April 20, 2010

Trone Says Ultra-High-Net Worth Embracing 'Fiduciary-Like' Standards

Wealth management standards out for public comment

More On Legal & Compliance

from The Advisor's Professional Library
  • Meeting and Exceeding Clients and Regulators’ Expectations Although it can be difficult, there are ways for RIAs to meet or exceed client expectations, increase customer satisfaction, and help firms retain current clients and attract new ones.
  • Proxy Voting RIAs are not required to vote proxies on behalf of their clients. However, when an RIA does assume responsibility for voting proxies, the firm’s policies and procedures should help to ensure that votes are cast in the best interest of clients.

While Senator Christopher Dodd's financial services reform bill, as it currently stands, excludes a fiduciary standard for brokers, Don Trone, CEO of Strategic Ethos--and founder of Foundation for Fiduciary Studies--says he doesn't think proponents of the fiduciary standard "are losing any significant ground." The momentum, he says, "is still toward a fiduciary standard, and we're just going to take a more prudent timeline to get there. The wirehouse leadership, even post Dodd, continue to talk about embracing a fiduciary standard."

Ultra-high-net worth folks, too--particularly after the Madoff Ponzi scheme--are embracing "fiduciary-like" standards as well, Trone says. "The ultra-high-net-worth have an aversion to the word fiduciary because...the term has been associated with private trusts and their roles on philanthropic boards," he says. High-net-worth families "feel they are incurring liability in the management of their own wealth, and they don't like that position." However, after the Madoff scandal, there's been a "very strong reaction from the wealthiest families around the world for someone to take the initiative to define standards for wealth management," Trone says.

That is why, he says, Strategic Ethos along with Charles Lowenhaupt, the CEO of LGA Global Advisors, have developed just such wealth management standards and put them out for public comment on the Institute for Wealth Management Standards' Web site, wealthstandards.org.

The comment period will run for another quarter. "Charles and his global council--which is made up of some of the top advisors to some of the wealthiest families around the world--developed the principles for wealth management, and once they were completed with the principles, they asked me to then define the standards, the process to fulfill the principles," Trone says.

Reprints Discuss this story
This is where the comments go.