Hello, and welcome back to the Life By Design podcast. I'm here again with Doug Walters.

Hi, Jay. How are you?

I'm fantastic. And today's topic is going to be fiduciaries, what are they, what does that mean, why do I care, et cetera.

Excellent. Let's get into it.

All right. So, you know, I think before I came on board and, and since, honestly, uh, I hear us talk about being a fiduciary.

I don't 100% know why it matters. And every time I hear, We are a fiduciary.

We work in your best interests, and I always a- I'm always thinking, Well, yeah, why wouldn't you? I mean, it's an obvious question, why wouldn't we work in your best interests?

And of course, we, we would, but it is the legal standard that we are held to. As a RIA, a Registered Investment Advisor, we are fiduciaries, and the legal s- standard for a fiduciary is to put the client first- Mm-hmm.

and to operate in their best interests. Yeah, and to kind of break that down, so we are, we are person first, product second, and then other investment firms who, who aren't fiduciaries, they're product first, person second, but they also have legal obligations as well.

Right, right. And there's, generally speaking, is more of a, a suitability standard.

So they have a suite of products, be it investment or insurance products, that they have to sell. That is their, their line-up.

What they have to make sure is that the product they're selling you is suitable for you. Mm-hmm.

So that if you are a, um, you know, elderly person, you know, 99 years old, they're not selling you a 50-year insurance product, right? That's not suitable for you.

Um, so that is their standard suitability. Doesn't mean they can't act in a fiduciary manner- Yeah.

but that is their legal standard. Yeah, and, and so, you know, we were talking before the podcast, trying to come up with an analogy that made sense to me, and the one I think we landed on is cars.

And so, for instance, with, with those, uh, companies, that would be as if you went to, let's say, a Honda dealer. Their product is Honda, so they're gonna sell you - Yeah.

the, uh, any car is gonna say Honda on it. But from a suitability standpoint, it could be a sedan or a minivan or a, a pickup truck, depending on what your needs are.

That's right. right.

And in the investment world, where I live, I like to think of it as, talk about it as being open standard, right? When we have a spot we wanna fill in the portfolio, you know, we want a position in value, we are going to look across the entire world of investments, find the best exposure to value that we can.

We're going to consider, is it giving us that pure value exposure? What are the embedded e- expenses in that fund?

How liquid i- is it? Are we gonna be able to trade in and out of it?

Is it a reputable firm that is offering that product? So those are the things that we're going to consider as sort of an open source investment manager.

Right, so, uh, so in the car analogy, it'd be like, Hey, I have a family of 6. I need to fit them all in one car.

We go on trips, we do this, and then you start, uh, uh, you know, as a fiduciary, we start looking at, Okay, here's their needs. Right.

Now, let's get them into something that actually is going to work for, for that list that they just gave us. Right.

It's not gonna be a sedan. It's gonna be a minivan, a large SUV with a third row, so- Right.

kind of, so that's, uh, would start. So kind of in line with that too, from, you know, not only doing what's in the best interests, uh, of, of the client from a fiduciary standpoint, there's also some other kind of, I guess, ethical ways that we operate as well, uh, than other fiduciaries, but, but designations such as CFP, CFA kind of align with that as well.

Right, right. So the CFP, if you're not familiar, Certified Financial Planner, it is what, uh, our advisors seek as a designation.

It is kind of the gold standard for, for a, an advisor, um, designation. And there is an ethical code within that designation that, uh, again, is, you know, uh, you are required to act as a fiduciary.

So if you have a CFP, doesn't matter, uh, what type of firm you work for, you are required to act as a fiduciary, and you're, uh, there is an ethical code. You're, you know, you want to, uh, obviously act in an ethical way.

And the same thing is held true for those who work with me in the investment team, the CFA, uh, the ser- uh, Chartered Financial Analyst, again, sort of the gold standard in, um, in, uh, investment research certification, also has an ethics code that ensures that those bearing those symbols are acting in an ethical way for their clients. Yeah, and, and similar to other fields where, you know, you might, you, you have a, a certification or a license or something like that, uh, there's checkpoints on that too.

