Fiduciary Duty – What does it mean to you?

As a Moneta Group client, you have heard on many occasions that we are your “fiduciary” and that we act only in your best interest. These are terrific and reassuring statements,but what does it really mean to you? Fiduciary Duty gets used in many contexts and depending upon the circumstances can mean different things. The Securities and Exchange Commission, through a course of InterpretiveReleases and regulatory actions, has boiled down the duties investment advisors must adhere to in all client relationships. You should expect Moneta to uphold these duties in all aspects of your relationship with us.

While this article is not intended to rattle off a raft of regulatory rules and references, it is important to provide you with the overarching concept of the Investment Advisors Act of 1940 (the “40 Act”). Section 206 of the ’40 Act states the following, “investment advisors cannot engage in fraudulent, manipulative or deceptive practices.” Now, the terms fraud, manipulation and deception carry a lot of negative connotations with them. The SEC uses these terms as a sharp sword allowing it to cover a broad array of inappropriate actions an advisor could commit. The idea behind such a strongly worded statement is to make clear that any breach by an advisor to its clients are taken very seriously and have potentially devastating consequences to the advisor. The SEC takes the role of a fiduciary very seriously, so does Moneta.

What are the duties we owe you as your fiduciary? They are as follows; (i) Duty of Care; (ii)Duty of Loyalty; (iii) Duty of Obedience; and (iv) to Act in Good Faith. Those are the four primary duties Moneta owes each and every client. Strong stuff for sure, sounds very much like a marriage and in many ways it is. Your next questions may be; “What do these duties mean?” and “These are great concepts, but how are they relevant to my relationship with my Moneta Principal?”

Let’s explore what these duties mean to us as your fiduciary.

Duty of Care: Our Duty of Care requires reasonableness and prudence. We fulfill our duty when we gather information about you, your current income sources, your portfolio, your risk tolerance, your spending habits and your retirement goals. Once we feel we have satisfactorily gathered as much information as possible, we must put together a financial action plan designed specifically to fit your circumstances. In order for us to do the best job we can, we need our clients to have full confidence that we will protect their information and interests.

Duty of Loyalty: Our Duty of Loyalty requires us to put your interests before OUR interests. For example, we must recommend investments suitable to your needs and not just those that make us more money or provide us with more benefits. Another example is our duty to identify the lowest net cost share class to clients. A broker/dealer has a lower standard of care and can sell you a share class that pays them a higher trail fee. One of our investment tenets is to ferociously work to minimize expenses thereby fulfilling our duty.

Duty of Obedience: This duty requires us to adhere to the governed documents, the engagement agreement, the investment policy statement,periodic rebalancing and any mutually agreed upon client specific guidelines.

Act in Good Faith: While this seems murkier and subject to differing opinions on what constitutes “good faith”, we believe it means thatwe put your interests first in everything we do. We strive to provide you with truthful and accurate information. We treat all clients the same, big or small, one client is not advantaged over another based on who you are or how big your account. We disclose any and all potential conflicts so YOU can make decisions based on all the relevant information. Perhaps the most important piece to our relationship is for you to know that we provide you with conflict-free guidance, and when a potential conflict occurs we clearly disclose it and manage it the best we can.

This is certainly a lot of information to digest. However, going back to my marriage analogy,when you agree to work with a Moneta principal, you enter into a relationship built on trust and your faith in us. To us, as we provide Raving Fan service we strive to meet and exceed each of the “duties” described above. The great thing about Moneta Group is our passion for the work we do for our clients does not feel like a duty. It is simply what we do.

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