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Summer 2015
THOUGHTS FROM OUR CHAIRMAN
Since the Crusades, and before, brokers and trustees have served mankind. Both have been involved with all kinds of property,
with different levels of responsibility. Through English law, the levels of responsibility have become better defined. But even
today, the US Supreme Court is struggling with the issues of “Fiduciary” and how broadly they should apply. To paraphrase
Wikipedia, a fiduciary is a person or group that holds a legal or ethical relationship of trust with one or more persons or group
of persons.
Brokers have forever been responsible for being the middlemen on buys and sells of all kinds of assets. On the other hand,
a trustee as a fiduciary was, and is, responsible for designing and implementing an objective approach to a client’s financial
requirements and stated goals. The purchase and sale of assets are then entered into as deemed appropriate solely in the best
interest of the client, without conflict of interest.
In this summer issue of As We See It, our associate Ted Staples tackles the debate as it pertains to the role of fiduciaries and
brokers managing assets.
Alfred B. Van Liew
Is a Fiduciary Best for You?
Edward K. Staples
The Supreme Court’s deliberation over the recurring topic
of differentiation between fiduciaries and brokers has been
at the forefront of investment and public policy news. With
literally thousands of stock, bond, mutual fund and blended
investment choices available to your family, business and
retirement assets, which is the best type of investment
manager for you?
philanthropy initiatives, discretionary decisions for family
and a host of varying personal preferences.
Fiduciaries are advisors held to the highest standard of
law to act solely for their clients’ best interest - without
conflict of interest. Fiduciaries encourage and participate in
a detailed, ongoing investment dialogue with their clients.
Their work incorporates the advice of attorneys and tax
professionals to construct portfolios for performance, market
downside protection and tax efficiency, all in accordance
with client wishes. For fiduciaries, legal documents – trusts,
wills, powers of attorney, healthcare proxies - become vital
elements to prudently address wealth succession goals,
By contrast, a broker must meet what is referred to as
the “suitability standard”. Client profiles are generally
matched to securities and financial products. The subsequent
purchase and sale of securities through a commission
compensated broker may be comprised of suitable
investments, but the broker is not obligated to meet the same
standards as a fiduciary.
Emphasizing the high regard of the term fiduciary, a few
synonyms include:
Reliable – Rational – Reasonable - Trustworthy
In fact, the brokerage industry has fought attempts to apply
fiduciary principals to brokers. Recent calls for regulatory
Investment Management and Trust Services
One Regency Plaza, Suite One, Providence, Rhode Island 02903 401.272.2510
Nine Memorial Boulevard, Newport, Rhode Island 02840 401.846.5550
www.vanliewtrust.com
reform in the financial services industry continue to focus
intently on disclosure of product suitability and risk and
greater transparency of fees. The fiduciary, being entrusted
through the formality of law to protect clients’ best interests,
is obligated to serve as the client’s professional advocate
without conflict of interest, regardless of compensation
incentive.
Where a trust is considered legally advantageous for the
titling and management of assets, your chosen trustee is
viewed as the keeper of the fiduciary relationship. In effect,
the terms are often used interchangeably. A brokerage firm,
however, cannot act in that capacity.
Professional fiduciaries, including trustees, are keenly
attuned to the significance of Federal and State law shifting
away from the charging of estate (“death”) taxes, including
applicable benefits gained from portability of the estate tax
exemption. Fiduciary oversight of sophisticated trust plans,
however, continues to compliment client marital and family
financial harmony, structuring an effective tax approach, and
often by serving as a liaison to the philanthropic community.
Interestingly, a unique attribute of trusts is that they may be
written to contain language, within legal parameters, which
allows a fiduciary the authority to adjust for changes in the
law and to act more decisively when addressing unforeseen
events.
This specialized document drafting gives the trustee the
benefit of informed choice (and often quite flexible financial
solutions) in managing client assets which may be better
than relying on a previously fixed position. Additionally,
legal control of assets through the granting of “second look”
general, limited and special powers of appointment may be
very useful – not only during one’s lifetime – but also after
death.
A trust may be designed for division of different property
types between spouses, the care of a child and future
generations. The fiduciary as trustee may be involved in
the management of a business, overseeing major retirement
assets and helping one diversify a newly inherited portfolio.
In such multi-faceted roles the trustee is not performing
simply at the broker suitability standard. The trustee as
fiduciary is obligated by law to inquire, exercise discretion
and consistently provide their professionally specified
strengths, without conflict of interest, for the success of your
financial well-being.
T
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US: Retail Sales (%yoy)
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High hopes for robust
consumer spending fell flat
in early 2015, with difficult
weather being pointed to as
the headwind. Yet, the trend
of weak retail sales continued
into April. Is a rebound
coming? It seems likely,
as estimates for US GDP
point toward 2.5% growth
for the rest of the year. We would be delighted to meet with you to share comments about this article, or to review your portfolio in detail.
PROVIDENCE
Ask for Joe Healy or Ted Staples
CALL 1-800-300-1116
NEWPORT
Ask for Elizabeth Gordon Dellenbaugh
This newsletter represents the opinions of Van Liew Trust Company, contains forward looking statements, is subject to alteration based upon changing market conditions, and is
general and educational in nature. It should not be construed as providing investment advice. Information contained herein has been obtained from sources believed to be reliable,
but not guaranteed. Past performance is not a guarantee or a reliable indicator of future results. Investing in the bond market is subject to certain risks including market,
interest-rate, issuer, credit, and inflation risk; investments may be worth more or less than original cost when redeemed. U.S. government securities are backed by the full faith of
the government; portfolios that invest in them are not guaranteed and will fluctuate in value. Mortgage and asset backed securities may be sensitive to changes in interest rates,
subject to early repayment risk, and while generally supported by a government, government agency or private guarantor there is no assurance that the guarantor will meet its
obligations. High yield, lower-rated, securities involve greater risk than higher-rated securities. Equities may decline in value due to both real and perceived general market, economic,
and industry conditions.