment for the next class, get it done that same day, or as soon as possible. Don’t wait for the deadline to arrive and be up half the night trying to study or finish an assignment. This is especially true in college because unexpected events pop up such as friends stopping by, an accident occurs, or a new class project is announced.

You have to learn how to think through the consequences of your decisions, even if it means learning to refuse your friends at times. Your true friends will understand and still be there when you are done.

College is not high school!

Don’t think you can get by without studying, as you may have done in high school if you were a genius.  College is different. Some of us never studied a lot in high school, but college is very different. If you don’t study, tests and quizzes will not be easy, and you probably won’t do very well.

Professors don’t spoon-feed you the material in college. Some of what appears on exams will never be discussed in class.

Be prepared for class, go to class, and pay attention in class.

You must attend to all of your classes – no excuses! Some of us did not learn that essential need until our sophomore year or later, were lucky enough to scrape by and not wash out. Believe you me, it does come back to haunt you.

Study two to three times a day. Study every night. If you do not, you will fall behind quickly. In order to grasp the many points taught in each class you need to do the reading and assignments outside of class. Getting all your work done will give you a sense of accomplishment, and will relieve stress.

Employ good study habits

When reading chapters, create outlines to help you effectively communicate and understand what you’ve read. Do outlines of the material prior to class. Or use concept maps; you can use “mind map” software, such as Freemind (free download).

Do the assigned reading – the day before class (or earlier). You can’t just float along by doing your homework fifteen minutes before class, like you may have done in high school.

Don’t underestimate the material or the professors.

Make certain that you put twice as much time toward a class, outside of the class, than you do when you are in that class. Repetition is the key here; you are not going to learn much from reading the material once.

Always go to a class prepared – meaning read the assignments and take notes beforehand!  Always review the material prior to class; this will prepare you for what is to come and will help you to memorize the material that much faster.

Pay attention in class at all times. Take as many notes as you can in class. It helps you to stay focused in class, and helps you to retain the knowledge you are exposed to.

Some of us have been told (and have learned) that sitting in certain parts of the classroom will enable you to perform better.  Sitting in the first two rows of the center section of class can be the most beneficial.

Manage your time; plan and be organized

Budget your time and set a schedule. If you do this one thing, and stick to it, then everything else will be much easier for you. Plan all of your activities out each week. Try to keep a steady schedule each day, balancing classes and homework with other activities.  It helps you stay organized and not stress out about what you need to do.

During the first year at college some of us had a hard time managing our time. But we got better. When you successfully manage your time, you find that you get a good amount of sleep and the time to engage in other (fun) activities.

Being organized can help you avoid some very foolish mistakes.

Know what is expected of you prior to each class.  If you keep track of all of your assignments and try to complete them on time, it will make your life much easier.

Always check your e-mail and Blackboard (course management system), to keep up with messages from your instructors.

Sleep! Eat! And take care of yourself!

“Go to class, go to chow, go to sleep.”

While it may sound self-explanatory, in our freshman year it took some of us some time to realize that he or she needed to get a good night’s sleep.  Once one’s sleep each night increased, so did one’s GPA.

We cannot stress how important getting enough sleep is!  Most of the time when you don’t get enough sleep, you don’t even bother to get out of bed, much less get to class! So make certain that you are getting enough rest!

One of us had an 8:00 a.m. class during freshman year and he or she was always tired in class, and that affected his or her grades.

“Sleep before study.” You mind cannot retain information if it is worn out and tired.  So get some rest.

Get 7 to 9.5 hours of sleep a night. Everyone is different as to how much sleep they need. One academic study suggests that the average college student needs 9.25 hours of sleep a night (some might need even more). And these studies demonstrate that the 8th and 9th hours of sleep are really important, as that is when long-term memories are best formed. 

If you get plenty of rest, you will have more energy to make it to every class on time, and to do all of the readings and assignments.

So get to bed at a reasonable hour.  Red Bull-fueled study sessions lasting all night are one quick way to burn out your candle.

Also, don’t go to class hungry. Eat a good meal so you can stay focused in class.  Don’t just survive on vending machines, as they will fill your body with garbage, sapping your strength and brainpower.

One of the most important things is to take care of your body.  Without proper nutrition and exercise your body won’t be as effective as it should be.  We know it’s a pain, but try to eat right, get the proper amount of sleep, and you will notice how good it feels.

