Sheryl Garrett Tells Planners: Sign Fiduciary Oath

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Pioneering planner Sheryl Garrett is using her moment in the national spotlight to get planners on board with a fiduciary oath.

President Obama singled Garrett out for praise during a talk at the AARP last month discussing the obligations of financial advisors and their role in retirement planning. "The role of a financial advisor is one of the most important jobs," he quoted her as saying. "But there is a segment of the industry today that operates like the gunslingers of the Wild West. We don't have the rules and regulations to protect those who we're supposed to be serving."

"I couldn't have said it better myself," the president added.

Now, as various federal agencies reinvigorate the debate around the fiduciary standard, Garrett -- founder of the Garrett Planning Network of fee-only planners who charge an hourly rate -- is calling on all planners to sign a pledge proclaiming themselves fiduciaries.


The move comes as the SEC Chair Mary Jo White announced this week that the commission will develop stricter fiduciary rules for all investment advisors, including those at broker-dealers.

The White House is also currently reviewing a Department of Labor proposal to impose a fiduciary standard on all retirement plan advisors.

"I'm optimistic," Garrett says. "Maybe the White House has said, 'Let's get this all done.'"

Among the five SEC commissioners, two oppose and two support a fiduciary rule, leaving the decision to White, Garrett says.

Harold Evensky has long backed the notion of advisors making a "fiduciary oath" to clients; Evensky and Garrett are both on the steering committee of the Committee for the Fiduciary Standard, which wrote the petition.

Hours after the fiduciary pledge went out to the 320 members of her small, but influential, network of hourly financial planners, about a third had signed on, Garrett says. The CFP Board, FPA and NAPFA also may send out the petition, she adds -- although none of those organizations has confirmed or denied it.


American investors deserve to work with advisors who put their clients' financial interests before their own, the president said during the AARP speech. All told, Americans lose $17 billion a year to advisors' conflicts of interest and bad advice, he said before re-emphasizing, "$17 billion every year."

After the talk, Garrett says, another attendee told her the most important thing she could do is encourage advisors to raise their hands as fiduciaries, to counter the impression -- circulated by vocal foes of a uniform fiduciary standard -- that there simply are not enough fiduciary advisors to serve clients, she says.

Garrett says she thinks there are enough advisors. 

"We've been asked to help share the stories of the faces of financial abuse because the opposition to the fiduciary standard says there's no harm, there's no bodies in the street and nobody's being victimized," Garrett says. To the contrary, "every financial planner I've ever met has worked with somebody who's received bad advice if not downright horrid advice."

The oath -- titled, "I Am a Fiduciary and I Am Ready to Serve Retirement Investors" -- contains the following pledges:

  • I will put my client's best interest first.
  • I will act with prudence; that is with the skill, care, diligence and good judgment of a professional.
  • I will not mislead clients and I will provide conspicuous full and fair disclosure of all important facts.
  • I will avoid conflicts of interest.
  • I will fully disclose and fairly manage, in my clients ' favor, any unavoidable conflicts.


Like many other Garrett Network advisors, Frank Boucher of Boucher Financial Planning Services in Reston, Va., signed the petition immediately -- but added that he thinks a fiduciary standard may be too difficult to enforce.

"I think the industry should have a better shot at going toward transparency of fees and conflicts of interests," Boucher says.

Another Garrett advisor -- Kent Grealish of Grealish Investment Counseling in San Bruno, Calif. -- casts the debate "as a David and Goliath battle," but says he doesn't expect it to be resolved any time soon.

His own career provides a stark example of what's at stake for the large financial services firms that are fighting the imposition of a fiduciary standard, he says.

After spending 30 years as a stock broker -- most recently with Morgan Stanley, Grealish switched to hourly planning a decade ago and now makes about half the income that he used to.

"I left behind all the residuals and changed to an hourly rate model -- which is not as lucrative but it's a lot more enjoyable," he says.

While he says he knows many ethical stockbrokers who serve as fiduciaries even though they are not required to, he also believes the business model has unavoidable conflicts.

"I'd like to say that in the 25 years I was strictly commission that every piece of advice that I gave was totally objective, but how could you know that? The only time I could say that was when I advised against something that would have made me money," he says. "The only way to eliminate that conflict of interest is to get rid of it."

Bloomberg contributed reporting to this story.

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