This is the Truth Network. Welcome to Finishing Well, brought to you by CardinalGuide.com. With certified financial planner, Hans Scheil, best-selling author and financial planner helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes. Now let's get started with Finishing Well. Welcome to Finishing Well with certified financial planner, Hans Scheil, and today's show, how fun, fiduciary duty of a CFP professional. Now that's a whole mouthful of words. And it is fun. I think you can really see some amazing things about this.
I sure have. And so the idea of a fiduciary and the word CFP, I'll try to give you those two. So a fiduciary is essentially a financial agent that is going to put the interest of their client over their own particular interests. And they have lots of ways of mitigating those things, as we'll talk about in today's show.
And a CFP means a certified financial professional, which both Hans and Tom are fiduciaries and CFPs. But as I thought about that idea of putting our clients' interests ahead of our own, I couldn't help but think that every Christian is essentially a fiduciary of Jesus. In other words, we should be putting God's interests way ahead of our own.
And so, you know, how exactly do you do that? And one of the ways is obviously, apart from me, you can do nothing, so we better be in prayer. And in prayer, you know, you're given sort of this wonderful thing in Ephesians 6 of saying how to get in alignment with God's interests by putting on the full armor, the armor of God. And a financial professional would be doing the same thing, because the very first thing you've got to put on is a belt of truth, because without the truth, you know, we're essentially the Antichrist, because he is the truth.
Right? So we've got to do that. We've got to put on the feet, fitted with a gospel of peace. And the word gospel means good news.
And you want somebody that looks like they've got good news for you, and that's one of my favorites. Of course, you know, you've got the shield of faith, and I could talk about all these for quite a bit of time, but I'm just going to go to the two offensive weapons that are mentioned, the first one being the sword of the Spirit, which is the word of God, which helps us get in alignment in all sorts of ways, especially through prayer. But also, a lot of people don't realize it says, and make intercession with all kinds of all prayer. Well, all prayer is the whole offensive idea, and as we pray, you know, that's how we can truly, in my mind, be a fiduciary for Jesus. Isn't that fun?
So with all that said, Hans, a little longer than I normally go, but it's hard to get the whole armor in there in just 20 seconds. Well, I think it's a very good parallel, you know, to what we're talking about today, which is, you know, a fiduciary or a person being called a fiduciary, the fiduciary duty that I have when I'm serving my clients, and Tom has, and any other CFP. And CFPs aren't the only fiduciaries out there.
I'll talk a little bit about that. But each different organization where people are deemed to be a fiduciary, they have a slightly different way of defining it. And the most strict is the CFP, in my opinion.
So we decided to use that for the show and the video. And so let me just give you the definition as the CFP board defines a fiduciary. It says, at all times when providing financial advice to a client, a CFP professional must act as a fiduciary and therefore act in the best interest of the client. So if we want to simplify this thing, when I'm serving a client, or if I'm serving you, the client, I'm to put your interests ahead of mine, or I'm to take my interests and set them to the side, and I'm supposed to give advice, and I do give advice that is acting in your interest.
Now this is easy when we're aligned. I mean, when my interests are the same as you, you know, we all want the same thing kind of a thing. We want to grow our money. We want to earn good interest on our money.
We want to buy insurance that's going to protect us from long-term care. I want that for my clients, and my clients want that. And so most of our business or a lot of our business is aligned. But there are times when we have competing interests or conflicting interests, such as, you know, if I'm working for an insurance company or just somebody that owns the agency above me, and maybe they're not in tune with this fiduciary deal, and they've got an agenda of their own. I mean, you know, this month, we want to sell this quarter, you know, we want to sell this particular policy to as many people as we can.
I mean, that's what we want you to do. We want you to sell our policy, our insurance policy. And so we go forth meeting the clients, and we have a hidden agenda to sell them policy XYZ. And, you know, it's kind of cool if policy XYZ was the ideal thing for this client, then we wouldn't have a problem. But seldom does that exist. I mean, we have, like if we're selling long-term care policies, we probably have about 15 different policies to choose from of all different formats.