Keep an open mind

You will meet people from very different backgrounds than yours. The world is full of different opinions, facts, information, and technology. Keeping an open mind can assist you in learning more about things that maybe you did not even know you were interested in.

Being able to act properly in any situation is a key to success in school and life. You never know what school or life will throw at you, and with an open mind you will be able to perform at your best.

Avoid groupthink

Don’t let your peers and their behavior unduly influence your own decisions and actions.  Like the saying goes, “If everybody agrees, somebody isn’t thinking.”

Keep your morals and your values close

Just because you have an open mind doesn’t mean you cannot have great morals.

Just because you may be able to get away with something doesn’t mean you need to go there.

Without integrity, you are nothing. Resist the urge to cheat on a test. Don’t plagiarize – every professor knows how to easily detect plagiarism using online software they access.

Ask questions, and ask for assistance

If you do not understand something, just ask a question.  Some people have trouble with this because they are too shy to say anything.  If you never ask, your professor will never know.  You are paying for the professor – and her or his time!  However, if you are too shy to ask questions in class, then ask the professor in her or his office, or e-mail the professor.

There is no dumb or stupid question. Always ask questions when you don’t know something. This way you will learn what you did not know, and you will be able to do better in those classes.

Go see your professors during their office hours. Listen to them. They know what they are talking about, so don’t be ignorant.

When you are doing your best and studying all of the materials, but you still don’t understand it, ask for extra help. You can even request a tutor to assist you. Some of us see tutors for a couple of our classes, and they have helped us come up with several good studying techniques.

Use the Writing Center to help you with a paper in any class. Your grades on essays will be better!

Do your math homework in the Math Lab – that way, if you get stuck on a problem, help is right there.

Get to know at least one professor each semester. Knowing your instructors will increase your connection with the material presented and is a great way to get extra help on class work.

If it gets to be too much, just take a breath and then ask for help.

Don’t give up!

Life and college are going to hit you hard at times, often provoking thoughts in you of quitting. But it is times like these when you need to persevere though any struggles you may be up against.

You should always try to look at the good things you have in life. Thinking about all the bad things will only lead to more bad things and negativity.

Take time to relax

Don’t take things too seriously. You need to relax and enjoy yourself once in a while.  But – don’t get carried away.

Have fun on occasion. School can be stressful at times. Make certain you give yourself time to go out and enjoy the best years of your life.

Remember – “Just Breathe!” Try to keep your stress level down; it always makes things more difficult if you are stressed out.

Be yourself and do what you love. Happiness is the key to success, and your time at college should be fun.  You can’t get your college years “back,” so take some time out to enjoy the college experience.

R U texting in class? Watch out!

Lastly, don’t text in class. At least one professor we know will seize your phone and throw it out the window! “Number 18, coming down!” was heard last semester, as he seized yet another phone – a practice he started many years ago. We are not joking!

Seriously, pay attention in class. Take notes. Be courteous to others, and your professor.

There is no reason why you cannot follow these steps to become a successful student.

Now go out there and make it happen!  “Just do it! Do it, do it, do it. DO IT NOW!”

We wish you all the best in meeting your challenges in all of your future endeavors!

Have a great time in College!

            - Your fellow students (Alfred State College, Alfred, NY, 2011-2014).

            "WE ARE ALFRED!"

To learn more about Alfred State, visit www.AlfredState.edu.

To learn more about Professor Rhoades, please visit http://www.alfredstate.edu/users/rhoadera.

College Students: I Failed. I Had Many Doubts. Yet, I Persevered. So Can You.

Dear College Student Scholars:

Please permit me to tell you a story.

Shortly after I arrived at college (nearly 40 years ago) I suffered several events that had not happened to me in high school – I failed. Over and over. I blew it on quizzes, essays, and exams. I was astounded when, just a few weeks into the semester, I had failing grades in one course and grades far below my personal expectations in several others. Hence, I felt as if I didn’t deserve to be at college.

Compounding the problem – I was extremely shy. It went beyond introversion (which, I later learned, is a strength, but not an excuse). I was not forming connections with other students. I was quiet. I often ate alone at the eateries on campus. I was lonely. I suffered from social anxiety. I felt, again, like I didn’t belong at college.

