Why Vault is a Fiduciary

Randy Fernando at TechCrunch Disrupt 2016 — London — Image by Dan Taylor — dan@dantaylorphotography.com

The way Americans handle their finances is in a state of much-needed transition. When I started my career as a financial advisor, I gained exposure to how the financial services industry was, in many ways, failing Americans. Most people only vaguely understand what happens to their money when it’s invested for retirement. The financial advisor industry puts a lot of emphasis on the “relationship” aspect of their business. It’s all about trust. They want you to trust your advisor to be the expert and always to have your interests in mind, so you don’t have to “worry” about it.

Unfortunately, people who choose to rely solely on the advice of their advisor, as opposed to seeking financial information and education themselves, are at much greater risk of being taken advantage of. The best financial advisors I have ever met are the ones who encourage and empower their clients to educate themselves and have a thorough understanding of their portfolios.

With information being more readily available, people are taking more initiative to be financially literate. It’s far more common now for people to have an understanding of fee structures and commissions, and the long-term effects of compound interest. To some extent, we have the media to thank for bringing financial literacy into the spotlight. This segment by John Oliver is an excellent example.

A step further, people are using apps to gain more insights into their daily finances. One of my new favorites is an app called Olivia, a chatbot that programmatically helps you make decisions about purchases in real-time using artificial intelligence (AI). AI is going to revolutionize the way we interact with our money, and we are just now witnessing its entrance into the mainstream. But machines, like financial advisors, are not substitutes for literacy. You need to know about your money.

Vault sits in between machines, financial advisors, and personal finance. Although we are a team of many individuals, whose primary means of communicating with our clients is technology, we are a fiduciary. A fiduciary is a person or organization that is legally obligated to act and provide investment advice in the best interest of their clients. As an investment advisor registered with U.S. Securities and Exchange Commission (SEC), Vault pledges undivided loyalty to its customers.

Not all advisors are fiduciaries. Here’s why we are.

Mission-driven business

While entrepreneurship has the potential to yield great riches for successful founders, that’s not what’s motivating our team. Our mission is to make retirement accessible to everyone. That means we need to deliver an experience that’s approachable to the one in every three people who have no retirement in the United States alone.

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Traditional financial services firms use tactics such as profiling and account minimums to maximize their pool of high net worth individuals. By design, they don’t offer their services to people who are just starting out. If you or someone you know is investing their first dollar into a retirement account, how important is it that the investment strategy behind that dollar puts the investor’s needs first? I’ll answer that for you. It’s mission critical.

Evolution through education

Although we still have a long way to go, I envision the financial services industry evolving, where predatory tactics and inflated commissions will become a thing of the past. Awareness is key here, and research shows that up and coming generations are getting better exposure to financial education at a young age. For example, The Street reports that Millennials (ages 18–34) are far more likely than older generations to have received formal training in managing their finances. Roughly 21% of Millennials learned about personal finance in school, compared to just 11% of Generation X (11%) or their parents in the Baby Boom generation (9%).

Fiduciary is the future

Many of the traditional firms in our industry are either fighting the movement, while some are rapidly embracing it. Startups like Vault have the advantage of building on the foundation of acting on what’s best for our customers. Our hope is to set the example of doing what’s best for each customer, regardless of how much they have or how much they make. Honest advice and exceptional service are two experiences that should be offered to all customers, regardless of their tax bracket.

I wrote this post because “Is Vault a Fiduciary?” is the second most-visited page in our Frequently Asked Questions site, second only to “What plans does Vault offer?”, which I answered in last week’s blog post. Our culture is customer centric, so we are constantly seeking opportunities to provide education and the empowerment that comes with it. An educated, empowered population of investors is what’s making fiduciary go mainstream.

Whether you’re thinking about opening a retirement account for the very first time, or curious to see how Vault can make it easier for you, I would love it if you gave our app a try. Visit getvault.com to get started.

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