And there's no way any one of those is going to be right for everybody. So this could be just as simple as a financial advisor like me works for a company, and the company has an agenda that they force on the advisor. And then the advisor goes out loyal to the company's agenda and sells that stuff to people. And that's a conflict of interest. Okay, I mean, it's just So if I'm understanding kind of from my perspective being in car sales all these years, you know, when we weren't necessarily fiduciaries like that, so I understand on the non-fiduciary level that you're selling this particular policy or these policies and they say, look, we want you to sell the policy that requires, you know, the person pay the premiums upfront. So to speak, and if every one of those that you sell, if you'll sell 15 of them this month, we're going to send you to Spain or some beautiful trip or something like that.
Right. And so your agenda as you're talking to every client is to see if I can, oh, I can get this person to make their payments up front so that I can go to Spain. And all of a sudden, you know, you describe the conflict of interest that exists everywhere in the business. Now, there is a way around this is or work with this would be to disclose it.
Okay, is you could just tell the people, look, I'm selling you this policy and I have a conflicting interest is I'm doing this to qualify for a trip to Spain, which means nothing to you. Okay. And, you know, I guess it means everything to me and everything to my employer. So if I disclose this to you and then manage it, I mean, I'm on some shaky ground here, but I'm just I'm trying to give you a sense of like, first of all, what we need to do is we need to be constantly aware of conflicts of interest.
Okay. I mean, they're just out there. And then we need to do everything we can to avoid them. I mean, that's the first thing we need to do. And I do that by not having a boss.
I mean, I like that a lot. I mean, it's just, we don't, you know, I mean, I got a boss in God and Jesus. And I have a boss in terms of the SEC Securities and Exchange Commission.
And I have a boss in terms of the laws of the state of North Carolina, and perhaps maybe even the insurance commissioner of North Carolina, that I need to follow. Whatever guidelines he or she sets for me. But that's pretty much everybody. But I don't have somebody else with a different agenda over me. Okay. And that that makes my job a little bit simpler. And I really set up my whole business around being fiduciaries. And I just want to tell people that, you know, there's a lot of people doing my job that are not fiduciaries.
Okay. And, you know, like being a CFP is not a requirement. It's, you know, it's a choice. And then you have to qualify for it.
You have to take exams, and you have to work for a CFP for two years. You have to agree to this code of ethics. It's not just fiduciary, it's a whole number of things. So there's a whole lot involved in that, but it is voluntary.
Oh, yeah. And so if I'm understanding it, and again, just slow on my part, but what you're saying is that part of becoming a CFP or certified financial professional is being a fiduciary. So it's not like fiduciaries are necessarily CFPs, but all CFPs are fiduciaries.
There you go. And it's certified financial planner. Excuse me, planner. And then CFP is certified financial planner. And in the title of the show, they're referred to as a CFP professional. Okay. I mean, that's in a lot of the advertising the CFP board does to promote all these things.
They refer to us as a CFP professional. Cool. Yeah. And so what we're going to do in the second part of the show is really break this down, this duty to act in a certain way. And we're going to break it down and we're going to talk about the duty of loyalty, the duty of care, and the duty to follow client instructions. Oh, I love that.
It's broken. They give you more than just, oh, this overall idea. And what a cool thing to think about, not only in asking people that deal with you, but in whatever line of work you have, to take up that kind of standard and to say, hey, I like this idea of being a fiduciary as a radio salesperson or whatever else you may do, as a radio talk show host, working in the client's best interest.
And so when we come back, of course, we're going to have a lot more on this whole idea of fiduciary duty of a CFP professional. But we remind you that the show is brought to you by Cardinal Guide, cardinalguide.com. And there at cardinalguide.com, you're going to see seven worries tabs.
And one of those seven worries tabs, which one is this one, by the way, today, Hans? Yeah, it's Social Security. I just didn't have anything more to say when I wrote this show about Social Security.
So I wanted to do this show, so I just plugged it in. OK, so you'll find this show under the Social Security tab on the seven worries tabs. And when you click on that, you're going to see the video with the same title and show notes, with a beautiful board that explains all these different three areas that we're going to go to in the second half of the show. And of course, there at the website, you'll also find Hans' book, The Complete Cardinal Guide to Planning for Living in Retirement. And then my personal favorite, The Contact Hans or Tom Page.