But – I persevered. How? I used my grit and determination to figure out how to change – a few little things, that then had major impacts. And, very importantly – I reached out for assistance, and received guidance – some from fellow students, some from professors, and some from other types of counselors on campus.

And then, with courage, I chose to tackle the challenges I encountered head-on. I utilized my new insights into how to study, how to keep myself focused, how to manage my time more effectively, and slowly learned how to get involved in groups and made friends.

Today I am very fortunate to be teaching college students, after successful careers as a lawyer and then as a financial planner. I have dozens of professional colleagues in law, financial planning, and in education that I am proud to call my friends. I also engage in advocacy efforts in Washington, DC, and speak several times a year at industry conferences – often to hundreds at a time (and I do so without any nervousness or anxiety). I’ve had the honor of serving on numerous industry committees and learning from top persons in the financial planning profession. My success I can tie back to one decision I made – to persevere, at a time during my first year of college when I didn’t think I belonged in, or deserved to be at, college. I prevailed … and so can you!

If you find yourself in similar situation, or having similar feelings of self-doubt, please realize this:

You deserve to be here. You’ve made it! – You are in college. You have every right to be here. You deserve this opportunity. It’s up to you to make the most of it!

Not all who apply to college are offered admittance. You were admitted with the full expectation that you possess the talent and abilities to succeed here. Your professors all want you to succeed – that’s why they welcomed you to the community of scholars on the first full day you were here.

Realize that scientific research has demonstrated that neither your intelligence, nor your I.Q., is fixed. The brain is malleable. With effort, practice, and exercise, new neural connections form in your brain. The result is that your intelligence, as measured by I.Q. scores, can and will increase.

You can, and will, make friends and join communities. College is a great place to make friends, many of whom will become lifelong friends.

A student once wrote to me that he suffered miserably from loneliness his first semester. And then he joined the Drama Club on campus. Not only did he make friends, but in his sophomore year he landed a small part in one of the plays. By his junior year he landed a leading role in another play. His self-confidence in social situations went from very low levels to very high levels. He learned to overcome his fears, and he then became outwardly friendly to others and a friend and mentor to many other students.

Many other of my students have written to me, in essays which I assigned in one of my classes, that they really didn’t find a lot of new friends on campus until they joined a couple of clubs and organizations. Some wrote that the first club they joined didn’t work out, so they just dropped out and joined another – and tried again until they found a “good fit” for them. If you have not yet done so - join a club or organization – this week!

Realize that in your freshman year, and often in subsequent years, EVERYONE will experience an academic setback (a grade, or many grades, below their expectations). And EVERYONE at one time or another – or for extended periods – will have awkward moments or periods when they feel that they don’t belong. These setbacks should not be interpreted by you as a sign you don’t belong in college, or that you are not going to succeed. YOU DESERVE TO BE HERE.

Another student I know lacked confidence in his abilities. “Everyone else seems so confident in class,” he told me. “Even when they take notes in class. I sometimes feel like I’m the only one who is lost.” I assured him he was not.

Every week I receive e-mails from students inquiring about how they should study for a particular class. (This past week I received over a dozen e-mails and visits, asking exactly that question.) And I often meet with students who doubt their own abilities. By reaching out to me, they have “crossed the threshold” – often I can empower them with a study method. At other times I refer them to another person on campus, perhaps a specialist in dealing with a particular issue, who can offer the needed guidance.

While each student’s situation is different, and the challenges and their solutions vary, perhaps the key is this … EVERY STUDENT HAS DOUBTS. EVERY STUDENT AT ONE TIME OR ANOTHER LACKS CONFIDENCE IN HIS OR HER OWN ABILITIES. BUT … EVERY COLLEGE STUDENT IS A SCHOLAR AND CAN OVERCOME THE OBSTACLES AND PREVAIL.

I cannot promise you that every experience you have on any college campus will be a positive one. At times you may have some negative experiences. But I can assure you that YOU BELONG AT COLLEGE. You made the grades to get into college. You can, with effort and perseverance, and if you reach out for assistance, succeed.

Small decisions by you can yield big results. One student relayed to me that she overcame her poor writing skills when she made the decision to cross the threshold and entered the Writing Lab. She asked for her essay to be reviewed (before it was submitted in the class she was writing it for. She received valuable tips on the essay’s organization, the use of topic sentences in paragraphs, etc. Her resulting essay grades improved dramatically. And this led to improvements to her final grades in many classes, and to her GPA.

