Monday, April 21, 2014
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Client-adviser trust a paramount concern

sievers column sig

By
From page C1 | February 16, 2014 | Leave Comment

The financial industry has never been renowned for its transparency and candor. The financial crisis and ensuing recession have not only contributed but also raised awareness about this perception. Unfortunately there are presently additional furors boiling about such matters.

There are two current controversies running on parallel tracks and both have at their core the issues of transparency, responsibility and accountability.

The first controversy centers on the standard of responsibility which financial brokerage companies should have with their clients. For a long time brokers have been subject to the “suitability” standard, which essentially says that they must recommend investment products to their clients that are suitable for the client’s situation. The problem is that the term suitable is rather vague and open to interpretation.

The companion issue is that brokers have a legal duty to their employer that is superior to their duty to the client. Clearly there is a potential conflict of interest here and the broker must be clear with the client so no misunderstandings arise.

Some organizations in the financial industry, including the Board of Standards and Practices for Certified Financial Planners, have advocated that all financial advisers be held not to a suitability standard but to a fiduciary standard. A fiduciary, by law, must make recommendations in the best interest of the client, clearly a very different arrangement.

The brokerage industry argued that a fiduciary standard would limit their ability to design and present financial products. Further, they contended that consumers should have access to all products and should be able to make their own decisions. In essence, consumers should be allowed to make their own decisions about products and seek independent, objective advice separately as they felt necessary. So far, Congress has agreed and not acted to change any definitions of responsibility.

The entire situation could be just fine as long as all the members of the financial industry are clear with clients about their role and method of compensation. Too often roles and methods of compensation become fuzzy and from this lack of clarity springs the next controversy.

The Board of Standards and Practices for Certified Financial Planners is again at the center of the controversy because it has started to enforce clear definitions of compensation for those who hold the certified financial planners definition. The board has three definitions for compensation:

  • Fee only (the certified financial planner is paid only by the client and receives no commissions from product sales).
  • Commission only (the certified financial planner is paid by commissions from products sold).
  • Fee and commission (some combination of the two methods).

The board took strong action last year when it changed its website and forced all certified financial planners to review their profile and affirm which compensation category they properly belonged in. Also the board then limited those certified financial planners with any brokerage affiliation from claiming they were fee only. Not surprisingly, this action has created some complaints.

I find it interesting that many of the complaints focus on how difficult it is for the adviser. Indeed many comments state that clients do not understand or appreciate the difference among the compensation methods. Also, some advisers simply state that it does not matter and they will continue on without any changes to the practice.

My comment is that the client should be the center of the care and concern. Each adviser should have as their primary concern whether their clients understand the professional relationship, especially the compensation method. Advisers can offer their services in many ways, but they should be clear to the client. Anything less is likely to breed problems.

Clients must be able to trust their advisers. Any other relationship is likely to lead to ill will and problems.

Mark Sievers, president of Epsilon Financial Group, is a certified financial planner with a master’s in business administration from the University of California, Berkeley. Contact him at mark@wealthmatters.com.

LEAVE A COMMENT

Discussion | No comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

.

Solano News

Rodriguez musicians win big in Reno

By Amy Maginnis-Honey | From Page: A1

 
 
