Advisors

It's All About Building Trust

Discussing fiduciary duties is vital

Some trivia: The word fiduciary, according to lexico.com, originated in the late 16th century when it meant ‘something inspiring trust, or credentials’— from the Latin fiducia (trust), and fidere (to trust). Something akin to fiduciary duties, historians believe, even dates back to 1790 BC and Hammurabi’s Code of Laws, which set 282 standards for commercial interaction, several of which dealt with the role of agents.

Today, there is nothing trivial about the term “fiduciary”. It’s thrown around a lot in the financial services industry, making such claims subject to regulatory scrutiny at the most, and creating considerable head-scratching at the least.

In fact, the most important topic an investor should raise with a potential wealth manager is around the subject of a fiduciary, George Webb, managing partner, Pension & Wealth Management Advisors, emphasized in a recent interview with Advisors Magazine. He acknowledged that while the notion of a fiduciary has been a fixture on the institutional investment side for more than 50 years, a fiduciary in a wealth management capacity is relatively new.

“Our firm has always had an institutional background,” Webb said. “Pension & Wealth Management Advisors has been managing institutional assets for over 35 years, so that fiduciary orientation is really the foundation of our entire firm.”

Webb explained that a fiduciary works for a client’s best interests and has aligned interests for the client’s success. “You cannot propose anything—anything—that conflicts with what’s best for a client, at any point in time,” he added.

web700x400Unfortunately, in much of the financial services sector, that’s not always the case. Webb noted that 75 percent of those practicing in the market today typically have competing lines of business—for example, promoting certain securities while also managing portfolios.

“That’s a clear conflict of interest,” Webb said, “making it impossible to be a fiduciary, although they may claim to be. Nobody is out there to intentionally harm a client, but having competing lines of business makes it impossible to work as a fiduciary,” he added. “We truly are conflict-free and independent. We only derive income from our asset-based fees.”

Based in Waltham, MA, Pension & Wealth Management Advisors currently manages $150 million in assets for over 125 families and institutions, with an average client asset size in excess of $2 million. The majority of their clients are entrepreneurs, business owners, and professionals.

“We look for clients who are looking for a long-term relationship and who want a partner to work with them in all aspects of managing their wealth,” Webb said. “And that includes the process of converting income into savings, and then savings into investments during their accumulation years.”

Webb said the firm’s clients tend to be highly educated and very specialized in their areas. Because of this, there’s a greater appreciation for partnering with an advisor, or people in general, who have deep expertise in areas where they may not, he observed.

“So, we tend to have multi-generational relationships; again, we’ve been in business for 35 years,” Webb reiterated. “We have many families where we’re managing assets for their children and grandchildren.”

Education plays a significant role in how the company engages clients. Smart, well-educated clients want information. But there’s so much available nowadays, especially online where financial information can often take the form of sound bites, brief videos, and five or six sentences with hardly any detail.

“An advisor needs to be that expert behind the three clickable lines,” Webb said, “to really get the data to support the right direction and the right path for the client.” He explained that the firm will distill all the information on a given topic of interest to a client, and then lay out the options for them in a condensed form.

Pension & Wealth Management Advisors has always advised its clients on a quarterly basis, and Webb maintained that the pandemic has been no different in most ways from any other major crisis the firm has helped clients to navigate. Between quarters, every few weeks or any time there’s a significant event in the market, the firm will reach out to clients with digital media, email, or to arrange virtual meetings.

During the height of COVID-19, the long-standing firm counseled clients to take a long-term view, to focus on fundamentals, and to observe what was happening. All but two clients remained fully invested throughout the pandemic panic. As the markets sold off, Webb and team rebalanced client portfolios at the right time and clients were pleased, he said. The outreach and relational business aspects of Pension & Wealth Management Advisors form the bedrock of the firm’s services.
web quote Among the newer services is one focused on what Webb calls emerging wealth. The company designed and launched an in-house robo-advisor, or online investment platform to help to address client needs.

He said the robo-advisor model the firm offers can be very helpful to younger investors with smaller balances and uncomplicated situations—particularly before they have children and usually before they inherit substantial assets. Its place at the firm is as an online investment launching pad.

“But once their balances rise in significance and we can monitor their portfolios—they are going to become less trusting of a computer algorithm, less trusting of a 1-800 number, and they’re going to want to talk to a 30-year seasoned professional,” Webb said.

Robo-advisor platforms, from Webb’s perspective, cannot address tax situations, estate planning, 529 plans, and the many factors that become much more significant as balances grow. With the company’s emerging wealth platform, he and his team can monitor client activity and balances, and then advise them as their situations change, ultimately transitioning them to a traditional full-service relationship.

To learn more about Pension & Wealth Management Advisors, visit: pensionwealth.com

 

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