Like, so every so often, you have to do something to re-certify or to, to keep it going. Right, yes, there's an a- annual re-certification.

You have to attest that you have not been involved in any crim- criminal activity or been charged with any ill- illegal activity, so there are, are checks and balances- Mm-hmm. and if ever you don't pass that test, y- your designation is going to be taken away.

Right. Yeah, and so it kind of comes back around to the conversation as someone, you know, listening and you're looking into financial planning or, or getting someone to help you, maybe you're headed towards retirement and you wanna know what's next and what to do, you know, these are kind of the check boxes you wanna look at for what's right for you.

You know, in saying, you know, Hey, do I, do I want somebody? I don't know a lot and I need somebody to just be looking out for me and my best interests.

Right. Yeah, if you, if you find a certified financial planner, CFA, you know that they have met certain standards and, uh, not just in terms of ethics but also in terms of competence.

Yeah, right. Right?

It is, these are very rigorous programs, not easy to pass, so if you've attained those designations, you've got a certain amount of knowledge that you can pass onto that client. Yeah, I think that's a great point that maybe we, I wanna reiterate, cause I think we maybe missed, missed that one a little bit.

Yeah, these are, like, exams and studying and, like, there's a lot of knowledge you have to have. Not just, not just your ethics, but, but your base knowledge of, of your position and your job, you have to have in order to get these designations as well.

Right. Yeah, and as a CFA charter hol- holder, I can tell you it is a, uh, it is a long, rigorous process.

So 3year process, 3 different exams covering different, uh, levels of, of topics, and it is probably the most Not probably. It is the most rigorous program I have ever ha- uh, been a part of, and probably the hardest, um designation that I've ever achieved, for sure.

And this is someone coming from an engineering background. Yes.

Yeah. And, and I would say too, it, it's, for CFPs it's similar, and, you know, I, if you're following, like, our news or, or any, really, anyone who is celebrating on their LinkedIn or there's an announcement that one of our advisors got their CFP, the reason why it's such a big deal is, is because it's very rigorous, very difficult to obtain.

And so for someone to reach that standard is, is a huge deal. Yeah.

It is a, as we say, a multi-year commitment, and typically one that's being, uh, achieved while you're working full-time. Right, right.

So, yeah, it's a, it's a big time commitment, uh, some of it coming on your personal time. So the fact that someone, anybody who has gained that designation really has put in the effort to be the best they can be in their industry.

Yeah. And so, so I think as a recap here, when, when we see someone's say fiduciary, someone's say CFP, CFA, when we hear all these things, the, the, the number of things that go into that from a, a legality standpoint, an ethics standpoint, and then just pure knowledge standpoint, the reason you hear firms like ourselves reiterate these words and say these things- is because it is a really big deal that for you, as a client, we have the knowledge, we have, you know, we're, we're ethically bound to do these things, and we're also legally bound to do these things.

Right. So just to have that kind of triple threat as a client, that's why we say em, so that you feel secure knowing that these are all a- true.

Right. Exactly.

We want our, our clients to feel secure, we want them to be confident in our abilities, and these are at least one way to show that confidence. Yeah.

And, and for us, from a strategic 1 the 2 words we always use is clarity and confidence. And being these things, fiduciary, CFP, CFA in your instance, we, we're being clear with what we're doing- Right.

because legally and ethically we have to. And then we're, you now have the confidence to know that not only are we following your best interests, but we have the knowledge in order to do that.

Right. Well said.

Yeah. So, all right, well, that is our, uh, our conversation on fiduciary.

I, I hope that for you at home who, who's listening that, like me, that cl- cleared it up- uh, and, and that you can, uh, walk away from this, uh, podcast a little bit more clear and confident on, on what that all means. Yeah.

Nice job, Jay. Thanks, Doug.