Hundreds turn out for Kroc Easter Egg hunt

By Susan Hiland | From Page: A1

Jelly Belly artist finds her work sweet

By Ian Thompson | From Page: A1 | Gallery

 
Heroes for Hire event goes haywire

By Tony Wade | From Page: A2

Center offers baby mammal care class

By Susan Hiland | From Page: A3

 
Fairfield police arrest 6 in alcohol sting

By Adrienne Harris | From Page: A3, 3 Comments

4-H Paper Clover Campaign starts

By Susan Hiland | From Page: A3

 
9th Annual Peace Summit on calendar

By Susan Hiland | From Page: A3

Tour past, present, future in Mountain View

By Susan Hiland | From Page: A3

 
Best of the best compete at dog show

By Adrienne Harris | From Page: A3 | Gallery

Event allows for safe medication disposal

By Susan Hiland | From Page: A4

 
Kids Fishing Derby to take place Saturday

By Susan Hiland | From Page: A4

 
Church offers document shredding

By Susan Hiland | From Page: A4

Suisun City to host 3rd annual MS walk

By Susan Hiland | From Page: A4

 
Club plans home garden tour in Fairfield

By Susan Hiland | From Page: A4

Local government meetings

By Susan Hiland | From Page: A4

 
Il Fiorello to host mushroom class

By Susan Hiland | From Page: A4

Silent movie night set in Rio Vista

By Susan Hiland | From Page: A4

 
Fairfield police log: April 19, 2014

By Susan Hiland | From Page: A9

Suisun City police log: April 19, 2014

By Susan Hiland | From Page: A9

 
Fairfield police log: April 18, 2014

By Susan Hiland | From Page: A9

Suisun City police log: April 18, 2014

By Susan Hiland | From Page: A9

 
Street-sweeping dealership comes to Fairfield

By Barry Eberling | From Page: A11, 1 Comment | Gallery

Networking event at Solano College

By Barry Eberling | From Page: A11

 
North Bay Pediatrics marks anniversary

By Barry Eberling | From Page: A11

Firm facilitates building lease in Fairfield

By Barry Eberling | From Page: A11

 
Weather for Monday, April 21, 2014

By Daily Republic staff | From Page: B12

.

US / World

Bid, Dick, bid: ‘Dick and Jane’ artworks for sale

By The Associated Press | From Page: A2

 
Bee colonies damaged after almond pollination

By The Associated Press | From Page: A4

Country music singer Kevin Sharp dies at age 43

By The Associated Press | From Page: A5

 
Sleeping girl killed after car drives into home

By The Associated Press | From Page: A5

Recreation areas reopening after Yosemite fire

By The Associated Press | From Page: A5

 
Nurse in critical condition after stabbing

By The Associated Press | From Page: A5

Study: Fuels from corn waste not better than gas

By The Associated Press | From Page: A6

 
Transcript reveals confusion over ferry evacuation

By The Associated Press | From Page: A7

Delay in ferry evacuation puzzles maritime experts

By The Associated Press | From Page: A7

 
Transcript of SKorea ship sinking: ‘We can’t move’

By The Associated Press | From Page: A7

.

Opinion

Why Hillary? The public awaits her answer

By Ann McFeatters | From Page: A8

 
Local voices, important choices

By Rod Keck | From Page: A8, 1 Comment

Question of the week: Will Flight 370 be found?

By Daily Republic | From Page: A8

 
Editorial Cartoon for April 21, 2014

By Daily Republic Syndicated Content | From Page: A8

Legislature critic is selective

By Letter to the Editor | From Page: A8

 
Knowledge, religion and the hard work of faith

By Cynthia M. Allen | From Page: A8

.

Living

Today in History for April 21, 2014

By The Associated Press | From Page: A2

 
Community Calendar: April 21, 2014

By Susan Hiland | From Page: A2

My friend’s wife drinks too much, verbally abuses her husband

By Kathy Mitchell and Marcy Sugar | From Page: B5

 
Horoscopes for April 21, 2014

By Holiday Mathis | From Page: B5

 
Horoscopes for April 22, 2014

By Holiday Mathis | From Page: B7

.

Entertainment

TVGrid April 21

By Daily Republic Syndicated Content | From Page: A10

 
‘Capt. America’ tops box office for third week

By The Associated Press | From Page: A10

TVGrid April 22

By Daily Republic Syndicated Content | From Page: A11

 
.

