Saturday, August 30, 2014

College Students: I Failed. I Had Many Doubts. Yet, I Persevered. So Can You.

Dear College Student Scholars:

Please permit me to tell you a story.

Shortly after I arrived at college (nearly 40 years ago) I suffered several events that had not happened to me in high school – I failed. Over and over. I blew it on quizzes, essays, and exams. I was astounded when, just a few weeks into the semester, I had failing grades in one course and grades far below my personal expectations in several others. Hence, I felt as if I didn’t deserve to be at college.

Compounding the problem – I was extremely shy. It went beyond introversion (which, I later learned, is a strength, but not an excuse). I was not forming connections with other students. I was quiet. I often ate alone at the eateries on campus. I was lonely. I suffered from social anxiety. I felt, again, like I didn’t belong at college.

But – I persevered. How? I used my grit and determination to figure out how to change – a few little things, that then had major impacts. And, very importantly – I reached out for assistance, and received guidance – some from fellow students, some from professors, and some from other types of counselors on campus.

And then, with courage, I chose to tackle the challenges I encountered head-on. I utilized my new insights into how to study, how to keep myself focused, how to manage my time more effectively, and slowly learned how to get involved in groups and made friends.

Today I am very fortunate to be teaching college students, after successful careers as a lawyer and then as a financial planner. I have dozens of professional colleagues in law, financial planning, and in education that I am proud to call my friends. I also engage in advocacy efforts in Washington, DC, and speak several times a year at industry conferences – often to hundreds at a time (and I do so without any nervousness or anxiety). I’ve had the honor of serving on numerous industry committees and learning from top persons in the financial planning profession. 
My success I can tie back to one decision I made – to persevere, at a time during my first year of college when I didn’t think I belonged in, or deserved to be at, college. I prevailed … and so can you!

If you find yourself in similar situation, or having similar feelings of self-doubt, please realize this:

You deserve to be here. You’ve made it! – You are in college. You have every right to be here. You deserve this opportunity. It’s up to you to make the most of it!

Not all who apply to college are offered admittance. You were admitted with the full expectation that you possess the talent and abilities to succeed here. Your professors all want you to succeed – that’s why they welcomed you to the community of scholars on the first full day you were here.

Realize that scientific research has demonstrated that neither your intelligence, nor your I.Q., is fixed. The brain is malleable. With effort, practice, and exercise, new neural connections form in your brain. The result is that your intelligence, as measured by I.Q. scores, can and will increase.

You can, and will, make friends and join communities. College is a great place to make friends, many of whom will become lifelong friends.

A student once wrote to me that he suffered miserably from loneliness his first semester. And then he joined the Drama Club on campus. Not only did he make friends, but in his sophomore year he landed a small part in one of the plays. By his junior year he landed a leading role in another play. His self-confidence in social situations went from very low levels to very high levels. He learned to overcome his fears, and he then became outwardly friendly to others and a friend and mentor to many other students.

Many other of my students have written to me, in essays which I assigned in one of my classes, that they really didn’t find a lot of new friends on campus until they joined a couple of clubs and organizations. Some wrote that the first club they joined didn’t work out, so they just dropped out and joined another – and tried again until they found a “good fit” for them. If you have not yet done so - join a club or organization – this week!

Realize that in your freshman year, and often in subsequent years, EVERYONE will experience an academic setback (a grade, or many grades, below their expectations). And EVERYONE at one time or another – or for extended periods – will have awkward moments or periods when they feel that they don’t belong. These setbacks should not be interpreted by you as a sign you don’t belong in college, or that you are not going to succeed. YOU DESERVE TO BE HERE.

Another student I know lacked confidence in his abilities. “Everyone else seems so confident in class,” he told me. “Even when they take notes in class. I sometimes feel like I’m the only one who is lost.” I assured him he was not.

Every week I receive e-mails from students inquiring about how they should study for a particular class. (This past week I received over a dozen e-mails and visits, asking exactly that question.) And I often meet with students who doubt their own abilities. By reaching out to me, they have “crossed the threshold” – often I can empower them with a study method. At other times I refer them to another person on campus, perhaps a specialist in dealing with a particular issue, who can offer the needed guidance.


I cannot promise you that every experience you have on any college campus will be a positive one. At times you may have some negative experiences. But I can assure you that YOU BELONG AT COLLEGE. You made the grades to get into college. You can, with effort and perseverance, and if you reach out for assistance, succeed.

Small decisions by you can yield big results. One student relayed to me that she overcame her poor writing skills when she made the decision to cross the threshold and entered the Writing Lab. She asked for her essay to be reviewed (before it was submitted in the class she was writing it for. She received valuable tips on the essay’s organization, the use of topic sentences in paragraphs, etc. Her resulting essay grades improved dramatically. And this led to improvements to her final grades in many classes, and to her GPA.