Another student was not doing well in College Algebra, but after his first test he started to do all of his homework in the Math Lab, where a proctor is available to help out when students get stuck on a problem or concept. His grades in that, and subsequent math classes, improved dramatically. (And he was less distracted at studies.) Other students have turned to online math tutoring, often offered through colleges for free.

Still another of my students wrote to me that she expanded her comfort zone by sitting down with another person, who was all alone, in the dining hall. She adopted the role of interviewer, asking questions about the other person’s major, what the other person liked about college, what advice the other person would have for an incoming freshman, etc. (Asking questions – and listening and then asking follow-up questions – is a great way to start a relationship.) She did this multiple times, and each time felt more comfortable approaching strangers in this way. It turns out that several of the persons she approached had some of the same challenges she was dealing with. And she made friends - that remain remain friends to this day.

If you suffer a setback, and you begin to feel depressed, or feelings that you may not succeed here, there is so much help available at Alfred State. Reach out and seize it. 

• Your Resident Assistants (they’ve been there – recently)
• Your Residence Directors (they’ve also been there)
• The Academic Success Coaches and other advisors at your college's Student Success Center.
• Peer tutors, available at many colleges and for many classes.
• Your academic advisor.
• Your professors.
• Your coaches.
• Your club advisor.
• Your college's Health & Wellness Center - the counselors there are very helpful when you have problems such as inability to get to sleep, anxiety, and so much more
• Your college's Career Development Center – particularly if you begin to question whether you are in the right major.
• … and many more!

 Where do you begin? Contact your RA, RD, academic advisor, or athletic coach – they can either assist you, or connect you with the right resources on campus. Your campus may also have special counselors or coaches for academic success.

Want to further boost your own ability to succeed? Write a letter to another freshman. This is an important exercise, which everyone can do. It will provide you with real insights, as you write the letter. (See the attached letter, as an example). Pretend to write a letter to “my brother/sister/friend, when you get to college.” Tell them what you’ve already learned. Give them tips on what it takes to succeed, and persevere, while at college.

(If you desire, shoot me a copy of the letter you write. RhoadeRA@AlfredState.edu. I’ll keep your name confidential, but may use excepts from your letter in future communications to your fellow students. It’s just one of the many ways you can help out your fellow students – and help me, too!)

Lastly, state either:

    (If you are presently alone, say out loud): “I am a scholar, motivated to succeed. I am part of a diverse, caring community of scholars.”

    (If you are with one or more others, say together, out loud): “We are scholars, motivated to succeed. We are part of a diverse, caring community of scholars.”

Repeat this daily. Print it out. Post in above your study area - or on the back of your door.

Some final thoughts …

College is a great place to grow and expand your comfort zone, a bit at a time. If not now, when? Challenge yourself to become a better person – and student – each and every day. Adopt S.M.A.R.T. Goals to propel you forward. Develop yourself better into the person that others will follow.

With grit, perseverence, and - on occassion - support from others, you CAN and WILL succeed at college. Never let self-doubt, lack of confidence, or instances of failure get in your way.

Instances of failure, as occurred more than several times to me, did not make me a failure. Nor should any setbacks cause you not to succeed at college.

Never, ever give up!

Ron A. Rhoades, JD, CFP(r) is the Curriculum Coordinator for the Financial Planning Program at Alfred State College, Alfred, NY. He provides his students with exceptional learning experiences in Business Law I, Investment Planning, Retirement Planning, the Personal Financial Planning Capstone course, Employee Benefits Planning, Insurance & Risk Management, and Money & Banking. He is also the author of Choose to Succeed In College and In Life: Continuously Improve, Persevere, and Enjoy the Journey, available for $2.99 (Kindle edition) at Amazon.com. He can be reached at RhoadeRA@AlfredState.edu. 

Rights of the Clients of Financial Advisors to Good Faith During Relationship Formation

Filled with apprehension, apposite to her uncertain personal financial future, abetted by anxiety pertaining to the global economy, my neighbor yearns for my guidance in today's complex financial world. She yearns to place faith and confidence in me, in my expertise, and in my judgment. My neighbor seeks my counsel, bound faithfully to her through the power of trust.

