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Financial Planning > Behavioral Finance

Fiduciary First of All

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I find the discussions on “fiduciary responsibility” interesting (see “Exemption Vacation,” May 2007 issue). A foundation of just about any profession, be it medicine, finance or other, should be to do what not only is believed to be in the best interest of the client/patient, but for which the provider can provide documentation to support any “prescription” given.

Whether the recommendation to the client is to purchase a mutual fund or portfolio of individual stocks, or a “managed account,” the advisor should have a fiduciary responsibility to the client to not just make a recommendation, but to be able to substantiate why such recommendation is believed to be in the client’s best interests based on the assumptions made and the client’s goals, objective and risk tolerance.

Perhaps what is needed is a rule requiring advisors not to just have documents in their file, but provide the client with copies of the assumptions used in making a recommendation and why the advisor feels it is in the client’s interests. This would give total transparency to the process for advisor, client, and regulators.

Ilene Davis, CFP

Financial Independence Services

Cocoa, Florida

Doing the Fiduciary Wiggle

I just read Bob Clark’s column (IA, May 2007) about the FPA vs. SEC suit and was alarmed to read “…that when the certificant is providing financial planning or material elements of the financial planning process, the duty of care owed to clients is that of a fiduciary…” and then [he] explained the wiggle room created by that. I vehemently objected to the original draft and thought this subsequent one “fixed” the fiduciary issue. I am not sure he is right about the wiggle room. The financial planning process, according to the board, is:

1. Establishing and defining the client-planner relationship; 2. Gathering client data, including goals; 3. Analyzing and evaluating your financial status; 4. Developing and presenting financial planning recommendations and/or alternatives; 5. Implementing the financial planning recommendations; 6. Monitoring the financial planning recommendations.

Wouldn’t step 5 be a “material element” of the process and thus fall within the scope of the fiduciary duty?

David Huldstrom

Financial Architects LLC

Woodstock, Georgia

If I understand your point, my answer is “no”: including implementation in the planning process does not solve the problem. In my view it is financial services sleight-of-hand to claim that sometimes a client’s financial advisor is their advisor, and other times he’s a financial salesperson. You’re either a professional or not, all the time. If CFPs ever want to be taken seriously as professionals, the CFP Board is going to have to stop pussyfooting around with the fiduciary issue. Professionals are fiduciaries for their clients, period. Anything else is just a loophole to keep taking dues from nonprofessionals. Of course, that’s just my opinion. I could be wrong.Bob Clark


In the April issue, information regarding the services offered by VSR Financial Services, Inc. was incomplete. This company offers a range of standard wealth management services as described in the corrected directory which is available as a PDF, in the Industry Directory section of

In the IA 25 article in May, we identified Mary Schapiro as chair of the combined NASD/NYSE SRO. Schapiro will be CEO of the new SRO, while NYSE Regulation’s CEO, Richard Ketchum, will serve as non-executive chairman.


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