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    Integrity Wealth Management

    Financial Advisor Magazine featuring Miles Babcock

    by bobby l. hickman
    Confusion over whether their financial advisor acts as a fiduciary continues to plague consumers, despite recent regulatory efforts to establish clearer standards.
    Fiduciaries are required to always put clients’ interests first, while broker-dealers have long only been required to make “suitable” recommendations to clients. A Department of Labor effort to reclassify brokers as fiduciaries was overturned in 2018. Last summer, the SEC introduced new rules that require brokers to act in the “best interest” of their clients.
    Almost two-thirds of Americans who use financial advisors incorrectly believe they are legally required to make recommendations in the best interests of their clients, according to a recent survey by Personal Capital. Meanwhile, a 2020 Financial Indicators study found only 50 percent of investors were certain they were being advised by a fiduciary.
    “If more people knew they were not working with a fiduciary, they would probably change advisors,” according to Miles Babcock, RFC, IAR, president of Integrity Wealth Management & Insurance Services in Cypress, California. “I believe the SEC and FINRA need to put out crystal clear guidelines and standards across the industry. That is the only way this will get better for the consumer.”
    Babcock, who began his career in life insurance before becoming an IAR, learned the distinction first-hand during the Great Recession.
    “After losing over 60 percent of our life savings through one of the largest brokerage firms in the area in 2008, I discovered there were two different standards in the financial services industry: suitability and fiduciary,” he said. “Our experience led me to become a fiduciary. I do not want any of my clients to go through what we did.”
    A fiduciary always puts the clients’ best interest first ahead of his or her own interests — regardless of compensation, Babcock continued. As a financial planner and investment advisor, he largely works on a flat fee AUM basis. His income is not tied to the size or frequency of clients’ trades – the exact opposite of a typical brokerage business model, he said.
    “Brokers are incentivized by their employer to recommend specific (often in-house branded) mutual funds, ETFs, and so forth. They are paid on the quantity, size, and frequency of the trades. Most brokers work for themselves first; for the firm second; and for shareholders third. So where does the investor come in?”
    While the ideal definition of a fiduciary is someone who does not earn any commissions, Babcock said, he sells some products that are typically available on a commission basis. Such scenarios demand full disclosure to avoid conflicts of interest.
    “If you’re going to be a true fiduciary by definition, you can only be fee-based or fee-oriented,” Babcock explained. “The trouble with that approach is that you’re going to leave some useful investment vehicles out of the discussion because they only pay commissions. Pre-retirees and retirees alike should have access to the whole universe of investments, not just those that a fee-based planner or fee-oriented broker make available to them. If a fiduciary advisor is going to do the best job possible for their clients, then how can they justify leaving some strategies completely off the table by virtue of their firms’ business plan? They can not. So, there is an intrinsic bias because they must do what their employer asks or they don’t work there anymore. This is the on-going conundrum within the financial services industry.”
    Financial education that addresses such issues is a key part of Integrity Wealth Management’s approach to retirement income, investment, and tax planning. Babcock takes a personal approach with his clients, noting many people do not truly understand all the planning recommendations they receive.
    “We take them through a three-step process that first examines their finances from a tax perspective; then from an income perspective; and finally, from a risk tolerance perspective,” he said. “We have to ask questions to help understand why they have funds positioned in a particular investment; the costs of having the funds in various vehicles; and what the rate of return is versus the risk they are taking.”
    Babcock added, “I don’t want anybody to be confused about what they own. This is why I do regular reviews to ensure portfolios are positioned properly according to my clients’ risk tolerances.”
    For more information on Integrity Wealth Management & Insurance Services, visit
    Most investors incorrectly believe advisors must act in clients’ best interests