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Cheeseburgers in Newport, RI and the Fiduciary Rule

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A couple of years ago, after reading one of his investment articles, I reached out to Norb Vonnegut. We met in Newport and talked investments at my all-time favorite burger joint, Mission. Yesterday Norb hit the nail on the head about why Spotify is eschewing Wall Street for it’s IPO.

It will basically be a DIY deal. The game is up for the self-dealing, old school wire houses. The future will continue to favor investment firms that abide by the fiduciary rule, or in other words, serve their clients’ best interests. It’s a rule that Richard C. Young & Co., Ltd. has always followed.

Norb writes:

The fiduciary solution

Back to Spotify’s direct listing. Sure, it is one deal, but one that implies loss of trust in Wall Street’s expertise, perhaps even its character. Something is broken when a streaming-music company, rather than an investment bank, is improving the path to public ownership. If Spotify is successful, it may be too late for Wall Street to fix IPO machines that systematically feed clients to the investment professionals at big broker-dealers

Direct listings showcase the power of unhappy clients. And given the arrival of robo advisers, it seems clear that client dissatisfaction extends beyond the I-bankers, stalking the halls in their Ferragamos or Jimmy Choos, all the way to the bullpens of wealth management. Spotify’s course to public ownership is simply more evidence of the importance of stepping back, assessing what makes clients less than deliriously happy, and then fixing it—whatever it is.

In my view, outstanding wealth management begins with fiduciary duty. Whenever the motivations of investment professionals are in doubt, the ensuing distrust creates reasons for clients either to look elsewhere for what they want or to build it themselves. With so many challenges on so many fronts to Wall Street’s business models, I believe it is time for broker-dealers to retool, abandon conflicted practices (like the revenue-sharing arrangements known as “pay-to-play”), and embrace the fiduciary standard.

Otherwise, the new thundering herd will be Silicon Valley engineers coding better wealth management experiences for investors.

Read more from Norb here.

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.