Episode 5: Pickleball, Fiduciary Duty, & Why Trust Matters in Finance

Welcome back to The Financial Huddle! In this episode, Ryan, Ed, and Brian kick things off with the rise of pickleball, from neighborhood courts to Bainbridge Island’s Hall of Fame. But beyond the sport, pickleball serves as the perfect analogy for today’s topic: fiduciary duty.

We break down:

• What it really means to be a fiduciary and why it matters to you.
• The difference between “suitable” advice and acting in your best interest.
• The history of fiduciary standards, from Roman law to the Investment Advisors Act of 1940.
• Common myths, marketing buzzwords, and what you should actually look for in a financial professional.

At the end of the day, it’s about trust, confidence, and knowing the game is being played for your success.

Join the Huddle Nation for a conversation that’s part education, part storytelling, and 100% focused on helping you make smarter financial decisions.

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Disclosure: Information contained in this podcast is for entertainment and informational purposes only, and should not be considered as financial advice. Financial Planning and Advisory Services are offered through Prosperity Capital Advisors (“PCA”), an SEC registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training. Keystone Financial Group and PCA are separate, non- affiliated entities. PCA does not provide tax or legal advice.

Transcript

Announcer: 0:00

The Financial Huddle does not provide tax, legal, financial, or other professional advice. Listeners are encouraged to consult with their own advisors in these areas. All right, everybody, huddle up. The play calls in. This is The Financial Huddle. Ready, break.

Ryan Fleming: 0:15

Yes, sir, everybody. I want to welcome you back to the Financial Huddle. I'm going to make a declaration on today's podcast. Our listeners, our beloved listeners, from now on moving forward, we're going to call them the huddlers, right? What do you think about that?

Brian Minier: 0:28

Huddler Nation. Huddler Nation. Huddler Nation. Welcome to the Huddle Nation.

Ryan Fleming: 0:32

Yeah. Hello, hello. Welcome, everybody. Certainly hope you and your loved ones are doing well today. Again, Ryan Fleming, Ed Bee miller, Brian Minier here. Excited to bring back and have just a little bit of a conversation today. and get a little educated, I think, on a topic. You know, one thing that I've been educated on myself here in the past year or so is this idea, this rampant idea of pickleball. It's insane.

Ed Beemiller: 1:00

Sweeping the nation.

Ryan Fleming: 1:01

It's sweeping the nation. It's in my neighborhood. Everyone's turning their driveway or space into a pickleball court. And this reminded me of something, and I understand why, because my mom, she turned 70 years old a few years ago and was a dream for whatever reason to go to Seattle. She'd never been to Seattle. She loved the Seahawks growing up. I have no idea why, but my brother and I were able to make that happen. She loved it. And while I was out there, I did not know this, but the origination of the sport of pickleball is on Bainbridge Island, which is right across the bay. We took a ferry over there. It was beautiful, but there was literally a pickleball hall of fame. Walked through there, learned quite a lot about that. And one thing that I've also learned over the past year or so is that you are a huge fan of pickleball.

Ed Beemiller: 1:51

I would agree with that assessment. Not only am I a big fan of pickleball, but my wife is what you would call a pickleball zealot. She has gotten a bug and then some, but it's something that a lot of people talk about it and say, oh, it's just for old people. I'm going to make a statement to say, well, it's not. My kids play, and when we're out playing, there's a lot of... of the younger generation out there. And I try to play a couple of times a week. As you know, some of my hobbies are pickleball now and cycling and a few other things, but This week actually had a, something reminded me when you're talking about this, had a game, just a drop-in at a local park that I go to and play, where when you do a drop-in, you can play with anyone. You put your paddles down and basically-

Ryan Fleming: 2:53

It's like open gym.

