Oakland, CA | East Bay; First & Main Financial and the Fiduciary Standard

Hi, I’m Erik Wolfers, managing member and founder of First & Main Financial. We’ve been helping clients with perfectly personalized individual financial solutions for over twenty years now—we turned 20 just this past July, 2021.

We started in 2001, which was somewhat of a challenging time, and then not too many years later we went through the financial crisis—so we’ve seen a few things in our days and it offers a lot of perspective to be in markets and serving people for over 20 years. Today, I want to talk a little bit about popular solutions that we’re seeing these days.

We recently did a financial plan for a client who had a family history of owning dividend paying stocks—which can be a great investment—I guess it depends on who you talk to. Some investment houses will argue that there’s a proven scientific basis for getting superior returns out of dividend paying stocks. I think that’s debatable. It might be considered a biased opinion.

We saw a solution recently offered by a large financial institution where they showed a chart that made it seem like dividend-paying stocks or companies that are likely to grow their dividends through time—that the investment returns of that set of stocks not only are vastly and dramatically superior, but also demonstrate lower volatility characteristics. They show this in graphical form and their data goes back to 1991—which is not very long when you’re trying to make determinations about where you might generate additional return in the stock market. But, then their actual performance was not good. The real life performance since the inception of their portfolios was about 20% behind the S&P 500, and this particular institution has the ability to implement a maximum fee of 3%, which is insane. 1% is industry average—still high in my opinion. 3% is devastating to any portfolio. We charge less than 1%.

There is comfort in dividend paying stocks for many people—they like the dividend. It feels good. You can reinvested dividends. You can spend the dividends. But, at the end of the day, if your stocks don’t pay dividends but you make more money, than you’ve made more money.

I bring this up because there are a lot of large financial institutions that have a tendency to give people what they want or what they think they want and what they’re comfortable with—even though it may be inferior to other investment solutions. When you’re compounding these returns over long periods of time, that difference can be dramatic—especially if you’re charging high fees to the client portfolio.

Another instance is where they’re implementing this sort of personalized index strategy by buying lots of individual companies in very small quantities—it’s just a nightmare. It’s a mess and it’s made it really hard to get the money away from the company where the strategy was implemented. There are all kinds of pitches and marketing tactics that make these kinds of things seem great—and they’re not horrible, they’re not killing the client—but it’s clear that the institutions that are implementing these strategies are not offering all the information and not necessarily offering solutions that are the best for the client, are optimal for the client, and will give the client best chances of success.

I’ve talked a lot about fiduciaries. There’s a difference between a sort of fiduciary, light rules of fiduciary, and true fiduciary standards—which is rare in the industry. We’re here to be your actual true fiduciary.

If you are looking for some financial guidance; whether for a one time financial plan or continuing advice on your investments, we invite you to meet with a First & Main Financial planner for a free consultation. We would be more than happy to sit down with you, assess your situation and review our services to help navigate your financial future.