Sports

 
Sharks take 2-0 series lead with 7-2 win vs. Kings

By The Associated Press | From Page: B1 | Gallery

Chavez gets 1st win, A’s complete sweep of Astros

By The Associated Press | From Page: B1

 
NBA: Refs missed foul call in Warriors-Clippers

By The Associated Press | From Page: B1

Posey, Lincecum lead Giants to 4-3 win

By The Associated Press | From Page: B1 | Gallery

 
Young Clippers try to mature against Warriors

By The Associated Press | From Page: B1 | Gallery

Wawrinka beats Federer to win Monte Carlo Masters

By The Associated Press | From Page: B2

 
Westwood wins Malaysian Open

By The Associated Press | From Page: B2

Jimenez closes with 67 to win Greater Gwinnett

By The Associated Press | From Page: B2

 
Kuchar rallies from 4 back to win RBC Heritage

By The Associated Press | From Page: B2 | Gallery

Prep baseball: Pair of 10-run innings powers Vikings to win

By Daily Republic staff | From Page: B2

 
Prizefighter Rubin ‘Hurricane’ Carter dies at 76

By The Associated Press | From Page: B2 | Gallery

Red Sox remember Boston Marathon victims

By The Associated Press | From Page: B2

 
After bombs, Boston Marathon under tight security

By The Associated Press | From Page: B2

 
Duncan scores 27 points, Spurs beat Mavs 90-85

By The Associated Press | From Page: B8

James, Wade lead Heat past Bobcats 99-88 in Game 1

By The Associated Press | From Page: B8

 
Nene dominates, Wizards rally past Bulls, 102-93

By The Associated Press | From Page: B8 | Gallery

Aldridge leads Portland over Houston 122-120 in OT

By The Associated Press | From Page: B8

 
.

Business

 
.

Obituaries

Anne Irene Elizabeth Fulgoni

By Nancy Green | From Page: A4, 2 Comments

 
.

Comics

Pickles April 21

By Daily Republic Syndicated Content | From Page: B4

 
Blondie April 21

By Daily Republic Syndicated Content | From Page: B4

Sally Forth April 21

By Daily Republic Syndicated Content | From Page: B4

 
B.C. April 21

By Daily Republic Syndicated Content | From Page: B4

Baby Blues April 21

By Daily Republic Syndicated Content | From Page: B4

 
Dilbert April 21

By Daily Republic Syndicated Content | From Page: B4

Frank and Ernest April 21

By Daily Republic Syndicated Content | From Page: B4

 
Get Fuzzy April 21

By Daily Republic Syndicated Content | From Page: B4

Baldo April 21

By Daily Republic Syndicated Content | From Page: B4

 
Rose is Rose April 21

By Daily Republic Syndicated Content | From Page: B4

For Better or Worse April 21

By Daily Republic Syndicated Content | From Page: B4

 
Garfield April 21

By Daily Republic Syndicated Content | From Page: B4

Zits April 21

By Daily Republic Syndicated Content | From Page: B4

 
Wizard Of Id April 21

By Daily Republic Syndicated Content | From Page: B4

Beetle Bailey April 21

By Daily Republic Syndicated Content | From Page: B4

 
Peanuts April 21

By Daily Republic Syndicated Content | From Page: B4

Sudoku April 21

By Daily Republic Syndicated Content | From Page: B5

 
Bridge April 21

By Daily Republic Syndicated Content | From Page: B5

Word Sleuth April 21

By Daily Republic Syndicated Content | From Page: B5

 
Cryptoquote April 21

By Daily Republic Syndicated Content | From Page: B5

Crossword April 21

By Daily Republic Syndicated Content | From Page: B5

 
Beetle Bailey April 22

By Daily Republic Syndicated Content | From Page: B6

Get Fuzzy April 22

By Daily Republic Syndicated Content | From Page: B6

 
For Better or Worse April 22

By Daily Republic Syndicated Content | From Page: B6

Rose is Rose April 22

By Daily Republic Syndicated Content | From Page: B6

 
Pickles April 22

By Daily Republic Syndicated Content | From Page: B6

Sally Forth April 22

By Daily Republic Syndicated Content | From Page: B6

 
Peanuts April 22

By Daily Republic Syndicated Content | From Page: B6

Frank and Ernest April 22

By Daily Republic Syndicated Content | From Page: B6

 
Garfield April 22

By Daily Republic Syndicated Content | From Page: B6

Zits April 22

By Daily Republic Syndicated Content | From Page: B6

 
Blondie April 22

By Daily Republic Syndicated Content | From Page: B6

B.C. April 22

By Daily Republic Syndicated Content | From Page: B6

 
Dilbert April 22

By Daily Republic Syndicated Content | From Page: B6

Baldo April 22

By Daily Republic Syndicated Content | From Page: B6

 
Baby Blues April 22

By Daily Republic Syndicated Content | From Page: B6

Wizard Of Id April 22

By Daily Republic Syndicated Content | From Page: B6

 
Sudoku April 22

By Daily Republic Syndicated Content | From Page: B7

Bridge April 22

By Daily Republic Syndicated Content | From Page: B7

 
Word Sleuth April 22

By Daily Republic Syndicated Content | From Page: B7

Crossword April 22

By Daily Republic Syndicated Content | From Page: B7

 
Cryptoquote April 22

By Daily Republic Syndicated Content | From Page: B7