Ed Beemiller: 2:53

Yeah. The next two up or the next three, four up, depending on how many are needed in the court, go up. So sometimes you get paired with, you can get paired with a teenager, you can get on the opposite end, you can get paired with, I mean, there's some 80-year-olds that are out there playing. And a lot of people laugh about it, but let me tell you, some of these 70- and 80-year-olds, they're pretty good. Now, the biggest thing, obviously, as we get a little bit older, which we all know, is you have some difficulty moving around and covering space. So, you know, one thing, I had a game this week, and as the paddles ended up, I paired with a 75-year-old gentleman who's actually a very good skilled player but has limitations on mobility. And there's a lot of movement, quick movement with pickleball. And you somewhat have to adjust how you play depending upon who you're playing with. And the reason why you do that is obviously I'm competitive. We're all very competitive. Of course. Given our backgrounds. So ultimately you'd like to win. No, it's not all about winning.

Ryan Fleming: 4:08

Oh, it's about winning it. But yeah, you'd like to- At the least, it's a very big part. Yeah, it's a big part. Cardio's the byproduct.

Ed Beemiller: 4:16

Yeah, I'd like to get some exercise and sweat a little bit. But in this case, I adjusted my game- to do what's in the best interest of giving us the highest chance to succeed. So that meant, you know, covering more ground, maybe instead of, you know, banging everything. And that's the term in pickleball, a banger. A banger is someone who just hits every shot as hard as they can. And there's, as you progress and get up in, you know, increase in talent and skill level, it becomes more of a softer game where you're, you've heard the term dinking, you know, and if you're you're playing with someone older, if you're just a banger, that's difficult for them just because reaction time and everything else. So you try to slow the game down a little bit.

Ryan Fleming: 5:05

Well, did you guys win?

Ed Beemiller: 5:05

Of course we won. Of course we won. But it was a really close game. It was a good game. But I had to kind of adjust what I was doing to do what was in the best interest, as I said, of us trying to win that game. And game to game, it's different. But, you know, that reminded me of kind of the topic du jour today, which is the concept that we hear all the time. And, you know, we talk about what are we trying to do here, which is financial literacy. And the topic, you know, that we're going to discuss here is fiduciary.

Ryan Fleming: 5:43

Yes, I love that. Yes. And that's a great segue. And that's why that's really what we want to hit upon today is this idea of like, what is a fiduciary? How How does this show up in our practice? But I thought, just for our listeners, people that are watching, one little thing that I thought you would appreciate, for those of you watching, is if you notice this right here, those are... first class pickleball paddles. Do you call them paddles?

Ed Beemiller: 6:11

Yes, they are. They're not called rackets. That's tennis. They are paddles.

Ryan Fleming: 6:16

Very nice pickleball paddle shirt today, Edward.

Unknown: 6:19

Thank you.

Ryan Fleming: 6:20

Thank you. No, in all seriousness, let's get to the idea of what this word fiduciary means, because it really is a big buzz thing in our industry. And so I thought we'd educate. And let's talk about the origins of the word. You know, it originated from the Latin root, the word called fiducia. And it really just That root word means trust and confidence. And it also has the word fides in it, which we see this a lot like in religion. Fides means trust. And we see this big in our world, fidelity, right? Big money manager fidelity. But it also had an origin through Roman law. So in ancient Roman time, I wrote a lot of notes down about this. I want to make sure we get this right for our listeners, is that this idea, this word fiduciary, referred to a type of legal agreement where property rights were at odds and one person was going to be entrusted versus not entrusted. That person that was going to be entrusting of that property was called a fiduciary. And then it moved into the 17th and 18th century in something that we call the fiduciary duty in English common law, believe it or not. And these English men and women in parliament, they adopted this idea of the fiduciary duty in cases, civil cases, guardianships and agents. And so the courts recognized this idea. And then as time moved on and as history moved on, we see this again show up in the 19th and 20th centuries. And this is where modern capital, investment firms, modern markets, trust companies, they started to emerge heavily. And a lot of the courts in the U.S. system apply this fiduciary principle to those financial people, to those financial professionals who are managed those assets. And there was actually some landmark cases that happened in the early 1900s that began defining the fiduciary standards, like really what was the standard. And there was really one pivotal moment in our history, in our lifetime, that came after the Great Depression in 1940. It was actually called the Investment Advisors Act of 1940. And again, this was passed after the Great Depression. And really what this ACT did is that it formally established the RIA advisors. And, you know, we work through a registered investment advisor here at Keystone. And it really put the onus on RIAs to own the fiduciary duty to their clients. And it required them to act in their best interest. You know, you mentioned that through Pickleball. You did what you had to do. Oh,

