Why Fiduciary is Meaningless

Why Fiduciary is Meaningless

Doctor “Financial Advisor” is Why Fiduciary is Meaningless


Fiduciary is meaningless when describing financial advisors. Fiduciary is a shortcut for fee-only, meaning you don’t accept commissions or sell insurance products. But it doesn’t mean you provide common sense recommendations in your client’s best interest.

I signed up for an email from a doctor financial advisor and want to tell you that just because your financial advisor is a physician doesn’t mean you will be treated well.

Let’s see an example of why fiduciary is meaningless by looking at this doctor financial advisor.


Fiduciary Doesn’t Mean Sound Financial Advice


Just because you happen to be a doctor and now are a fiduciary doesn’t mean you provide sound financial advice!

I got a pitch email recently from a fellow physician who is a fee-only financial advisor, and it knocked my socks off. Maybe it is because I haven’t watched the news or CNBC for over a year, but it just made me sad. And a bit angry that people are still doing this to fellow physicians. But I’m sure this is not the worst example I could find, but let’s look at what is happening here.

First, he sets up the problem:

Why Fiduciary is Meaningless


I’m not so sure why this market commentary bothers me so much. You hear much worse on the news and on CNBC every day. Maybe since I have tuned out for a year now and am no longer inoculated daily by such silliness, it irks me so much.

Point one is that large growth is doing too well and driving the market. How is that news? That’s what has been happening for the last 12 years. One could have said the same thing at any point in the last 12-year market cycle. It reminds me of predicting interest rates, where folks predicted they would go up for ten years after the 2009 meltdown. They did, but you would have wilted on the vine if you held your breath waiting. The market goes up and down; why would you try to predict what drives it? You can’t. No one can! Market timing is a good way to lose your shirt.

And the second point using inverted yield curves to predict a recession. Wow, that is contrarian. Not. And totally useless. The last time the yield curve was inverted, Covid caused a recession. I’m sure no one in the world predicted that. Just because you know something doesn’t mean that it is useful.

And finally, the false flag of fed watching. I just have nothing to say about how silly his predictions sound!


And How to Protect Yourself?

And how do you protect yourself? He says:

One possible way to meet today’s challenges is to diversify risk mitigation systems.


Today’s challenges are different from other days’ challenges how? And today, you should have several risk mitigation systems. He suggests:


Ok, so structured notes are the risk mitigation system he is using. I talked about using structured notes as a hedge and then also mentioned that buffered ETFs are a much less expensive way of doing the same thing.

So, you can get a 21-month note on the S&P 500 where you don’t lose money if it is down, and your gain is capped at 12.5%. The problem is that the index could be up 30% or more over almost two years, and you would lose out on all that upside. But you won’t lose money if the market is down.

The next note is 36 months long and has a 25% cap. Note that there is a bit of an illiquidity premium at play here.

But fundamentally, he is offering structured notes which cap your upside. Sure, there is no loss besides the 1.6% AUM fee he takes on your money. That’s right, 1.6% AUM fee and a capped upside. Now that is wealth talking.


Fiduciary is Meaningless


A self-proclaimed Nuclear Physician offers these notes. As a physician, I think that means that he is atomically powered or maybe that he is a nuclear medicine specialist. Given his investing philosophy, what is clear is that his brain has been exposed to excessive radiation. Don’t they shield the brain?

I spent some time with his ADV just for fun. Looks like he used to run a hedge fund and closed it down this year. Hmmm. Well, most hedge funds lose money. If he can’t make money there, he will do it with his 1.6% AUM.

Fiduciary is meaningless, as evidenced by this physician financial advisor.

This is another example of absurd advice that might pass on CNBC but not with smart physician investors.

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