You know, this stuff seems a little too complicated for me to do at home. You just hit the Contact Hans or Tom Page, and there you can get up with them and get your own customized plan. It's there at cardinalguide.com. We'll be right back with a whole lot more.
Stay tuned. Investment Advisory Services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents.
Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Welcome back to Finishing Well with Certified Financial Planner Hans Scheil and today's show, The Fiduciary Duty of a CFP Professional. And so I love this idea, Hans, that we're going to break this into three areas, and there's a lot to this stuff. Yeah, so we're going to talk about the duty of loyalty, and then next we're going to talk about the duty of care. And the third is the duty to follow client instructions. And so let's start with the duty of loyalty, and the loyalty, what it says is place the interest of the client above the interest of the CFP or CFP firm.
Okay, so we've already said that over and over and over again. So we're putting the client's interest first, ours second, or off to the side. Now, how you do that is number one is you avoid conflicts of interest. So we do everything possible to avoid conflicts of interest. And by doing that is we can like choose products that we recommend or asset categories that we recommend that are in the client's best interest. I mean, so right when we're picking what we're going to sell to people, we've got their needs and their desires ahead of using our agenda.
I mean, there's certainly products that I would like to sell to more people, but I don't let that affect me. Okay, so Tom and I, you know, so it really gets down to us is avoiding conflicts in the first place. Okay, now when they can't be avoided, then what we need to do is we need to disclose the conflicts to the client. And I'll give you an example of a conflict that can't be avoided is like you bought life insurance from us and you bought based upon our recommendation. Okay, and we chose the best product for you. Now, we are also paid a commission by the insurance company. But all insurance companies pay us a commission, but that is a conflict. So what we need to do is disclose that to you, which we did.
You did. And then we need to obtain informed consent. So we need to obtain your consent and your informed consent.
So it's easy to say, is that okay? You know, but we need to inform you of the conflict and then obtain your consent after you're informed. And then we next need to properly manage the conflict. And so sometimes not even next is just when an inevitable conflict comes up and something comes up, so sure we got to disclose it. And then obtain your consent, but we still need to manage that over time. And there's lots of ways we could go into details, but we need to be able to show that we're managing the conflict.
And we need to act without regard to the financial or other interests of the CFP. So we need to be able to prove that. So we have an interest to earn commissions.
We have an interest to go on a trip to Spain. And we need to be able to show that we're putting that interest aside and that's just a byproduct. I mean, it's just if we win a trip, it's just because their product shines so much and it was so useful. And it was in the best interest of the clients that we sold that we just sold a lot of people and things.
And then the trip is just part of the compensation. So we're doing a lot of talking and a lot of, but I'm just trying to break down is this stuff is on Tom's and my mind every day. Okay, so the duty of loyalty is number one. Yeah, and I love that word loyalty, right?
Yeah. It really speaks in and of itself volumes of things that I love that they put in there. Because you just have a sense a lot of times that you're dealing with somebody that's a fair weather, I guess, financial planner. They're not necessarily loyal, but I didn't want to get past that word without just saying, you know, that's a really great word.
And I really like the use of it and that they're actually holding it to part of the standard. But that's I just want to add that. Sure. So the next one, the duty of care. So what it says with that is you act with care.
Well, I guess that's kind of like an oxymoron, but whatever they say, act with care and next skill. And so Tom brought this up in the video is that we've spent days and days and weeks and months studying and listening to Ed slot in the tax area, the IRA area. And that's just one of the places we follow. We do this around long term care.
We do it around Medicare. And so we need to not only have knowledge, but we need to have skill in what we provide to the people. Okay.
What we provide to you. Next one is prudence. And, you know, prudence is kind of an interesting word. I mean, I, I looked it up and it's just, it's basically it says doing the right thing.
Okay. And like consciously doing the right thing, thoughtfully doing the right thing. Yeah. Which fits up perfectly with the breastplate of righteousness is to just simply do what's right.
And you can't miss. Right. And diligence of a prudent professional. So they have the standard of a prudent professional, which, you know, we work constantly to meet that standard and exceed that standard of, you know, of a prudent professional in light of client's goals, risk tolerance, objectives and financial and professional circumstances.