Ed Beemiller: 9:00

so just like Pickleball,

Ryan Fleming: 9:01

right? Just like Pickleball, right? And so the law codified that. And then as you move into like modern modern times, the application of this idea of fiduciary is absolutely central to financial planning, investment management, you know, ERISA retirement plans, like pension plans. That's really very, very important. The Department of Labor and the SEC, not that long ago, back like in the 2010s, really took a stance on this idea of a fiduciary practice. And, you know, I thought that was interesting. I understand where this idea comes from because the word gets passed around a lot and they don't understand that there's you know there's a type of fiduciary lawful approach that we have to take as professionals but then there's also another type of standard that we're held to that's called the suitability standard and we can talk about that maybe a little bit or even on another episode but you know that got me thinking Brian I mean you deal with people all the time have you ever do you get this brought up a lot Like, do people ask you a lot? Like, are you a fiduciary? They

Brian Minier: 10:10

do. And I'm sure you guys get that question as well, but they ask it quite a bit. And I think a lot of it has to do with a certain commercial that I won't name who, but there is a certain group of advisors who were fiduciaries. And so people think about that when they come in and maybe they're meeting with me for the first time. And, you know, as they start to vet me out a little bit, they will ask.

Ed Beemiller: 10:36

There's been a significant significant uptick in marketing and advertising. You know, using that word, throwing it out and saying, hey, make sure you ask your financial professional, are they a fiduciary?

Brian Minier: 10:47

Right. And what's interesting about that question, and you guys probably know this as well, people don't even know what that means. They just want to hear you say, yes, I'm a fiduciary.

Ed Beemiller: 10:55

Yes. Oh, okay. Check the box. And that means you're okay.

Brian Minier: 10:59

I am

Ed Beemiller: 11:00

good to go,

Ryan Fleming: 11:01

right? So are you a fiduciary?

Brian Minier: 11:02

I am. I hope so. No, we, yeah. Absolutely, fiduciary. And I think the place to start with that is what is a fiduciary as far as is there a certain designation, a certain license that you have? And so I want to go through a list of those that automatically make somebody a fiduciary. So, for example, if you're a CFP, you're a fiduciary. If you're a CFA, a chartered financial analyst, you're a fiduciary. If you're a CPA, you're a fiduciary. If you're, this is one you probably never heard of, CIMA, Certified Investment Management Analyst, you're a fiduciary. If you're an AIF, an Accredited Investment Fiduciary, or if you're an IAR, I'm an IAR, Investment Advisor Representative. Now, here are some ones that do not make you an automatic fiduciary. If you're a broker or a registered rep, if you have a Series 7 or a 63, or if you're an insurance agent, those do not automatically make you a fiduciary. So I explain that when people ask, well, why are you a fiduciary? Well, because I'm an IAR. We have a RIA, Registered Investment Advisor firm. They oversee what we do. And I also explain that the three of us took an extra step getting our certified financial fiduciary certification so that we have an additional understanding and level that just gives us more awareness. The The name is literally the name of what we're- That's exactly right. So I think it is one of those things where people do want to hear, yes, we're a fiduciary. We take this very seriously. And again, I think when you just say, yes, we are, but then I think it's important to explain the why behind

Ed Beemiller: 12:54

that. Yep, yep. And we talk about topics that are misunderstood, and this really is one of them in the realm of finance, financial planning. with financial professionals. And it comes down to when you look at that term fiduciary, it is a legal, you have a legal responsibility to do what's in the best interest of your client versus another term that's thrown around quite a bit, suitability. Is this suitable? Well, something can be suitable, but not necessarily in the best interest. And we run into those things where you choose a strategy or product and I'm not saying... that this exists, but it does. You know, people say, all right, I can get this much commission or I can, you know, I'm a captive or I can only sell these products. So I push these products. Well, they may be suitable, but they're not in the best interest of the underlying client. So you get a little bit of that self-interest that kind of squeezes its way into the calculation.

