Comprehensive Advisor

UPIA & Third Restatement

These two documents are closely linked.  They lay out the actual legislation and interpretations adopted by most states.  Since most of my work is in Virginia and these documents apply here, you may want to check out whether these apply in your state, or not.

Also, just in case you can't find the Third Restatement, try looking for Restatement of Trusts 3d:  Prudent Investor Rule.

Both pieces generally impose "the obligation of prudence in the conduct of investment functions."  The person overseeing investments considers "the purposes, terms, distribution requirements and other circumstances" of the investments.  Further, the investment activities must be viewed not in isolation, but in the context of the whole responding to the goals and objectives of the investment policy.

The heart of these documents is the list of parameters a fiduciary should consider when overseeing investments.  This list includes general economic conditions, inflation/deflation, tax consequences, the overall components of the investment pie, other resources, needs for liquidity, and more.

Next time, we'll discuss the role of loyalty, diversification, impartiality, investment costs, and delegation for a fiduciary in the light of the UPIA and the Third Restatement.

You're a fiduciary, so what?

You've heard the term fiduciary, especially lately, ever since the recent FPA lawsuit victory over the SEC.  A fiduciary duty can be imposed on a person in a number of ways.  Wait, let's define fiduciary.

According to dictionary.com, a fiduciary is a person entrusted with the property of another party and in whose best interests the fiduciary is expected to act when holding, investing, or otherwise using that party's property.

A fiduciary can be a person from many walks of life, including small business owners who have 401(k) plans for their employees.  A fiduciary can be a member of a board of directors.  The point is someone can be a fiduciary and not even know they are liable for the tremendous responsibilities.

A person registered as a Registered Investment Advisor with the government, usually the SEC or the state is a fiduciary.  Most often the RIA has no training or special knowledge of what their role as a fiduciary means to themselves or their clients.

As a minimum, a person holding themselves out as an RIA ought to be versed in the Uniform Prudent Investors Act, the 3rd Restatement, and the Center for Fiduciary Studies.

In the next entries, each of these will be discussed.

Working With a Pool of Specialists

The second part of comprehensive advice is being able to call upon a vast pool of specialists.  In a firm like ours, these specialists neither pay us, nor do we pay them.  Each of them and us receives compensation solely from our clients.

Having these specialists as separate firms brings a level of professional services and client dedication that is impossible to achieve in large consulting firms.  Since each professional is responsible to their own firms and small staffs, we all must demonstrate to every client our service and commitment to our clients at all times.  We can never hide behind a corporate veil, nor can we blame circumstances beyond our control.

Finally, having specialists as outside entities ensures the solutions we provide are as unique as our clients.  We avoid the approach of providing cookie cutter responses to clients' needs.

In our next entry, we will talk about the differences between those who are supposed to act like fiduciaries and those with the training and skills to do so.  The difference is vast.

What does it mean to be comprehensive?

Being a comprehensive advisor means having access to the knowledge and specialists needed to help you fulfill all of your goals and objectives.  As a life financial plannerand as a comprehensive consultant, to us advising people means going beyond dollars to make sense of how money fits into your life.

No single individual has the resources to be so knowledgeable about all the multitude of aspects of money and people that other resources might not be required.  So, since we know that we don't know it all, we use two complementary approaches to provide comprehensive advice.

The first is continuing education.  We have committed ourselves to completing over 100 hours of continuing education every year.   This education covers the spectrum from financial planning to taxes and estate planning to communications and counseling.

The second approach allows us to call on specialists to fulfill the wishes and needs of our clients.  We will discuss this approach further next time.