NAPFA Unveils "Fiduciary" Campaign & Website

On Friday, May 4, 2007, the National Association of Personal Financial Advisors (NAPFA) unveiled its new website "Focus on Fiduciary", in conjunction with its Second Annual "Focus on Fiduciary" campaign, "which aims to educate Americans about the need for financial professionals to hold themselves to a fiduciary standard."

According to the home page on its website, NAPFA "is the nation’s leading organization dedicated to the advancement of Fee-Only comprehensive financial planning." NAPFA adopts its own (not a "common law" or a "statutory") definition of "fiduciary", specific to the setting of a paid financial advisor:

fi•du•ci•ar•y – A Financial Advisor held to a Fiduciary Standard occupies a position of special trust and confidence when working with a client. As a fiduciary, the Financial Advisor is required to act with undivided loyalty to the client. This includes disclosure of how the Financial Advisor is to be compensated and any corresponding conflicts of interest.

Its self-defined concept of being a "fiduciary", with duties to a client, not others, appears key to its membership's service offerings.

What makes members of NAPFA different from most other financial advisors?

One of the critical differences is that NAPFA members serve their clients in a fiduciary capacity. A fiduciary standard means that your financial advisor is putting your interests first.

When you hire a NAPFA member, you are getting the best advice that he or she can give, without any influence from outside interests.

This way of conduct is entirely different than how most so-called “financial advisors” work today. More than 90 percent of financial advisors are paid (fully or partially) by commissions; this means that they have incentives to promote products and services that maximize their income. * * *

NAPFA members affirm that organization's Code of Ethics, which addresses areas of: Objectivity; Confidentiality; Competence; Fairness & Suitability; Integrity & Honesty; Regulatory Compliance; Full Disclosure; and Professionalism.

To support this Code, NAPFA members also subscribe to a "Fiduciary Oath":

The advisor shall exercise his/her best efforts to act in good faith and in the best interests of the client. The advisor shall provide written disclosure to the client prior to the engagement of the advisor, and thereafter throughout the term of the engagement, of any conflicts of interest, which will or reasonably may compromise the impartiality or independence of the advisor.

The advisor, or any party in which the advisor has a financial interest, does not receive any compensation or other remuneration that is contingent on any client's purchase or sale of a financial product. The advisor does not receive a fee or other compensation from another party based on the referral of a client or the client's business.

A brief article by Aaron Siegel, dated May 3, 2007, entitled "Focus on Fiduciary campaign unveiled", posted by Investment News, noted NAPFA's 2007 Campaign:

* * * The campaign, which was announced at NAPFA’s National Conference in Chicago today, will consist of a new website, a set of posters and fliers, public service announcements, a podcast, a multimedia presentation and a letter-writing campaign to congress. * * *

That article -- together with a second article by Mr. Siegel, posted there on the same date, entitled "Clients unclear on 'fiduciary,' survey finds" -- referred to NAPFA's “2007 Consumer Understanding of a Fiduciary Standard Survey”.

According to NAPFA's "Consumer Understanding of a Fiduciary Standard Survey Report," 34% of respondents indicated that their adviser didn’t explain the term "fiduciary" to them or discuss its importance. * * *

However, more than 92% of consumers who responded said that they have heard what the term “fiduciary” means and another 97% said that they would seek an adviser who goes by a fiduciary standard.

The survey canvassed 922 consumers who receive NAPFA’s quarterly newsletter in 48 states and six foreign countries between December and February. * * *

NAPFA's "Focus on Fiduciary" Campaign website is well done. It offers seven separate sections, which explain: NAPFA's definition of "fiduciary"; the NAPFA "Fiduciary Oath"; the "Fiduciary Difference"; further Fiduciary Information; the Fiduciary Questionnaire; an available "podcast" about the Campaign; and NAPFA contact information. The many links to articles & publications provided on the Fiduciary Information page lead to good references about this developing area of standards.

Any public awareness campaign that focuses on the "fiduciary" aspects of a professional advisor to the individual client evidences a welcome & healthy movement.

* * *

Update: 05/10/07:

On the Wills, Trusts & Estates Prof Blog, author-professor Gerry Beyer noted my posting in his own entry, dated May 10, 2007, entitled "NAPFA Enhances Website".

Update: 01/10/08:

For a further development on this topic, see: PA EE&F Law Blog posting "Are Investment Advisors & Broker-Dealers, Fiduciaries?" (01/10/08).