What Does “Fiduciary” Really Mean?

By Amy McIIwain, President, Financial Social Media on Tuesday, February 15th, 2011

An interview with Nancy Hradsky, Special Projects Manager, NAPFA

“Fiduciary” is one of the industry’s hot topics. The National Association of Personal Financial Advisors (NAPFA) has been a champion of the fiduciary standard since the mid 1990s, well before it became popular. I recently had the opportunity to speak with Nancy Hradsky, Special Projects Manager for NAPFA, and get her perspective on the fiduciary standard.

How would you define “fiduciary?”

The concept of being a fiduciary has been around for years. It’s a lot like the Hippocratic Oath – doctor do no wrong. What makes someone comfortable going to a doctor? It’s the Hippocratic Oath that conjures up trust— putting the patient first. It’s not just doing the right thing but knowing when you aren’t the best person and referring out. That’s what a fiduciary does. Advisors with fiduciary responsibility put their clients’ interests first and create a relationship of trust. When I look at the questions advisors need to ask to get a picture of their client’s life goals and financial picture, it’s almost like a doctor asking you to get naked so s/he can see your moles.

What does “fiduciary standard” signify for NAPFA and its members?

The concept of a fiduciary standard is woven into the DNA of NAPFA members. Every member re-signs the NAPFA Fiduciary Oath every year on their renewal. It is such a fundamentally important concept. It is one of three legs in NAPFA’s three-legged stool:

1.       Fiduciary oath

2.       Fee-only compensation

3.       Clients are best served by a comprehensive approach to planning. We want someone treated the way you would treat your Mom.  

Do you think consumers understand the concept of fiduciary responsibility? 

 We are light years behind in having consumers understand the fiduciary standard versus the Hippocratic Oath for example. The nature of the beast of a financial advisor is difficult to explain. Even for people that are numbers-oriented, it can be tough explaining to clients their method-to-madness in the plainest terms.  There is that challenge to take a complex, analytic concept and reduce it to a simple message that can be spoken plainly, easy enough (for clients) to understand.  That is why the campaign “Focus on Fiduciary” includes print pieces, videos, and other tools for advisors. It takes a scary word and turns it into something clients can understand. Clients don’t need to know how the clock works; they need to know if it is telling time correctly.

What does fiduciary responsibility mean to you? 

Financial planning is about so much more than how did my stocks do today. It’s about everything from identifying goals to estate planning to retirement planning to investments, and beyond.

“I will walk with you on this path—I can’t guarantee the outcome, but I will give you my best.”

Since 1978, Nancy Hradsky has gone from serving as a news producer for a major television affiliate, to owning a thriving business, to training future NASD licensees. Now she serves as the Special Projects Manager for the National Association of Personal Financial Advisors (NAPFA). Prior to joining NAPFA, Nancy worked as a Training Specialist for Bisys Education Services and was based in Chicago, IL, where she developed and presented two to five day training courses for financial professionals seeking to pass National Association of Securities Dealers (NASD) examinations. Click here to read more

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