Fiduciary Standards

Fiduciary Advice is the Only Type He Gives

As the debate rages on in Congress, and in the offices of federal regulatory agencies, regarding what – if any – fiduciary standard should govern the workings of all types of financial advisors, the amount of assets under management by registered investment advisors (RIAs) continues to grow. According to an annual study by the Investment Advisor Association, another $7 trillion in assets was added in 2014.

This doesn’t surprise Clarksdale Ms., fee based advisor, Dudley Barnes. He's the chief compliance officer for Barnes-Pettey Financial Advisors – and he is a big believer in doing business in a fiduciary manner.

“We operate that way,” Barnes said, referring to the fiduciary standards that require an RIA to present clients with the best possible investment options. Always putting the needs of the client ahead of the advisor is key. “Being a fee-based advisor, I think, is a better model. It is a better model to be able to say to the client, ‘Here is what the cost of making this particular investment is going to be, here is what I am going to do on your behalf and here is what your total fee is.’ It is transparent. It is what clients want.”

Barnes isn’t willing to say that advisors on the other side of the financial advising fence – the commissioned broker/dealers – don’t also operate with integrity. He is sure that many do. Yet he knows that leaders and policymakers from that side of the industry are fighting hard against a blanket fiduciary standard.

His 30-plus years in the financial services business lead him to believe that regulators and lawmakers are far from making any final decisions or rulings on this issue. Barnes notes how hundreds of proposals have come from Congress, the President and government regulators to alter the way financial services are delivered. These have only been bandied about, but never enacted.

“I don’t pay a lot of attention to proposals until they become law,” Barnes said. “There is so much that is talked about but never happens, that you are better off to run your business as best you can and work with your clients with as much integrity as you can – and let the laws settle before you figure out how you need to respond to them.”

What Barnes does keep close tabs on, however, is the rate at which his clients are taking their retirement drawdowns.

Barnes is in a mature practice. He is 66, and the bulk of his clients are folks he’s been advising for decades. Now, both Barnes and his clients are either on the cusp of entering their golden years, or can at least glimpse the rays from where they are.

He knows, too, just how badly the Great Recession hurt many of them, and he knows they are concerned regarding their retirement years.
“Longevity is a big part of our lives now,” Barnes emphasized. “It is a reality we have to plan for.”

Stocks and bonds – while essential foundational building blocks in a retirement portfolio – just aren’t enough to complete the project in today’s volatile market. With the federal government backing out of its quantitative easing program to artificially keep inflation at lower rates, Barnes knows investors must seek alternatives with higher risk tolerances just to keep ahead of inflation.
The trouble is, not all investors are convinced that they need alternatives until it is too late to benefit from having them in an investment portfolio. This is especially true in today’s bull market, in which it has become all too easy to forget the devastating crash of 2008.

“When you have such strong equity markets as we have now and for the past three years, alternatives will always lag some,” Barnes said. “One of the difficulties of being an advisor is helping people remember that when you need an alternative to the traditional stock market, it has to be in your portfolio before the event occurs. You simply cannot benefit from making that type of investment after a significant market correction occurs.”

As much time as Barnes spends educating his clients, he noted that he spends even more time listening to them. Barnes believes it takes time – lots of time – to thoroughly listen to a client, so that as an advisor, he fully understands their needs, wants and goals.

When he hung out his own shingle in 1976, Barnes knew he wanted to build a practice characterized by long-term relationships with his clients that weren’t simply transactional. He wanted to be viewed as a trusted advisor – as a professional who could and would help clients navigate rough financial seas, as well as the turbulent changes of life that come with the death of a spouse or a poor financial choices.

“Unforeseen circumstances happen all the time,” Barnes said. “You just deal with it. If your relationship (with your client) is strong and your planning has been properly done, then you should have the catastrophic type of planning you need already in place to be executed and you get your client through the storm.”

That might not be especially well expressed within the wording of regulatory agency definitions of “fiduciary,” but for Barnes, it is woven into the daily operations of his firm. After three plus decades as an RIA, he’s certain that he is using a winning formula.

Learn more about Barnes-Pettey Financial Advisors, LLC, online at www.barnespettey.com

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