Finance

The fee-only fiduciary relationship

Building trust through transparent financial planning

Even though proposed legislation introduced by the Obama administration that would require that all financial professionals operate as a fiduciary was squashed under President Trump in his effort to loosen regulatory strongholds within the financial industry, many wealth management firms stand by their philosophy to adhere to a fiduciary standard.

In fact, the National Association of Personal Financial Advisors calls the fee-only compensation model for financial planning “the most transparent and objective method available” because it ensures that a financial planner acts as a fiduciary – that is, they are legally obligated to always act in the client’s best interest without regard to commissions earned by investment products and other incentives from financial institutions.

Marty 2018Recently, “Advisors Magazine” interviewed Martin A. Watkins CFP®, CEO of TrueNorth Wealth and his son Samuel Watkins, a financial advisor at the Salt Lake City, Utah firm to learn why they say their high client retention rate is rooted in the foundational relationship of being a fee-only fiduciary wealth management firm.

“We value our approach as fiduciaries because it enables client retention and facilitates a deep and trusting client relationship. When you teach clients properly about what being a fee-only fiduciary means, they start to understand how our incentives are better aligned with theirs and they really come to value that,” said Samuel. “It’s become core to our business and our relationships.”

Sam 2018Father and son, along with the rest of the financial advisory team at TrueNorth Wealth – founded by Martin in 2006 and managing more than $430,000,000 in client assets – agree that educating clients is a large part of their role in the financial planning process.

“We often tell our clients, ‘Nobody cares more about your money than you do, so you need to understand it. Our role is to help you understand why a certain strategy is better than another with sufficient clarity that you could explain it to someone else,’” said Martin.

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Martin explained that educational approaches are customized to each client. For instance, while charts, graphs, and other similar aids may be useful for visual learners, spreadsheets and raw data may be more effective for those with an analytical approach to processing information.

TrueNorth Wealth’s comprehensive services include a review of a client's overall financial picture from retirement, estate, investment, and insurance planning to college saving plans and income tax planning.

The firm also works with multiple generations within a family including the children, grandchildren, and even great-grandchildren of their clients, guiding them through proper investment principles and how to work with their finances related to their particular situations.

“We'll meet with them to teach and train them, and not leave it up to them to find a website or algorithm that might help them through it,” said Martin, referring to online financial planning and management platforms and apps often called robo-advisors. “We dedicate the time to them to make sure that they make the right choices.”

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While digital tools are useful for some financial exercises, they begin to lose strength as customization and intricacies of an individual's circumstance are considered. These “smart” tools aren't able to provide the necessary services, according to Samuel.

“You reach a certain event horizon of complexity and working with an individual who can work outside the box – outside the algorithm – to create solutions and process a greater number of variables becomes a necessity,” he said, describing the value of working with a human being versus a digital platform – and making the case for what should be obvious, but still must be emphasized to stand out from daily advances in financial technology.

“From our perspective, we get more into the weeds and details of a client’s financial life and make sure that everything works as well together as possible,” Samuel continued. “We're proud of the value we offer to our clients, and we’re grateful for the services we're able to offer them.”

TrueNorth Wealth has built an atmosphere of transparent family planning, and their approach to delivering comprehensive services is based on sound academic planning and investment strategies.

Martin explained that the firm's approach to retirement planning employs a “hybrid indexing factor-based investment portfolio that provides a low-cost solution to building a globally diversified diverse portfolio.” Equity and risk levels are customized to each client's needs and his or her ability to tolerate volatility.

“We highly customize what we do depending on needs. Our first and foremost priority is that the clients meet their goals – and then within those constraints of meeting their goals, typically we help clients maximize their net worth in a way that will not jeopardize their goals," said Samuel.

Another business segment of TrueNorth serves as a fiduciary for over $13 billion in institutional investment relationships.

“We're trying to meet the needs of multiple marketplaces and we enjoy working with a varied group of clientele,” said Martin.

After graduating college in 1993, Martin helped form UMA Financial services, a company for the Utah Medical Association to help physicians and surgeons build and secure their wealth. In 2006, he left there and started IMA Financial Services to serve healthcare professionals in Idaho – today it is a division of TrueNorth that works with executives and business owners, physicians, surgeons, and dentists. TrueNorth Retirement Services is another division of the firm that focuses on 401(k) and other retirement plans.

For more information, visit: truenorthwealth.com

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