June 18, 2019
As a fiduciary, our legal obligation is to act in the best interest of our clients. In publicly traded firms, directors and officers have a duty of loyalty to make decisions on the behalf of the corporation, with an objective of maximizing shareholder value. In other words, the company’s best interest comes first. Corporate decisions around services, product offerings, pricing and compliance are all influenced by this obligation to serve the shareholder rather than the client first.
Open architecture investment solutions help to combat potential conflicts and enhance our duty of loyalty to our clients. The term open architecture is used by many in our industry, but our definition of the term is separating custodians and record keepers from money managers from brokerage services from consulting. Other firms present bundled solutions in which they fill multiple roles themselves. Three examples of bundled services are:
- A single firm can act as the money manager, perform trading through their own brokerage firm, custody the assets, and act as the consultant, for one inclusive price, or
- A company can be a retirement plan provider that charges one price if you use their proprietary funds but a different, higher one, if you use someone else’s funds; or,
- A organization will charge the client a stated fee for the cost of an independent manager, but if they can retain the underlying manager for less, the negotiating firm keeps the difference.
At Cornerstone, independence and unbundled solutions are clearly defined: we have no financial ties to money managers, custodians, or brokers and as a result, have no incentives to direct business to any party that we believe is not best suited to serve our clients. We eliminate the conflicts of interest that exist when one firm plays multiple roles, and we create transparency around services and pricing. We also negotiate pricing for these services on behalf of our clients. Unbundling solutions does not equate to higher fees. Our scale allows us to negotiate with each provider to supply its best pricing. By integrating these unbundled services through technology and anticipatory client service, we strive to create a better experience for our clients. In our opinion, that is the value of being independent.
We hope you and your families enjoy the Summer.
The Barron’s Top Institutional Consultant list was based on a range of criteria, including institutional investment assets managed by the company’s financial advising team; revenue generated by those assets; the number of clients the team serves; the number of team members and their regulatory records; and the advanced, professional designations and accomplishments of the team. https://www.barrons.com/report/top-financial-advisors/institutional