Anchor Wealth helps clients create comprehensive financial plans. A comprehensive financial plan considers all the areas of our client’s financial life, the past, present, and future. To create a plan that is comprehensive we must understand past behaviors, current assets, and future goals. Getting that complete understanding starts by establishing a relationship with our clients. And that means asking questions!
Asking questions has always been part of the Anchor Wealth experience because our advisors are genuinely invested in the lives of the clients that they help serve. But thanks to some recent changes in regulations, asking questions is also now a requirement for all financial advisors.
Increased Transparency for Advisors
Anyone invested in the markets today should understand how the markets work and the risks associated with investing. Modern investors have experienced the dot com bubble, the 2008 market crash, and the market effects of a pandemic. To help investors, a series of rules have been introduced to increase transparency for financial advisors. The first is the SEC’s Best Interest Ruling. Introduced in 2019, the SEC’s regulation now requires that financial advisors always act in the best interest of their clients, something our Advisors at Anchor have been doing since the beginning. The ruling is effective through two approaches. First, it protects investors through a measure of accountability that requires all financial advisors to provide justification for the decisions they make on behalf of their clients. Those changes must be directly aligned with the long-term goals of a client. Previously, financial advisors were only held to a standard of suitability by which they had to show that recommendations made regarding a client’s investments were suitable even if they were not entirely in their best interest. Second, the Best Interest Ruling ensures that financial advisors receive reasonable compensation for their services. What does this mean? The provision is in place to prevent bad actors from recommending a product or service that may have a higher commission rate for the advisor but does not help the investor move towards their ultimate financial goal. We have nothing to hide so we are happy to share our compensation model. Anchor’s compensation structure is intentionally simple and fully transparent. The investment for Anchor’s services is a tiered range depending on the assets under management. This structure means our clients know exactly what they are paying for the services that they receive at the beginning of the relationship and that our team is incentivized to work in the best interest of our clients.
The second ruling put in place to protect consumers came in the form of the DOL’s fiduciary ruling. The Fiduciary rule is aimed at updating the Employee Retirement Income Safety Act (ERISA) first published in 1974. The original ERISA provides consumer protections from creditors but had never been changed to reflect the modern investment trends that have moved away from defined retirement benefits (think pension) and towards defined contribution benefits (think 401k). ERISA also did not provide guidance that would cover the significant increase in IRAs that has occurred since 1974. The updated Fiduciary Rule provides protections for investors in instances when an advisor makes a recommendation to roll over a 401k. It also creates guidance for things that can be considered financial advice. It is a large reason our blogs are purely educational and do not provide any financial advice.
Is Anchor a Fiduciary?
By law, all financial advisors are fiduciary in that they are required to work in the best interests of those they serve. We like to say that Anchor was fiduciary before it was cool! And we were most certainly fiduciary before it was required. We have always valued relationships and achieving long-term goals over transactions and short-term gains.
We adhere to a shared set of values in our office and one of those values is honesty. We talk about it like this — We value your trust and put your interests first; you can expect straight answers to your financial questions. Our values are more than a poster that greets our team every morning when they show up to work. We live these values every day and we hold each other accountable to the standard they create. Because this has always been the case for Anchor, the changes that have occurred in the financial industry in the past few years did not affect us. They are reflective of the way we have always done business. We have always asked important questions to get the best for our clients and we will continue to ask those questions, you just might get a few more mailings explaining why we are asking some of those questions.
If you have been hesitant to get help with your comprehensive financial plan because of a past experience, or hesitant to transition to an advice-based structure, we would love to talk to you about your past, present, and future to show you what a wonderful experience it can be to work with a trusted professional.
By Andrew Burgess