I grew up next to a cornfield in Syracuse, New York.
To me, a boy at the time, that cornfield was the most wonderful place on earth. Sometimes, my friends and I would disappear into that field for hours at a time playing hide-n-seek or tag. Other times, we would sit on the outskirts and pick raspberries while we watched the farmer drive his tractor. That cornfield always offered an adventure.
Until we trampled the corn.
During one of our games of tag, my friends and I got a little out of control. We smashed down corn stalks as we ran away from each other. I still remember how abruptly our game ended as my best friend’s father called us back to his house. It was one of those moments that you don’t forget easily; I knew something was wrong right away. My friend’s father had this look on his face – he was seriously upset.
He explained to us (in not so quiet a voice) that we were ruining the farmer’s living. He demanded that we make amends.
But how? We already did the damage.
After much deliberation, my friend’s father decided on a course of action. In the morning, he would walk us over to the farmer’s house and make us apologize to him directly. Face to face. He wanted us to look the farmer in the eyes and tell him how sorry we were for ruining his harvest.
In our mind, the farmer was a gruff, hard-working man. He scared us. I remember walking up to the door and watching as my friend rang the bell. Admittedly, I hung back and let my friend do the talking (I was a shy boy and he was the outgoing one). My friend told the farmer that we knocked down his corn and we all voiced our apologies.
The farmer, while appearing upset, thanked us for our apologies and nodded his approval to my friend’s father. (Years later, I still think that my friend’s father called the farmer and let him know how scared we were, so he would go easy on us.)
Thinking back, that was a defining moment in my life. Whether this parent knew it or not, this was probably the most important lesson I learned in my childhood.
It reflects one of our firm’s guiding principles:
Do what is right. Always.
Now, that may sound cliché, but it is that concept found in the Fiduciary Oath that guides our practice. Here’s an excerpt:
The advisor shall exercise his/her best efforts to act in good faith and in the best interests of the client.
When you’ve been around the financial industry long enough, you realize that many financial firms do not work in this way nor do they put the clients interests above their own. And, to be blunt, most are not required to do so. As my advisor David Bright wrote years ago in his Latin Lingo Lesson post, a fiduciary standard does not exist on most of Wall Street. Translation…many Wall Street firms owe a duty only to their shareholders, and it’s a duty of profit.
This is why the recent Op-ed in the New York Times was so troubling for me to read. (If you have not yet read it, we urge you to do so immediately.) The op-ed, written by former Goldman Sachs’ executive director Greg Smith, described the “toxic” culture of his former employer. If this article is correct, I applaud Smith for having the courage to step forward and voice his concern, even if it was a delayed realization.
The article paints a bleak picture of humanity – one in which the author no longer felt comfortable looking future employees in the eye. Many bloggers and reporters are left wondering and contemplating the truth of Smith’s article. Regardless of its accuracy, investors are left with depleted trust in an already shaken financial services industry.
If the article was right, can the financial services industry be fixed?
While I can’t answer the question about what was actually happening, I do have a perspective on what to do. Not all financial firms work in the way described in the article.
Here’s a quick video that explains the difference:
There is a small, but growing minority of registered investment advisors, who are waving the “fee-only” fiduciary banner and are advocating on behalf of their clients for a fiduciary standard. If investors and clients were to join forces with the small group of advisors who were willing to stand up for them, that voice would hold more weight. Maybe just enough to enact a change…
Investors, themselves, can help drive that change by voting with their dollars and their investments. Seek out a fee only registered investment advisor – a person or firm that is held to a fiduciary standard. Find a company that is mandated to put your interests first. Find a firm that doesn’t think of it’s clients as “muppets.”
As to where this leaves Mr. Smith. This is just my opinion, but I don’t think you write articles like that to condemn a company or resolve a personal agenda. I think you do it as a sort of confession or a way to ask for forgiveness.
You meet your farmer, if you will. You confess. And you hope that the world forgives you.