John C. Bogle, A Mutual Fund Master Advocating for a Unified Fiduciary Standard

Article Spotlight: Read the Article

John Bogle, founder of the large mutual fund complex Vanguard, had a recent article in the New York Times. In that article he lays out what he sees as many of the central problems in the financial services industry and suggests possible solutions.  One of his suggestions mirrors our beliefs regarding the way the industry should approach their clients. Bogle’s desire is to have a “unified fiduciary standard for all money managers.” The quote below describes exactly what we do as Certified Financial Planners and Investment Advisors.

A fiduciary standard means, basically, put the interests of the client first. No excuses. Period.

Certain Investment advisors (like Empirical) are already bound by the fiduciary standard under the Investment Advisors Act of 1940. While others rely on what the industry has coined as a “suitability standard”, meaning any recommendations need only be suitable in light of a client’s circumstances (i.e. it doesn’t need to be the best strategy for a client or necessarily place the client’s interests above the firm’s interests). We support the belief that, for anyone in the business of suggesting investment strategies to people, clients’ interests must be placed ahead of their own. In short, you should not profit at the expense of your clients by making inferior recommendations simply because they serve the firm best.  Complying by a universal code of conduct is crucial for investment advisors, as we rely on the trust and confidence of our clients.

We suggest you ask anyone providing you with investment/financial planning recommendations to put in writing the answers to the following questions:

  1. Are you obligated to act in my best interests (as a fiduciary)?
  2. Please disclose all fees, compensation and expenses that you and your firm will receive from me as a customer? Further, who else is paying you to recommend the products that I purchase from you? This should include bonus calculations, trips, prizes etc.
  3. Please disclose in writing all conflicts of interest that may exist in our relationship?

If you wish to learn more about Bogle and the way he continues to change the industry, the article is an excellent read.