Do you work with a financial cupbearer?

Bill Parrott |

The cupbearer was a trusted confident of the king and was held in high esteem.   What is a cupbearer?  The cupbearer was the person tasked to taste the king’s wine to make sure it was poison free.   If the cupbearer drank the wine and lived, then it was safe for the king to drink generously.   Obviously, if the cupbearer died after drinking the wine, then the king would receive a new glass of wine and a new cupbearer.   The cupbearer was hired to protect the king.    The cupbearer had to put his interest below that of the king.

The Department of Labor is currently deciding on the fate of the fiduciary standard for the investment industry.   Who is a fiduciary?  What is advice?  Should you put your client’s interest first?  The questions go on and on.

Registered investment advisors already adhere to the fiduciary standard which means they are held to this standard under the Investment Advisors Act of 1940.  An investment professional who is not a registered investment advisor only has to make a suitable recommendation to the client.  It would seem obvious that an advisor would put their client’s interest first but it is not so and that is why the Department of Labor is now involved.   In my opinion, every investment professional should act as a fiduciary, regardless of title, and always put their client’s interest first.  

When I watch CNBC I am always amazed at the number of investors, professionals or analyst that hype up their best investment ideas in front of millions but they do not own the stock themselves.  If the stock is expected to take flight, why would the analyst not own one share?

I would suggest to take the fiduciary standard one step further.   I believe that advisors should act as a financial cupbearer for their clients and show clients their personal investment holdings.  This full disclosure suggestion is similar to a presidential candidate releasing their tax returns.   How does your advisor invest their life savings?   Does your advisor own stocks, bonds or funds?    Is your advisor buying or selling?  A quick peak at your advisor’s holdings will tell you all that you need to know. 

So, do you work with a financial cupbearer?

…For I was the king’s cupbearer.  Nehemiah 1:11

Bill Parrott is the President and CEO of Parrott Wealth Management, LLC.

Source: Investopedia.  Choosing A Financial Advisor: Suitability Vs. Fiduciary Standards by Ryan C. Fuhrmann, CFA, November 17, 2011