1) The document discusses choosing a trusted fiduciary financial advisor and outlines some key considerations. It notes that many brokers prioritize commissions and products sold over quality advice due to conflicts of interest. 2) Registered Investment Advisors (RIAs) are held to the fiduciary standard but some exploit loopholes to still have conflicts of interest. It's important to scrutinize an RIA's disclosures. 3) The document recommends doing thorough homework on advisors and using an advisor questionnaire to evaluate advisors and identify any conflicts of interest or lack of fiduciary duty.

1. Steven D. Lockshin | April 2014
Choosing a
Trusted Fiduciary

2. AdvicePeriod It’s that simple. | © 2013
2
Why did I write
this book?
1. Confusion about who is truly an “Advisor”
2. Fiduciary versus Suitability Standard
3. Advizent experiment was a valuable experience

3. AdvicePeriod It’s that simple. | © 2013
3
© 2012 Behavior Gap

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Why listen to me?
1. History of disruptive approach to the financial services industry
2. Founded one of the largest independent registered investment
advisory firms in the US ($12B AUA)
3. Built one of the largest TAMPs ($100B on platform today)
4. Ranked by Barron’s for several consecutive years — most
recently recognized as:
• #1 in California for all Brokers and Advisors (2013)
• #2 in US for all Independent Advisors (2013, and #1 in 2012)
5. Passionate about doing what’s best for consumers

5. WHAT PORTION OF
CONSUMERS USE A
WIREHOUSE
OR BANK TO MANAGE
ALL OR A PORTION
OF THEIR WEALTH?

6. DO YOU BELIEVE
INVESTORS
UNDERSTAND WHERE
THE CONFLICTS OF
INTEREST MAY LIE?

7. Give a human an
economically conflicted
choice and they will
usually choose poorly.
The less obvious the
outcome, the greater
the probability they
make the wrong choice.

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Full disclosure.
“Advisors who disclose their conflicts of interest actually deliver
advice that is twice as bad as the advice they would give if they
didn’t disclose.
Disclosure appears to give the advisor emotional license to guide
investors toward whatever outcome benefits the advisor.” 1
1Daylian Cain, assistant professor of organizational behavior at the Yale School of Management.

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Full disclosure.
"Disclosures did not usually give investors pause. Sometimes
investors were apt because of a human connection with the
advisor to feel that they should help the advisor out, even if
it meant lowering their own return.” 1
1Daylian Cain, assistant professor of organizational behavior at the Yale School of Management.

10. CONSUMER USE OF
REGISTERED
INVESTMENT ADVISORS
(RIA) TO MANAGE
ALL OR A PORTION
OF THEIR WEALTH?
….how many consumers read the ADV?

11. ASSET
ALLOCATION
MANAGER
SELECTION
LIFE, TAX,
ESTATE
PLANNING
ASSET
ALLOCATION
MANAGER
SELECTION
LIFE, TAX,
ESTATE
PLANNING
11 AdvicePeriod It’s that simple. | © 2013
WHAT YOU PAY FOR WITH MOST ADVISORS WHERE YOU GET TRUE VALUE
Most advisors focus on manager
selection and asset allocation —
and offer to give away the planning.
However, the value of effective and
quality planning trumps investment
management every time.
Effective planning trumps investment
management…what do consumers pay for?

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Fees Matter!
© 2012 Behavior Gap

13. *A person in a position of authority whom the law obligates to act solely on behalf of the person he or she represents and in good
faith. Unlike people in ordinary business relationships, fiduciaries may not seek personal benefit from their transactions with those
they represent.
What should an advisor be focused on
(and the relative impact)?
ESTATE + TAX
PLANNING
ASSET
ALLOCATION/
PORTFOLIO
RE-BALANCING
FEES MANAGER
SELECTION
QUALIFIED EXPERT
FIDUCIARY* ADVICE
AdvicePeriod It’s that simple. | © 2013
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Who to choose?
1. Brokers
2. Banks, Trust Companies, Asset Managers
3. Registered Investment Advisors
38.0%
17.9%
14.0%
7.3%
15.3%
5.1%
5.4%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Wirehouse
IBD
RIA
Dually
Reg.
Regional
Bank
Insurance
2010
2013
14+%
and
growing…
but
not
all
fiduciaries

15. Your advisor should
adhere to the highest
level of duty and loyalty
to clients, always
putting your interests
ahead of his or her own.
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Your advisor should
make every effort
to keep clients’
assets safe from
fraud and keep client
information private.
Your advisor should
operate his or her
business according to
the highest standards
in the industry.
Duty
Standards
Safeguards Professionalism

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1. Brokers (most but not all)
• The more things change, the more they stay the same. Most
brokers and bankers celebrate the success of commissions
earned or products sold, not the quality of advice given.
• Conflicts of interest (situations where your advisor has to
decide whether to put your needs ahead of his) are the key
ingredient in the recipe for bad decision-making, and disclosure
is not the antidote.
• Most brokerage firms are simply hundreds — or thousands — of
individual brokers or small teams. Brand has won the day, not
value to consumers.

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2. Banks, Trust Companies,
Asset Managers
• Banks: typically have their own product and do not hire top talent
(can’t/won’t play)
• Trust Companies: often part of a bank (product). Watch out for
the fox guarding the henhouse.
• Asset Managers: “I’m a hammer, so everything else is a nail.” Won’t
ever fire themselves.

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3. Registered Investment Advisors
• RIAs supervised by the SEC are held to the fiduciary standard;
although, there exists a giant loophole they can exploit.
• There is virtually no barrier to entry for becoming or
remaining an RIA.
• The giant loophole – “avoid or
disclose” – allows conflicted advisors to meet the
fiduciary standard. Beware of RIAs that bury disclosures in their
public disclosure documents (specifically their form ADV, which
they must offer when you meet them). Fancy language and a
mountain of paper hides many a conflict.

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Passive vs. Active
“The investment management world is a strange place in that
the right solution is not in the middle. The right solution is at
one extreme or the other. One end of the spectrum is being
intensively active. The other is being completely passive. If you
end up in the middle, which is where almost everybody is, you
pay way too much in fees and end up getting subpar returns.”
– David Swensen, Yale Endowment

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“Transparency is well and good, but
accuracy and objectivity are even better.
Wall Street doesn’t have to keep
confessing its sins. It just has to stop
committing them.” 1
1James Surowiecki, “The Talking Cure,” Talk of the Town Column, The New Yorker, December 6, 2002.

21. BOTTOM LINE:
DO YOUR
HOMEWORK
Email steve.lockshin@adviceperiod.com for a copy of your
advisor questionnaire.

22. GET WISE
TO YOUR ADVISOR
Steve Lockshin
steve.lockshin@adviceperiod.com