About a month ago, Greg Smith wrote his New York Times op-ed “Why I am Leaving Goldman Sachs.” His editorial is easily some of the best advertising for NAPFA’s approach of fee-only financial advisors. But I wanted to highlight a couple of his comments:

[Culture] revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust. …

Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym. …

When I was a first-year analyst … I was taught to be concerned with … getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there.

Culture matters, but so does compensation. I concede that there are probably many commission based agents and brokers who have integrity, humility and are generally trying to do right by their clients. But that is often against the way that they get paid, and the love of money is the root of all kinds of evil. Being a NAPFA fee-only fiduciary doesn’t completely eliminate all conflicts of interest, but it does help minimize them in two important ways.

First, our compensation is not dependent on pushing product or churning an account. Second, there is a larger NAPFA culture of  ethics, teamwork, integrity and always acting the client’s best interest which helps keep each NAPFA firm focused on the moral fiber which is what is really important to building trust. Here is NAPFA’s Fiduciary Oath:

NAPFA’s 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.

For clients who don’t choose our services, we recommend considering other NAPFA members. Find a NAPFA advisor in your area today!