Trust and the Fiduciary: A Symbiotic Relationship between the Client and the Advisor.


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The Oxford English Dictionary (OED) defines the origin of “fiduciary” as “Late 16th century (in the sense ‘something inspiring trust; credentials’): from Latin fiduciarius, from fiducia trust, from fidere to trust.”

Symbiosis is defined by the OED as “a relationship between two types of animal or plant in which each provides for the other the conditions necessary for its continued existence”.

My father was in the investment business for over 50 years, starting just after the 1929 Depression. Back then, there were few investment options outside of the US stock/bond markets, and savings accounts. Simplicity and transparency were the keys; it was easy for his clients to monitor their investments. He consistently focused on their needs and the integrity of his work. He was in a symbiotic relationship with his clients.

Things have changed since he left the business. The US represents only about a third of the world’s capital markets. Today, hundreds of thousands of investment advisors crowd the market pushing complex hedging strategies, sophisticated math based derivative instruments and multi-currency assets. With so many advisors and such a broad array of investment approaches and instruments, how can the average investor be assured that their advisor is looking out for them?

One way is to see if your advisor is focused on your best interests is to ask them if they know about the fi360 Prudent Practices® and the Centre for Fiduciary Excellence (CEFEX). If they do, ask them if they have had, or intend to have, an independent fiduciary assessment by an AIFA® analyst accredited by CEFEX. Think of an independent fiduciary assessment in the same way as you think of an independent audit by a CPA.

What are the fi360 Prudent Practices®? In the1990’s, the CEFEX and fi360 developed the fi360 Prudent Practices® based on ISO 19011 management principles. For fiduciaries, the practices consist of 21 Practices and 82 Criteria. The  seven precepts which underly the fi360 Prudent Practices® are

1. Know standards, laws, and trust provisions
2. Diversify assets to specific risk/return profile
3. Prepare investment policy statement
4. Use “prudent experts” (for example, an investment manager) and document due diligence
5. Control and account for investment expenses
6. Monitor the activities of prudent experts
7. Avoid prohibited transactions and avoid or manage other conflicts of interest in favor of the portfolio

These precepts form the basis of trust and integrity between you and your advisor. Whether you are an individual investor, a trustee of a private trust, or a board member responsible for constituents (nonprofits) or employees (retirement or health funds), it is your duty to base your decisions on the best resources available. If your advisor is accredited by CEFEX, you can rest assured that they will be focused on what’s best for you, for what’s best for you, is best for the advisor –  a true symbiotic relationship.