WHY I BUILT a B-Corp™, Fiduciary Wealth Management Firm
To Resist A Culture of Conformity in Finance
The financial industry has a bad reputation when it comes to ethical business practices. See: opposition to the fiduciary requirement, persistent lack of diversity, willfully unclear fees and compensation, and outright fraud a-la Wells Fargo or Bernie Madoff. I believe this ethical mess springs from a culture of conformity that is rife with groupthink and confirmation bias, resulting in mediocre products and minimal service.
Before I became a CERTIFIED FINANCIAL PLANNER™and founded Modernist Financial, I was a sculptor and writer. My creative community valued curiosity, knowledge, and individuality. When I landed in finance in 2011, I was shocked to find a culture still conforming, quite happily, to a 1970s version of white male supremacy. With few exceptions, the environment was a cliche of itself: nearly all the advisors were men who wore oversized polyester suits to the office and then spent their afternoons golfing. Meanwhile, their all-female support staff provided most of the client service, focused on expensive and slapdash investment portfolios. Almost no one was out of the closet and there were few people of color.
My experience is borne out by the data: 79% of financial advisors are white and 69% of financial advisors are men. 77% of CFPs are men. (The CFP board, which arguably administers the most rigorous designation in the industry, doesn’t even track data on race or sexual orientation, which says a lot).
My inner creative told me there had to be a better way. I envisioned a financial firm that aligns with our clients’ creative and progressive values - from the way we structure our company, to the way we help our clients’ structure and invest their wealth. So, when I founded Modernist, I knew we needed two key legal structures: a benefit corporation and a fiduciary standard.
Photo courtesy of Molly Quan
Photo courtesy of Molly Quan [/caption]
To “B the Change"
In 2017, Modernist became a Certified B Corporation®. Being a B Corp™ means we are legally required to consider the impact of our work on all our stakeholders – our employees, suppliers, clients, community, and planet. We are so proud to join this global movement of people using business as a force for good.
As of this month, there are 56 B Corp™ Investment Advisors, while there were 32,736 RIA firms as of May 2015. This means that .001% of independent advisors have made this legal commitment to consider the triple bottom line of People, Planet and Profits. We encourage all financial firms to join us in this commitment.
To Put Clients First = Be a Fee-Only Fiduciary
“Fiduciary duty” is a legal requirement to act only in another party’s interests i.e. our clients’ interests have to come before our own. This is a legal requirement that we happily implemented for our firm, as a Registered Investment Advisor firm and, personally, as a CFP® professional.
Shamefully, some of our industry is allowed to put their own compensation ahead of the financial well-being of their clients. At Modernist, the fiduciary rule requires us to document why our recommendations are the best option, be it for a client’s retirement accountsor their brokerage accounts. The rest of the industry should be required to do the same for all investments, as well as bank accounts, loans, and insurance. In addition, we think all advisors, like Modernist, should only be compensated by their clients (rather than often invisible commissions, kick-backs, or referral fees).
To Live Modernist Values
In early 2016, we used the same planning process that our clients experience to identify the values that guide our growth: Invite & Include, Invest in People, Innovate & Iterate, Do Good Work & Do it Well. Our internal practices reflect these values: robust employee benefits, comprehensive financial life planning for our clients, regular pro-bono education, consistent charitable giving, and more.
In order to formalize our commitment to running an ethical business, we began exploring B Corp™ Certification at the end of 2016. Happily, we found that we already met the requirements because, to us, it was the only way to build a wealth management firm. We invite the rest of the financial industry to join us in building a diverse community of professionals who put profits after clients, our community, and our environment.