Fiduciary Standard

Fiduciary Standard

A hot topic in industry publications and on nightly news has been focused on the Department of Labor’s April 2016 announcement of the “fiduciary standard” which Noesis has adhered to for over two decades. From a June issue of the Financial Times, “(The fiduciary standard) demands that financial advisors act in the clients’ best interests when handling retirement accounts. The new rules apply to anyone supplying advice on retirement plans and individual retirement accounts. The Securities and Exchange Commission, meanwhile, is considering applying it to all advisors and brokers and all products, not just retirement plans, which would override the traditional situation where many brokers merely have to recommend ‘suitable’ investments.”

This is very satisfying to Noesis as our philosophy has always been that the client comes first in every investment decision that we make. Shouldn’t this be the natural order of things and how one should act even without being told to do so by a regulatory body? Noesis prides itself on following the Chartered Financial Analyst Code of Ethics (as we employ three charter holders) which includes:

• Act with integrity, competence, diligence, respect and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.

• Place the integrity of the investment profession and the interests of clients above their own personal interests.

• Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities.

We are pleased to see that the rest of the industry is moving in the direction of placing the client’s interests first, ahead of any other interests. What this really means is that brokers historically just had to convince their compliance department that any product they buy for their clients is suitable – not necessarily in their best interest or the right fit, just that it is suitable. This can translate to higher (and hidden) fees and costs, and underperformance. Noesis has always adhered to the fiduciary standard, which means we have always purchased investments for our clients that meet their objectives and are in their best interest. We do not participate in commissions of any kind and all costs associated with client accounts are made completely transparent.

Many of our clients are aware of our custodial relationship with Charles Schwab. Most of our clients’ assets are held at Schwab, which we believe is one of the most ethical, transparent and cost effective custodians in the world. Indeed, Schwab currently holds more than $2.7 trillion in assets – by far the largest independent custodian and in fact bigger than its top three competitors combined. Schwab recently re-launched a marketing campaign aimed at educating individual investors about the Registered Investment Advisor, or RIA. Noesis has been an RIA since its founding in 1995. For a variety of reasons we chose this structure – not the least of which is the ability to deliver truly independent advice.

The RIA channel is the fastest growing segment of our industry, and for good reason. Clients seek unbiased advice and want the trust that only a fiduciary relationship can provide. If you have friends or families that are still looking for the right solution, we welcome you to introduce them to us here at Noesis – we would be glad to help them!