Wealth management has grown to be a very big business. There is no shortage of people and firms seeking to be the “trusted advisor” to wealthy individuals, families and private foundations. They approach this attractive market with all sorts of motivations, business models, levels of experience and, frankly, degrees of trustworthiness. In most cases, their principal motivation is to sell a product (usually investment related), and the advice and other services they provide become subordinate to that goal. These secondary services are often provided at a substantial discount, or even free of charge, putting additional pressure on the need for more product sales in order to sustain the profit growth that management and the stock markets demand. This clear conflict makes it very difficult for them to be that “trusted advisor.”

I believe that wealthy clients want something very simple: the assistance of a person or group with the requisite skills and experience to help them navigate the many challenges that great wealth entails, who can give them the “sleep at night” comfort that their interests are understood and are being protected, so that they can focus on the other important aspects of their lives.

What they want is a fiduciary.

For generations, bank trust officers filled this role, and did so admirably. But corporate profit pressures and the ascendancy of other business lines and business models have relegated these professionals to the dreaded back office backwater of “cost center.” Lack of investment and rounds of “expense reductions” have decimated their ranks. In many cases, they now have sales goals, which can place them in direct conflict with their primary role as fiduciary. Not surprisingly, this has driven considerable turnover in the industry and a diminishing interest in appointing banks and other institutions as corporate fiduciaries. Family offices and private trust companies have stepped in to fill that void, but only for the very wealthiest of clients.

For the rest, the need remains. This problem must be solved. We must find an effective way to bridge the gap between expectations (fiduciary, trusted advisor) and economic reality (product-driven economics). Our clients deserve it.

Dan FitzPatrick, President
Northway Wealth Advisors, LLC

Many forms of conduct permissible in a workaday world for those acting at arm's length, are forbidden to those bound by fiduciary ties.  A trustee is held to something stricter than the morals of the market place.  Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.  As to this there has developed a tradition that is unbending and inveterate.  Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the "disintegrating erosion" of particular exceptions ....  Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd.

Justice Cardozo, Meinhard v. Salmon, 249 N.Y. 458 (1928)