Ryan Fleming: 14:03

There's some relativism in that, right? It's an opinion. He said, she said, when you get into that. And I think a part of that goes back into the root word that we talked about, Fides, right? That's trust, trust based on evidence. So as a fiduciary, you should be earning the trust of your clients in many, many ways. And that trust is important, but should not be taken advantage of, right? And so sometimes people do what you do say, Ed. And sometimes people actually do do it. It's like in all walks of life, you're going to have some good, you're going to have some bad, you're going to have some things in between. And so as a consumer, yes, you should be asking this, you should be making sure you understand the cursory idea of what this means, not just accept, yes, we are. So what is the evidence that they truly are fiduciaries?

Brian Minier: 14:50

You know, I have this conversation all the time is being a fiduciary, you should have an understanding of what that means to have the best interest of that person you're working with. But I also tell people just because you're labeled a fiduciary, if you're unethical, it doesn't matter if you're labeled a fiduciary or not, you're going to be unethical. So there is a level is, do I feel comfortable do i feel like this person is honest and and so it's more than just the name because again you i know people and we've heard of stories where people were fiduciaries and unfortunately they did things that were not in the right interest of

Ed Beemiller: 15:23

the people yeah this kind of gets back to you know there's a lot of myths or statements that are made out there and you brought up brian the concept of ethics well ethics morality character sometimes those are hard to come by in today's world, right? Not everyone is ethical. The difference when you're a fiduciary is it's a legal responsibility. So there is legal liability that if you do not act in the best interest. So it is important when we talk about, you know, and I think people hear that idea and have said, all right, well, I need to work with the fiduciary. And I think we would all say, we agree, you know, that that makes sense. But underlying, you also, the old know, like, and trust, you need to get to know who you're working with. You need to trust them. You need to have a relationship with them. Because just because they have, you know, an acronym with some letters, you know, all these different titles and accreditations doesn't mean that they're always acting in your best interest.

Ryan Fleming: 16:28

That's right. So are there some pretty prominent myths versus reality our listeners need to understand?

Ed Beemiller: 16:32

Well, we covered one already, which is, well, all financial professionals are fiduciaries. Well, Brian answered that. They're not. You know, And it is a good question to ask. If you're looking at different advisors or financial professionals to work with, that's a legitimate question to ask. And another one is, okay, well, fiduciary just means you're going to act ethically. Well, no. As I stated, a fiduciary really is a legal responsibility. So it goes beyond ethics when we're talking about how to handle a relationship. And, you know, using that legal responsibility does add another extra layer. And so that's where the difference between the concept of everything that's offered, you know, we go through and have to make sure, first and foremost, that it is suitable. And then the next layer that I feel really is that fiduciary responsibility to say, all right, this is suitable, but what's really in the best interest? And that comes from, all right, I need to listen to my client. What are they telling me they need? All right. Well, this could be suitable, but this other strategy here is actually in their best interest. It's the best thing for them.

Ryan Fleming: 17:50

Yeah. I think about some people that I know in the industry that I have very high respect for that are not on paper fiduciaries, but I think they're some of the most amazing ethical advisors that I've met in my entire life. So, you know, there's that side of the house too. So just be because you have this label of a fiduciary, you have a CFP, doesn't automatically mean from a human standpoint they're going to be doing everything in your best interest. So you get that side of the house too.

Ed Beemiller: 18:22

And the one other thing that a lot of people, they just associate that term fiduciary with financial professionals. The reality of it is there's whole other classes out there that also have that fiduciary responsibility. Attorneys have that legal responsibility to do what's in your best interest. Trustees. Well, doctors is a little bit different. Hippocratic oath. Yeah, so that's a little bit different, but then corporate directors, so there are other areas where that fiduciary responsibility does come into play.

Brian Minier: 18:59

Yeah, I think we would all agree that the fiduciary title is good because it gives awareness, it gives education, and it just tells people that I have taken being ethical and understanding what your best needs are serious but there's also a human element as we all talked about even if I have that but you don't trust me you're not going to feel comfortable working with me so we have to not only understand what it means but we have to make sure that people see that side of us that he's empathetic I can trust him and he's going to do what's best for

Ryan Fleming: 19:33

me that's so true well with that huddlers we're going to call this a wrap appreciate you all chiming in to the huddle nation. Join us next time. We look forward to seeing you guys. Take care.