Sitting in an ethics class while a student in chiropractic college, I learned four key points that I’ve followed to this day.
The instructor stated that, as a healthcare provider, your job is to render objective, non-partisan advice or opinion after obtaining all the pertinent information available regarding a patient.
Moreover, never make promises or assurances that cannot be kept, honored, or realized to finality. In essence, if you take credit for getting a patient better, be prepared to take the blame if they don’t.
In addition to always being mindful of ethical standards of care, equally important is taking responsibility for one’s own actions. The instructor described responsibility as the ability to respond to any situation that occurs.
Realistically, render due care and stay within the standard of care of the healthcare community when treating a patient and avoid potential claims of negligence.
Finally, if it isn’t written in the patient’s file, there is no record of it happening. Verbal communication, although important and part-and- parcel with patient interaction, is considered hearsay in many if not all legal arenas and inadmissible. The lesson learned: Write down what the patient told you, what you told the patient, and note both subjective and objective findings.
Your fiduciary responsibility
Being a doctor includes the accountability of being a fiduciary, as do attorneys, CPAs, CFP professionals, and others.1The prudent-person rule is at all times in effect and a fiduciary professional is required to uphold this duty and do what is best for an individual.2
Regardless of the financial title used, most investors fail to thoroughly evaluate if a selected financial broker or advisor is rendering accurate, unbiased, and truthful advice—or is even a fiduciary. In the U.S., there are approximately 450,000 individuals who call themselves financial advisors. Of these, about 75,000 are certified financial planners (CFPs) who are all fiduciary professionals.3
About 75 percent of CFP professionals interact with clients directly, while the others provide indirect client services.
Of the 450,000 financial advisors, it is reasonable to surmise that less than 25 percent of them are actually fiduciaries, including those who have other fiduciary financial designations. CFPs are required to always put a client’s interest above their own.
Currently, less than 50 percent of the U.S. population consults with financial planners or advisors. If you’re one of them, then prior to beginning a financial relationship with any financial professional, do your own due diligence and investigate their credentials.
The Financial Industry Regulatory Authority (FINRA) oversees the people and firms who sell stocks, bonds, mutual funds, and other securities. At their website (brokercheck.finra.org), type in your current or prospective broker’s name to see their employment history, certifications, and licenses—as well as regulatory actions, violations or complaints you might want to know about.
If the financial advisor you’re considering is registered with the U.S. Securities and Exchange Commission (SEC), use the Investment Adviser Public Disclosure website (adviserinfo.sec.gov/IAPD/default.aspx). These quick internet checks let you investigate before engaging in a financial relationship.
Know your goals
There are only a handful of industries that are more personal and emotional than the financial services industry. And as in every relationship, it is important to know the expectations and boundaries.4
After conducting in-depth conversations and carefully reviewing the forms to be signed, you then can entrust your money with a selected advisor. The plans and action steps you agree to should be unambiguous. After you obtain an investment policy statement (IPS), your portfolio will be developed and implemented.5
Note that unless you’re purchasing a guaranteed investment product, the security markets are prone to daily shifts—both up and down—so your portfolio values should be expected to change.
How your portfolio is structured is of vital importance. Do you or your advisor want to take a concentrated position (known as concentration risk) in a market segment and be exposed to potentially larger gains but equal or greater loses?6
On the flip side, diversification of invested assets will allow for less exposure to risk.7
If one market segment goes up while another goes down, the overall effect can be less drastic than if you have a concentrated position.
Making sense of your portfolio
Some investors who allow a financial advisor to manage their portfolio take an active role and ensure their investments are being invested and monitored in a prudent manner. Other investors hardly give it any thought and just look at their monthly and quarterly report statements.
Monitoring your portfolio is proactive and lets you maintain oversight of asset purchases and sales, observing the posting of dividends and accrual of interest. Is the information on the statements matching the conversations you’ve had with your advisor? When the market is doing well, is your advisor taking credit for his or her recommendations?
What if your portfolio is decreasing in value? Is your advisor disavowing responsibility? Is your advisor counseling you in market risks signals and making suggestions to mitigate potential threats? Are you seeing frequent buying and selling of assets or, conversely, inaction with respect to your advisor’s investment recommendations? Any of these actions should be clearly explained by your advisor.
In the event an honest error was made that causes you a loss, but there was no ill intent or malfeasance, an advisor or broker will often make restitution or suggest filing errors and omissions (E&O) insurance. Miriam Rozen, a prominent lawyer, says: “Financial advisors don’t expect to be error-free. Life happens; mistakes are made.
Unfortunately, in this milieu, money gets lost when errors occur.”8
A lack of clear and forthright communication between an investor and advisor is a recipe for trouble. If unresolved, this can lead to litigation or, more likely, the filing of a securities complaint. Sadly, these actions are usually time consuming, costly, and the ultimate resolution can leave those involved with a distaste of the system as well as financial losses.
Trust, investing, and money are intertwined when working with any financial advisor. These are litigious times, too, and those who have proof of what was discussed and agreed upon will have the better chance of winning a dispute.
Thus it is highly advisable to maintain accurate notes that reflect each client-advisor interaction you have.
You and your advisor should confirm every conversation with a note, which starts a “paper trail” to reference at any time should a question arise. The goal is to avoid a “he-said, she-said” scenario. As the saying has it, if it isn’t written down, it never happened.
William (Bill) Wolfson, DC, FICC, MPAS(SM), CFP, is a financial consultant and adviser. He is a member of the Financial Planning Association of Long Island, the New York delegate to the American Chiropractic Association, and a member of the New York and Florida Chiropractic Associations. He retired after 27 years of chiropractic practice and can be contacted at 631-486-2792 or firstname.lastname@example.org.
- “Fiduciary.” Law.com. http://dictionary.law.com/ default.aspx?selected=744. Updated Jan. 2017. Accessed Jan. 2017.
- “Prudent.” Merriam-Webster.com. http://www.merriam-webster.com/dictionary/ prudent. Updated Jan. 2017. Accessed Jan. 2017.
- CFP Boardd. “CFP Professional Demographics.” http://www.cfp.net/news-events/research-facts- figures/cfp-professional-demographics. Updated Dec. 2016. Accessed Jan. 2017.
- Investor Guide.com. “Your Rights as a Financial Advisor’s Client.” http://www.investor guide.com/article/11219/your-rights-as-a- financial-advisors-client. Updated Jan. 2017. Accessed Jan. 2017.
- Portfolio 100. “Creating Your Investment Policy Statement.” Morningstar.com. http://news.morningstar.com/classroom2/course.asp?docId=4439&page=1. Updated Jan. 2017. Accessed Jan. 2017.
- FINRA. “Concentrate on Concentration Risk.” http://www.finra.org/investors/concentrate- concentration-risk. Updated Jan. 2017. Accessed Jan. 2017.
- Investopedia. “The Importance of Diversification.” http://www.investopedia.com/ articles/02/111 502.asp. Updated July 2016. Accessed Jan. 2017.
- Rozen M. “Profit From Your Mistakes With Clients.” https://financialadvisoriq.com/c/ 1125903/120423. Published May 2016. Accessed Jan. 2017.