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One-Man Think Tank: The fiduciary standard may sink Wall Street's advisors-on-yachts. Should we care?

How much should a professional investment advisor make?

Author Ron Rhoades, Columnist December 7, 2010 at 5:22 AM
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Ron Rhoades: I have personally observed dozens of my clients, throughout my 25-year legal and then investment advisory career, inform me that their “financial advisor” took them on “for free” and “has never been paid a dime.”

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Don Davidson

Don Davidson

December 8, 2010 — 3:21 AM

Your competitive edge angle is well stated. The purists in the fiduciary movement would work more to keep this topic hush if that were the case.

Skip Schweiss

Skip Schweiss

December 8, 2010 — 4:51 PM

Ron, superbly presented ideas, as always. Keep your hold on the flag!



December 8, 2010 — 5:48 PM

If I’m not mistaken, Don Trone told a group of AIF candidates that the minimum fee for a fiduciary audit, and being a plan co-fiduciary, should be no less than $6k and probably closer to $10k. A fiduciary is also liable for the actions of other fiduciaries. It scares me to think that I might lose my home and my business because I missed some obscure little fact when advising a client who paid me $150 or $1000 to be a fiduciary. And to be clear, I’ve never been sued, I’ve made money for my clients, and I don’t have a yacht – I don’t make the “big bucks” – in fact, I’m not even netting 6 figures at present. I act as a fiduciary, by choice, and by law as an RIA, but it scares the hell out of me because of the “ambulance chasers” out there. Is my $300, or $900, or whatever fee reasonable compensation for the risk I take by accepting grandma and grandpa who don’t have enough saved, don’t have adequate insurance, and will certainly either run out of money or have to severely reduce their lifestyle. I want to help them, but they have an unsolvable problem like many middle market clients. You can only do so much with so little, and somebody will surely be able to find fault with ANY solution. Don Trone gets paid $10k, or more?, to be a fiduciary for one little area. I get paid a lot less than that to be a fiduciary in MANY more areas as a planner. I don’t like or defend the crooks on Wall Street, but if we go the way of the medical profession with liability and lawsuits, and our E&O costs $10s or $100s of thousands like theirs does, then how do we continue to serve the little guy?

Elizabeth MacBride

Elizabeth MacBride

December 8, 2010 — 6:37 PM

Thanks for the great response.
In fact, I almost wrote an introduction to the story that raised this very question, because I think there are points of comparison between financial services and health care. The economics of health care — resulting from lots of government regulation, an overabundance of lawsuits and the fix-it-now culture we live in — are such that there’s a big shortage of primary care doctors, whom we might compare to advisors serving the middle market.

Skip Schweiss

Skip Schweiss

December 8, 2010 — 6:53 PM

Elizabeth, great angle that I hadn’t thought of. Worth pursuing, I’d say.

Andy Tilp

Andy Tilp

December 14, 2010 — 9:19 PM


Great comments. To add to your stories about client outrage when they learn about the true cost of the their previous 'free advice’. As I review a plan with client’s and I get to the part where I explain their true costs, it is amazing to see their expressions turn from general interest to one of real anger. I find it almost universal that these middle-class clients state their 'advisors’ provide little value other than a product sales pitch and have no real understanding of their actual financial situation or long term goals. I had a client leave my meeting to immediately fire her high-fee broker.

On a positive note, I am finding that as the public becomes educated on what it really means for a advisor/planner to be a fiduciary, as defined by Garrett Planning Network and NAFPA, they recognize and appreciate the value. (Full disclosure, I’m a member of both). But there are so many messages in the marketplace, many with huge marketing budgets, the eduction process is slow.




December 15, 2010 — 12:29 AM

Andy, thanks for sharing your experiences. Garrett Planning Network has a lot to offer to fee-only financial planners – especially those trying to start up a practice, or transitioning from a warehouse.

VG, I’ve had several advisors (including two BDs about to leave their wirehouse) contact me over the past several months, after reading my column on RIABiz.com, who have been concerned about the increased liability of a fiduciary. I observe that a fiduciary advisor has much less to fear with regard to liability to clients, in comparison to a registered rep, as long as the fiduciary understands the nature of trust. I hope to address the components of trust in a future article at RIABiz.com.

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