So that's a mouth client. I'm going to repeat that client goals, risk tolerance, objectives and financial and professional circumstances. I mean, a lot of clients don't really know what their goals are. They have trouble articulating them and we'll spend a lot of time trying to pull them out. But so whatever we need to know what their goals are, their risk tolerance. A lot of people talk one game. And then when you do some of the exercises, they come up with a different score and we need to arrive at a risk tolerance that we have an understanding of.
And they may have an understanding, but really couldn't give you a talk about it. But we need to know what it is and we need to make decisions. I mean, we're doing care and we're meeting this duty of care is we need to give people advice, put them in things, put their money in things that are aligned with all of this stuff. And we're doing it as a prudent professional.
That's really beautiful because when you think about it, I never really had until you brought this up in this way today. But my risk tolerance and those kind of things could be phenomenally different than the financial planners risk tolerance and all that kind of stuff. And so to actually and I know you guys have always done this because we've talked about it so many times to spend a lot of time trying to understand what you know, where are you comfortable, even though I would never put you in that riskier thing being the professional that I am. If that person is really wanting to have that kind of risk and you really through assessing that situation, realize that they want to be on the edge of risk and they like living there. Then really, you're obliged under that to go against what you would normally suggest, right?
Kind of. I mean, we need to show and we do drill down like when the client is in a different place risk wise than we are, a more risky place. Let's go to the next one and that'll kind of get answered. So that number, letter C for the third one duty to follow client instructions. So, I mean, unless there's some sort of exception, we need to follow what you tell us to do. Okay? You, the client. Right. Now, we don't really have that much of this because I guess it's who we work with or people that come to us for advice generally aren't full of a lot of instructions.
Okay? And when people are, in other words, I want to buy and put all my money in Apple or I want to do this, that or the other thing. I want to put it all in Tesla or I want to buy really risky stocks. I want to buy stuff.
I want to put it all in gold. I mean, when we are hearing that kind of stuff on the front end, a lot of times we don't take them on as clients. And unless we can really back them down a bit because we don't want to get to this number C. We don't want to be in a position where we have to follow their instructions and it goes against what we think our duty of care. So this isn't as simple as I'm making it sound. I mean, this is a little dicey and we have to be thinking about this all the time. And there are places where we're going to, I mean, people ask us to do sometimes maybe even something shady around taxes.
Okay? And when I say shady, it's just, you know, I'd just like to do this because I think I can get away with it or this is the fudge area. And, you know, they're giving us an instruction to do something and then we have to back off and just say, well, we won't do that. But let's go through this duty to follow client instructions. Comply with all objectives, policies, restrictions and other terms of the engagement and all reasonable and lawful directions of the client. So this starts out with, we have an engagement with each person that we work with.
Okay? And then in that engagement, there's objectives, there's policies, there's restrictions, there's terms of the engagement. We obviously have to comply with all that. That's pretty easy actually because we just operate within some boundaries or some significant boundaries.
Wow. I hate we're out of time before we're out of show, but that's common here on Finishing Well. But it's a good time to remind you. The show is brought to you by Cardinal Guide, cardinalguide.com. And there you'll find the Seven Worries tabs, which today's show is under the tab of Social Security just because it, you know, it's really a necessary idea. I'm so glad that we did this show, but there you're going to find a video along these same lines with, again, a board that's going to show these three different things of care and all the things that we're talking about in the show notes.
It's all there at cardinalguide.com as well as Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement, and my favorite, Contact Hans or Tom page. So we're hoping that today you saw the need to find a fiduciary, somebody that is a certified financial planner, a CFP professional. And so thank you, Hans. Awesome show.
Thank you and God bless you. The opinions expressed by Hans Scheil and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such.
Any statements or opinions are subject to change without notice. Investments involve risk and unless otherwise stated are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation.
Finishing Whale is designed to provide accurate and authoritative information with regard to the subject covered. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other.
Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. We hope you enjoyed Finishing Whale brought to you by cardinalguide.com. Visit cardinalguide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments and taxes, as well as Hans' best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement and The Workbook. Once again, for dozens of free resources, past shows or to get Hans' book, go to cardinalguide.com. If you have a question, comment or suggestion for future shows, click on the Finishing Whale radio show on the website and send us a word. Once again, that's cardinalguide.com. Cardinalguide.com. This is the Truth Network.