My neighbor's expectation of my faithful service exists not just within her, but within all of our fellow Americans, as they struggle to navigate a maze of investment products, mitigate risks, and secure their own financial futures. My neighbor is not alone, for her longing for the peace of mind which flows from the placement of trust is nearly universal among our fellow brethren.

But we must ask, and financial advisors and investment counselors - when our neighbors give to us, financial advisors, their confidence, what rights do they in return secure from us? I explore just one aspect of these rights - those which exist during the formation of the relationship between the investment or financial advisor and the client.

GENERALLY, THE RIGHT TO HONESTY AND GOOD FAITH IN FORMING THE CONTRACT

We begin with good faith in the formation of a contract in which trust and confidence are to be reposed by a client to a fiduciary. While the doctrine of culpa in contrahendo has long been viewed as a source of the obligation of good faith in civil law jurisdictions, in the context of negotiations to form a contract, only recently have our common law courts chosen to embrace good faith in contract formation. In 1808, Justice Sedgwick of the Massachusetts Supreme Judicial Court observed, in disregarding a pretense by a party in securing a contract which resulted in fraudulent concealment, that "not only good morals, but the common law, requires good faith, and that every man in his contracts should act with common honesty." Bliss v. Thompson, 4 Mass. 488, 492 (1808).

Each of our neighbors possesses a choice - to engage with a person in an arms-length transaction, or to go further and secure the services of a fiduciary. Yet, during this process, our neighbor is not to be fooled by misleading titles, false statements, or other designs amounting to fraudulent concealment. Indeed, given the expectations of our fellow citizens (as evidenced by so many surveys of consumers over the past decade) that they will place trust in those who provide financial and investment advice, full and complete frankness of the nature of the relationship must be undertaken.

Hence, we require full and frank disclosure of the nature of the relationship to be assumed. "If dual interests are to be served, the disclosure to be effective must lay bare the truth, without ambiguity or reservation, in all its start significance.” See “Will the Investment Company and Investment Advisory Industry Win an Academy Award?” remarks of Kathryn B. McGrath, Director of the SEC Division of Investment Management, at the 1987 Mutual Funds and Investment Management Conference, citing Scott, The Fiduciary Principle, 37 Calif. L. Rev. 539, 544 (1949).

SPECIFICALLY - THE RIGHT TO NOT BE CONFUSED BY THE USE OF TITLES OR OTHER MARKETING DEVICES WHICH MIGHT HIDE THE NATURE OF THE RELATIONSHIP

There must be no attempts as obfuscation of the nature of the relationship, when an arms-length relationship exist and trust and confidence is neither placed nor accepted. As stated by the U.S. Securities and Exchange Commission (SEC) early on in its history: "The necessity for a transaction to be really at arm's-length in order to escape fiduciary obligations has been well stated by the United States. Court of Appeals for the District of Columbia in a recently decided case: ‘[T]he old line should be held fast which marks off the obligation of confidence and conscience from the temptation induced by self-interest. He who would deal at arm's length must stand at arm's length.  And he must do so openly as an adversary, not disguised as confidant and protector.  He cannot commingle his trusteeship with merchandizing on his own account…." Seventh Annual Report of the Securities and Exchange Commission, Fiscal Year ended June 30, 1941, at p. 158, citing Earll v. Picken (1940) 113 F. 2d 150. [Emphasis added.]

Yet, the very use of titles, such as "financial advisor" or "financial consultant" or "wealth manager," or designations such as "Chartered Financial Consultant" or "Certified Financial Planner(tm)," are indicative of an advisory relationship. Someone forgot to tell Wall Street that trust-based marketing, without acceptance of fiduciary status, can rise to the level of intentional misrepresentation.

The view that one holding out as an advisor should be governed by the fiduciary standard of conduct finds recent support in academic literature: “The relationship between a customer and the financial practitioner should govern the nature of their mutual ethical obligations. Where the fundamental nature of the relationship is one in which customer depends on the practitioner to craft solutions for the customer’s financial problems, the ethical standard should be a fiduciary one that the advice is in the best interest of the customer. To do otherwise – to give biased advice with the aura of advice in the customer’s best interest – is fraud. This standard should apply regardless of whether the advice givers call themselves advisors, advisers, brokers, consultants, managers or planners.” James J. Angel and Douglas M. McCabe, Georgetown University, Ethical Standards for Stockbrokers: Fiduciary or Suitability? Sept. 30, 2010. [Emphasis added.]

