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WASHINGTON, D.C.//July 26, 2006///Still confused about who is and who is not an “investment adviser”? Things may not get much clearer any time soon for financial consumers now that a major push is underway to promote the use of the term “fiduciary” to describe investment advisers. Who exactly is a fiduciary and who is really just a glorified salesperson on commission peddling financial products? Three financial experts from the independent Zero Alpha Group (ZAG) today outlined the five things every investor should do in order to identify genuine fiduciaries who put the best interests of their clients first.

The ZAG tips entitled “The Fiduciary Code - The 5 Ways to Tell If Your Investment Adviser is Working For You ... Or For Himself” – were outlined by Jeff Buckner, founder and president of Plancorp, St. Louis, MO, Gregory Carlson, founding principal of Carlson Capital Management, Northfield, MN, and Kimberly Sterling, vice president and principal, Resource Consulting Group, Orlando, FL.

Jeff Buckner, founder and president, Plancorp, St. Louis, MO, said: “We’ve already seen the term ‘investment adviser’ twisted and turned so much that investors are understandably confused and even skeptical about what it means. Now that there is a major effort underway to acquaint investors with the term ‘fiduciary,’ we want to inoculate the public against the same kind of confusion. While those now promoting the wider adoption of fiduciary standards by investment advisers absolutely have the best intentions of investors at heart, it is inevitable that this term, as it gains wider popularity, will be exploited by some unscrupulous individuals who will either lie about being a fiduciary or simply try to leave investors with the mistaken impression that such high standards are being upheld.”

Gregory Carlson, founding principal, Carlson Capital Management, Northfield, MN, said: “Fiduciaries put the needs and agenda of their clients first and are not driven by sales commissions and other self-interested considerations. So, it is of paramount importance that investors determine if, in fact, they are actually dealing with a fiduciary. The second step in the process for investors is to understand what they can expect from a fiduciary and how to make the relationship really work for them.”

Kimberly Sterling, vice president and principal, Resource Consulting Group, Orlando, FL, said: “The bottom line is that investors who understand how to work with a fiduciary are empowered in a way that other investors are not. Not only does the fiduciary relationship put the investor in the proverbial ‘driver’s seat,’ it also inspires a degree of confidence and even comfort in investors who otherwise would lose sleep about who is handling their money and what tricks they might have up their sleeve. For investors, the trick here is to make sure that, in fact, such confidence and comfort is justified and not misplaced, as in the case of dealing with a non fiduciary.”

THE “FIDUCIARY CODE”: FIVE WAYS TO SPOT A REAL FIDUCIARY

Fiduciaries are investment advisers who operate under a legal obligation to provide only suitable investment advice to their clients. Under the federal Investment Advisers Act, this duty “generally requires an investment adviser to determine that the investment advice it gives to a client is suitable for the client, taking into consideration the client's financial situation, investment experience, and investment objectives.”

How do you know if you are getting financial advice from a real fiduciary? The following five steps are recommended by the Zero Alpha Group and its members:

1. Ask the financial professional outright if he or she is a fiduciary. Don’t assume … ask questions! There is so much confusion now among investors about the term “investment adviser” (and vaguer titles such as “investment consultant” and “financial adviser”) that you very well may think you are dealing with a fiduciary when you are not. One solution is to ask your current or prospective financial professional flat out if he or she is a “fiduciary.” But don’t stop there …
2. Look for a “clean” ADV report. Investment advisers are required to provide up-front disclosures about their qualifications, services, compensation, conflicts of interest, and record of disciplinary actions against them. Rule 204-3 under the Investment Advisers Act requires every registered investment adviser regulated by the U.S. Securities and Commission (SEC) to deliver a written disclosure statement detailing the adviser's business practices, education and business background. (The rule also requires an investment adviser to offer to deliver a brochure to existing clients every year without charge.) You want to get this document and then read it carefully. Look at how the adviser is paid, any commission relationships and other indications of conflicts of interest that could put you in second place.
3. Beware the tell-tale disclosure of a commissioned financial professional. Even if you don’t normally read marketing materials, you should look at the ads and brochures of your current or prospective financial professional. New SEC rules require stockbrokers and other financial professionals who are not considered true to fiduciaries to make the disclosure: “Your account is a brokerage account and not an advisory account. Our interests may not always be the same as yours. Please ask us questions to make sure you understand your rights and our obligations to you, including the extent of our obligations to disclose conflicts of interest and to act in your best interest. We are paid both by you and, sometimes, by people who compensate us based on what you buy. Therefore, our profits, and our salespersons’ compensation, may vary by product and over time.” If you see this in the fine print of ads and brochures, you know that – by definition -- you are NOT dealing with a fiduciary!
4. Test willingness to seek out a “second opinion.” Test your adviser in creative ways. For example, does your adviser balk when you share your plan to seek a second opinion from a competitor? A fiduciary may make a strong case for you to use his or her services but will understand if you want another perspective. Keep in mind that a non-fiduciary who fears losing a commission has a built-in incentive to pressure you into investments that may conflict with your best interests.
5. Expect a high level of personal handling. This gets to separating the trusted adviser who is looking out for you from the salesperson who really is just on the hunt for their next commission. A salesperson who wants a sale may only be in touch with you again when he or she can generate more commission income. By contrast, a fiduciary will give you a high degree of customized information and data – not just “hot” stock tips and “canned” financial planning tools. He or she will want to know enough about to reasonably determine what the investment advice and services are that make sense for you, taking into account your financial situation, your investment experiences and your investment objectives. A fiduciary also will regularly update your retirement plan to reflect any changing circumstances.
   
   The Zero Alpha Group experts emphasized that the new ZAG fiduciary-related tips are only part of the process of fully screening a current or prospective investment adviser. For more information, see the excellent brochure “Cutting Through the Confusion” at http://www.icaa.org/public/investoredbrochure_2006.pdf. The brochure is a joint product of the Investment Adviser Association, the Consumer Federation of America, North American Securities Administrators Association, Financial Planning Association, and CFA Institute.

ABOUT THE ZERO ALPHA GROUP

Founded in 1995, the Zero Alpha Group (http://www.zeroalphagroup.com) is an international network of independent investment advisory firms that manage a total of more than $7 billion in assets. Members of the Group are committed to providing objective, long-term private wealth management solutions to investors, focusing on asset allocation and a structured, quantitative approach to investing. The firms in the Zero Alpha Group network share a common philosophy about investing and client service - a commitment to passive, tax-managed investment strategies while providing an independent financial planning solution for investors. Visit ZAG on the Web at http://www.zeroalphagroup.com.

CONTACT:   Patrick Mitchell, (703) 276-3266 or .