- Best Practices
- Fiduciary September
- Frankel Prize
- Campaign for Investors
Mark Tibergien’s Comments on RIAs Are Tough, but Deserve to Be Heard
On November 8, 2017
By Knut A. Rostad
Originally posted on ThinkAdvisor, November 8, 2017
What do Alan Dershowitz and Mark Tibergien share? Dershowitz, the renowned Harvard law professor and Democrat, upset Democrats when he seemed to defend President Donald Trump.
Mark Tibergien, the Pershing Advisor Solutions CEO, is sure to upset many RIAs, as his comments on RIAs suggest in an Oct. 18 discussion I had with him.
Stay with me on this. Each overlooked the unwritten code that values unity over candor. Each spoke out on principles dear to him. For Dershowitz, they underpin civil liberties. For Tibergien, the business of advice. His vision and blueprint for how RIAs evolve and thrive is his passion.
RIAs’ voice in Washington is fragmented and their brand, like the major political parties, unclear, according to Tibergien. RIAs suffer the collateral damage of consumer distrust of banking and finance. One reason people reject entering the RIA business is that they think the industry is “corrupt.” Also, he says RIA standards are too low.
His public comments are tough. Such sharp words usually stay private. When was the last time a widely respected RIA leader similarly commented so pointedly on RIA standards and branding? Recently, ever?
Like ‘em or not, Tibergien’s comments deserve to be heard. Though I have my disagreements, they are thoughtful and pertinent.. What’s more important for a profession in development than standards and branding? Here are some key excerpts from the interview:
On Advice Vs. Sales
The industry and regulators share responsibility for allowing “confusion in terminology” on brokers and advisors, Tibergien says. In other professions, there are clear distinctions in education, training, and codes of conduct. “That’s missing in our business,” he says. “If you begin with the premise, ‘Your job is a salesperson,’ then the nature of regulation will be different than if I said ‘Your job is as a fiduciary client advocate.’”
Product distributors are the “great influencers.” Still, “the RIA community has to try to influence the conversation if not the regulations. There are many fragmented groups … It sort of feels like both major political parties. We don’t know exactly what they stand for today.
“The opportunity is to change the conversation, … promote the idea that there is a difference, but not as a pejorative, more as a distinction. I would prefer to see the conversation … about clarity and transparency.”
Credentials and Training
“The RIA community has not been subjected to any kind of rigorous regulation from an individual practitioner standpoint,” Tibergien argues.
“I’m not sure that once people are hired into advisory firms then they are being credentialed and developed and trained [like] … the legal profession or the medical profession or the accounting profession. I don’t think [it’s] part of the continuing education of most people in this business. I think it is incumbent upon the profession to raise the standards.”
Fee, Expense Transparency
“One of our challenges is to distinguish between cost, price, and value. … The question [for] advisory firms is: ‘How will they demonstrate value if they intend to hold prices where they do and how will that be clear to clients?” Tibergien asked.
In Australia, Tibergien continued, “when you take on a client, you have to disclose in dollars, the first year you have to estimate in dollars what the client will pay [in all-in costs]. And in subsequent years you have to disclose what the client will pay in dollars. It doesn’t get more transparent than that.
“I’m not a complete libertarian but sometimes I think we are forcing policies on professionals when it is really the duty of the consumer to be more informed … Now, if I as a client ask you as my advisor to tell me the costs all-in, and you shade it, you camouflage it, then I think you are doing damage.”
Investor Distrust, Conflicts
“I talk about [investor distrust] a lot,” Tibergien says. “The lack of trust this industry has in its relationship with consumers is terrible…. We have formal surveys and asked people, ‘Why did you choose not to come into this business?’ One is that they never studied finance. Two, they think it’s a sales job. And three, they think the industry is corrupt.
“I’m not troubled by conflicts. I’d rather people be transparent in terms of the implications of those conflicts. Knowing that I have a potential for conflicts is different than actually acting on a conflict.”
Money Is the New Sex
Tibergien caps off the interview with a metaphor — or Freudian slip. He muses on the financial literacy program he sponsors at his former high school and why getting people to talk about their finances matters.
“Money is the new sex; it’s the thing people don’t talk about,” he said.
Until now anyway, as Tibergien sets his sights on beating the norm of silence in financial illiteracy, too.
The Institute for the Fiduciary Standard
Welcome to the Institute for the Fiduciary Standard!The Institute is a nonprofit formed in 2011 to benefit investors and society through its research, education and advocacy of the fiduciary standard's importance to investors, our capital markets and economy. Six key fiduciary duties embody the fundamental elements of an investment fiduciary’s responsibility. Read More
Why an InstituteThe rationale for an Institute for the Fiduciary Standard is straightforward: The fiduciary standard is important, representing ideas central to our form of government and free market economy; it is under significant pressures from market forces that could sharply limit its reach; no other entity is solely focused on preserving and promoting the fiduciary standard. More...
The 6 Core Fiduciary Duties
- ‣ Serve the client’s best interest
- ‣ Act in utmost good faith
- ‣ Act prudently -- with the care, skill and judgment of a professional
- ‣ Avoid conflicts of interest
- ‣ Disclose all material facts
- ‣ Control investment expenses
Best Practices Board
- Christopher Cannon, CFA
- William C. Prewitt, M.S., CFP
- Stephen D. Johnson, CFP©
- Knut A. Rostad, MBA
- General Counsel to the Best Practices Board: Daniel Bernstein
- Clark M. Blackman II, CFA, CFP, CPA/PFS