See also Arthur B. Laby, Reforming the Regulation of Broker-Dealers and Investment Advisers, 65 Bus. Law. 395, 400, 413-17 (2010) (arguing that the broker-dealer exclusion from the definition of "investment adviser" in 15 U.S.C. § 80b-2(a)(11)(C) should be lost if a broker-dealer markets itself or otherwise holds itself out as an "adviser" in light of the connotation of the word).

The SEC, over five decades ago, warned against the use of any attempt to obscure the nature of the relationship by brokers. In its 1963 comprehensive report on the securities industry, the SEC stated that it had “held that where a relationship of trust and confidence has been developed between a broker-dealer and his customer so that the customer relies on his advice, a fiduciary relationship exists, imposing a particular duty to act in the customer’s best interests and to disclose any interest the broker-dealer may have in transactions he effects for his customer … [BD advertising] may create an atmosphere of trust and confidence, encouraging full reliance on broker-dealers and their registered representatives as professional advisers in situations where such reliance is not merited, and obscuring the merchandising aspects of the retail securities business …. ” 1963 SEC Special Study on the Securities Markets. [Emphasis added.]

SPECIFICALLY - THE FORM OF PAYMENT SHOULD NOT DECEIVE: 12B-1 FEES ARE DECEPTIVE TO CONSUMERS AND VIOLATIVE OF THE "SPECIAL COMPENSATION" RESTRICTION ON THE EXCLUSION OF BROKERS FROM THE REQUIREMENT OF REGISTRATION AS AN INVESTMENT ADVISER

The form of payment must also be consistent with one's status as a fiduciary. If an asset-based fee is to be charged, then there exists a reasonable expectation of the client of an ongoing advisory relationships.

In reality, in many contexts, 12b-1 fees are "investment advisory fees in drag.”  They are utilized to compensate registered representatives and their broker-dealer firms for services of an investment advisory nature.

The anti-fraud provision of the Advisers Act, 15 U.S.C. § 80b–6, Prohibited transactions by investment advisers, forms the basis on which fiduciary duties have been applied to investment advisers, states: “It shall be unlawful for any investment adviser by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly— ….”  (Emphasis added.)  Broker-dealers who receive “special compensation” -  generally, anything other than a commission at the time of a product sale or upon the deposit of funds into the product, appear to fall outside of the broker-dealer exclusion from the Advisers Act.  See Philadelphia Suburban Water Co. v. Pennsylvania Public Utility Commission, 2002 PA 3603 (PACW, 2002) (“’Indirectly’ signifies the doing by an obscure circuitous method something which is prohibited from being done directly, and includes all methods of doing the things prohibited except the direct one. Farmers' State Bank v. Mincher (Tex. Civ. App.) 267 S.W. 996. State v. Pielsticker, 225 N.W. 51, 52 (Neb. 1929). Moreover, in Amicable Life Insurance Co. v. O'Reilly, 97 S.W. 2d 246, 249 (Tex. Civ. App. 1936), the Texas Supreme Court noted that ‘indirectly’ cannot be treated as surplusage; this word must be given its meaning in the adjudicated case.”)

Noting hat the ill-advised fee-based accounts rule was overturned in Financial Planning Ass'n v. S.E.C., 482 F.3d 481 (D.C. Cir., 2007), I can only wonder why no judicial challenge to 12b-1 fees as impermissible special compensation has not yet arisen. One cannot do indirectly what one cannot do directly.

CONCLUSION

While other blog posts have addressed other aspects of the fiduciary obligation, including the inability to "switch hats" at will and the impossibility of wearing "two hats" for the same client, in this post I have directed my attention at the harm caused, in the business practices today, during the contract formation stage.

The SEC and FINRA have, for far too long, permitted this harm to occur. Yet, through the Dodd-Frank Act, the SEC has the ability to right these wrongs.

For the sake of all of our neighbors, let us hope that the SEC will proceed down the path of correctly applying, and then enforcing, fiduciary obligations. Let us hope that the SEC will choose to respect the rights of our fellow Americans to honesty and good faith, as they enter into contracts for the receipt of personalized investment advice.

Ron A. Rhoades, JD, CFP(r) serves as Chair of the Steering Group of The Committee for the Fiduciary Standard. He is an Asst. Professor at Alfred State College, where he serves as Program Director of its B.B.A. Financial Planning program.

Evidence of Harm; Who Will You Choose to Be?

What I write here may mean nothing to the masses of the American people. The many entries in this blog are read by perhaps only a few thousand. Here I write mainly for those who are partisans for those in the cause of the fiduciary principle. Perhaps, on occasion, a few lines from an entry in this blog will be picked up by the industry press. But mostly the readers of this blog are those already involved in the fiduciary debate.

But our fellow citizens remained untouched, and largely unaware, of the public policy debates in which we engage. Americans toil in jobs and careers, seeking the freedom that comes from achieving the goal of financial security. They save. They invest. They seek to manage their tax burdens. They hope that they are acting correctly.

To assist them to achieve their goals, our fellow citizens turn to financial advisors. In this incredibly complex financial world, it is extremely rare indeed to find the individual consumer who does not require assistance from an expert, trusted advisor.

These consumers are vaguely aware that financial advisors are regulated and supervised. They are informed by their financial advisor that his or her advice will be “objective” and “in their best interests.” Some financial advisors go further, and tout that they are “fiduciaries” under the law.

But most of these “financial advisors” and “investment advisers” and “wealth managers” – however they are regulated – are not true fiduciaries at heart. They disclaim their core fiduciary duties. They place another piece of paper in front of the client and say, “Sign here.” Unwitting clients, wanting to trust their advisor, then permit their advisors to abrogate their core fiduciary duties, to engage in unwarranted conflicts of interest, and to receive additional compensation, often to levels wholly unreasonable.

95% of the time, true fiduciary practices are not employed by financial advisors. Consumers are subjected to a mere illusion of protection, nothing more.

I have seen the evidence of this harm.

I have seen hundreds of my fellow Americans possess investment portfolios that consist of highly expensive or risky investments. I have seen these portfolios designed with little consideration to proven investment principles and tax-efficiency. I have seen the attainment of the financial goals of my fellow Americans substantially delayed, and at times obliterated, as a result. I have seen the evidence of this harm.

I have seen hundreds of retirement plans possess extremely high fees and costs, despite the economies of scale which retirement plans can bring to bear on behalf of the plan participants. I have seen the retirement futures of millions of my fellow Americans circumscribed, as their retirement nest eggs are far less than that which is possible. I have seen the evidence of this harm.

I have seen hundreds of financial advisors who have no real training nor any expertise in providing personalized investment and financial advice. I have seen hundreds of financial advisors trained by consultants in how to develop relationships of trust and confidence with their customers, in order to be able to sell wholly inappropriate investment products to them. And I have seen hundreds of financial advisors who desire to “do the right thing” by their clients, yet be constrained by the restrictions imposed by their employers; they are forced to sell proprietary funds, engage in principle trades on unfavorable terms to the consumer, and they are restricted from offering the best investment products available (as these products don't provide, to their employers, payment for shelf space, soft dollars, 12b-1 fees, or other revenue-sharing arrangements). I have seen the evidence of this harm.

I am part of a community of investment advisors and financial planners. But I must admit - there is no reason for American consumers to trust us. Regardless of what title we utilize. Regardless of what certification or designation we possess. I am not a part of a “profession,” but only of a trade, deserving of no more respect than a used car salesperson.

The sad influence of Wall Street in Washington

It is wholly unclear if policy makers in Washington, D.C. are listening to the call for a broader and more correct application of the fiduciary standard. Congress, under pressure from Wall Street, seeks to influence the government agencies from the exercise of their authority. The Administration seems fearful to engage in combat with Wall Street and its tremendous resources.

Yet, there are a few dauntless souls, such as EBSA’s Phyllis Borzi and her staff. They realize that imposition of the fiduciary standard upon all providers of advice to qualified retirement plans and IRA accounts will secure for hundreds of millions of Americans a brighter economic future.

But powerful opponents exist. The courageous voices of Phyllis Borzi and her team, and consumer advocates, are drowned out by the estimated 3,000+ financial services lobbyists and the hundreds of millions of dollars they deploy to secure influence over Capitol Hill. Wall Street firms and their lobbyists will "do whatever it takes" and will "spend whatever it costs" to kill any broader application of the fiduciary standard.

Additionally, those few dutiful public servants who seek to protect individual investors are far outnumbered by other public servants who engage in the folly of the revolving door between Wall Street and government agencies. As a result of this revolving door, few leaders and staff of  government agencies are brave enough to advocate any restrictions which may be imposed upon Wall Street. They either possess allegiance to the firm and sales culture they came from, and/or they look forward within months or years to the promise of high-paying jobs on Wall Street or in the law firms or lobbying firms employed by Wall Street firms (as long as they don't "rock the boat" while serving in the government agency).

Indeed, I would observe that few of the current staff at the SEC believe in a bona fide fiduciary standard. Even if Chair Mary Jo White desires to proceed to reform Wall Street's practices in the delivery of investment advice, she appears surrounded by key staff - division heads and others - who desire to preserve the status quo.

Over the past four decades the SEC has refused to apply, and has weakened, the fiduciary standard. As a result of these and other actions and inactions at the SEC, Wall Street's pressure and influence has transformed what was once the most well-respected of our government agencies to a hollow shell.

The result of Wall Street's lobbying visits to members of Congress and the government agencies, which outnumber those of consumer advocates by 20 to 1 (or more), is a distortion of the truth. Wall Street knows that if their lies are said loud enough, and often enough, they become the “reality” perceived by those “inside the beltway.” I have personally observed policy makers, and their staffs, bombarded by visits from Wall Street’s firms and lobbyists, and thereafter adopt views of our present financial services system which are wholly distorted from the actual reality facing Americans on Main Street.

Financial and investment advisors – if you desire to do what is right for your clients, what can you do?

You can educate yourself, both formally and informally. You can become the expert advisor our fellow Americans deserve, able to critically examine financial and investment strategies, weigh risks and rewards, and recommend only those few strategies and techniques which withstand close scrutiny and, often, the tests of time.

You can choose to become truly independent, by transitioning to a firm that has embraced, wholly and without reservation, a bona fide fiduciary culture. You can choose to move on, so that you can truly sit on the same side as your client. You can choose to love being able to go to work and assist your fellow Americans, as you will deserve of their trust. You can choose to be stewards not only of your clients’ wealth, but also of their hopes and dreams. You can choose to love what you do, and to love yourself, as you embrace a love for your neighbors.

You can then join one of more of those very few professional organizations which embrace a bona fide fiduciary standard and who require practice models that eschew conflicts of interest – the National Association of Personal Financial Advisors (www.napfa.org), the Garrett Planning Network (www.garrettplanningnetwork.com), and/or the Alliance for Comprehensive Planners (www.acplanners.org).

You can choose to be part of the future, not the past, of investment advice. You can choose to abandon product sales in return for the joy derived from the delivery of objective advice. You can choose to be a trusted advisor. You can choose to be a bona fide fiduciary. You can choose to be part of the small but ever-growing community of professionals. You can choose to go to work each day with a smile on your face and knowledge that you are doing what is right for your clients.

Until many more make this choice, we cannot become a true profession. We have not earned that right. Collectively, at the present time, we do not deserve the trust of our fellow Americans. But, over time, with effort, this can change.

There are already a few financial and investment advisors – thousands (not tens of thousands) across this land – who possess the requisite expertise and true objectivity to truly be deserving of the title “professional.” They practice as bona fide fiduciaries. They are trusted advisors to their clients. They act as "purchaser's representatives," rather than "investment manufacturer product representatives." And, as word spreads of their deeds, their market share continues to gain.

You can take the actions necessary to join with other bona fide fiduciaries. Should you choose this path, the personal rewards (financial and otherwise) resulting from your endeavor will be far more than you ever thought possible.

Then, together, we can continue to press forward for adoption of the fiduciary principle. Together we can place our clients’ best interests above our own. Together we can justify our professional-level compensation, as a result of the application of our expertise in the representation of our clients.

Then, together we can correct the current sad state of the financial advisory industry. Rather than merely bear witness the evidence of harm caused by so many in financial services today, we can use our strengthened collective influence our policy makers to extend the fiduciary principle to all providers of financial and investment advice.

Only then will we, as a profession, earn the respect of our fellow countrymen, and enable them to better succeed in pursuit of their financial goals. Only then can we end the harm to which hundreds of millions of our fellow Americans are subjected.

Our fellow Americans deserve the emergence of a true profession of financial and investment advisors, bound together by the fiduciary standard of conduct.