Another student was not doing well in College Algebra, but after his first test he started to do all of his homework in the Math Lab, where a proctor is available to help out when students get stuck on a problem or concept. His grades in that, and subsequent math classes, improved dramatically. (And he was less distracted at studies.) Other students have turned to online math tutoring, often offered through colleges for free.

Still another of my students wrote to me that she expanded her comfort zone by sitting down with another person, who was all alone, in the dining hall. She adopted the role of interviewer, asking questions about the other person’s major, what the other person liked about college, what advice the other person would have for an incoming freshman, etc. (Asking questions – and listening and then asking follow-up questions – is a great way to start a relationship.) She did this multiple times, and each time felt more comfortable approaching strangers in this way. It turns out that several of the persons she approached had some of the same challenges she was dealing with. And she made friends - that remain remain friends to this day.

If you suffer a setback, and you begin to feel depressed, or feelings that you may not succeed here, there is so much help available at Alfred State. Reach out and seize it. 
  • Your Resident Assistants (they’ve been there – recently)
  • Your Residence Directors (they’ve also been there)
  • The Academic Success Coaches and other advisors at your college's Student Success Center.
  • Peer tutors, available at many colleges and for many classes.
  • Your academic advisor.
  • Your professors.
  • Your coaches.
  • Your club advisor.
  • Your college's Health & Wellness Center - the counselors there are very helpful when you have problems such as inability to get to sleep, anxiety, and so much more
  • Your college's Career Development Center – particularly if you begin to question whether you are in the right major.
  • … and many more!

 Where do you begin? Contact your RA, RD, academic advisor, or athletic coach – they can either assist you, or connect you with the right resources on campus. Your campus may also have special counselors or coaches for academic success.

Want to further boost your own ability to succeed? Write a letter to another freshman. This is an important exercise, which everyone can do. It will provide you with real insights, as you write the letter. (See the attached letter, as an example). Pretend to write a letter to “my brother/sister/friend, when you get to college.” Tell them what you’ve already learned. Give them tips on what it takes to succeed, and persevere, while at college.

(If you desire, shoot me a copy of the letter you write. I’ll keep your name confidential, but may use excepts from your letter in future communications to your fellow students. It’s just one of the many ways you can help out your fellow students – and help me, too!)

Lastly, state either:

    (If you are presently alone, say out loud): “I am a scholar, motivated to succeed. I am part of a diverse, caring community of scholars.”

    (If you are with one or more others, say together, out loud): “We are scholars, motivated to succeed. We are part of a diverse, caring community of scholars.”

Repeat this daily. Print it out. Post in above your study area - or on the back of your door.

Some final thoughts …

College is a great place to grow and expand your comfort zone, a bit at a time. If not now, when? Challenge yourself to become a better person – and student – each and every day. Adopt S.M.A.R.T. Goals to propel you forward. Develop yourself better into the person that others will follow.

With grit, perseverence, and - on occassion - support from others, you CAN and WILL succeed at college. Never let self-doubt, lack of confidence, or instances of failure get in your way.

Instances of failure, as occurred more than several times to me, did not make me a failure. Nor should any setbacks cause you not to succeed at college.

Never, ever give up!

Ron A. Rhoades, JD, CFP(r) is the Curriculum Coordinator for the Financial Planning Program at Alfred State College, Alfred, NY. He provides his students with exceptional learning experiences in Business Law I, Investment Planning, Retirement Planning, the Personal Financial Planning Capstone course, Employee Benefits Planning, Insurance & Risk Management, and Money & Banking. He is also the author of Choose to Succeed In College and In Life: Continuously Improve, Persevere, and Enjoy the Journey, available for $2.99 (Kindle edition) at He can be reached at 

Sunday, August 3, 2014

Rights of the Clients of Financial Advisors to Good Faith During Relationship Formation

Filled with apprehension, apposite to her uncertain personal financial future, abetted by anxiety pertaining to the global economy, my neighbor yearns for my guidance in today's complex financial world. She yearns to place faith and confidence in me, in my expertise, and in my judgment. My neighbor seeks my counsel, bound faithfully to her through the power of trust.

My neighbor's expectation of my faithful service exists not just within her, but within all of our fellow Americans, as they struggle to navigate a maze of investment products, mitigate risks, and secure their own financial futures. My neighbor is not alone, for her longing for the peace of mind which flows from the placement of trust is nearly universal among our fellow brethren.

But we must ask, and financial advisors and investment counselors - when our neighbors give to us, financial advisors, their confidence, what rights do they in return secure from us? I explore just one aspect of these rights - those which exist during the formation of the relationship between the investment or financial advisor and the client.


We begin with good faith in the formation of a contract in which trust and confidence are to be reposed by a client to a fiduciary. While the doctrine of culpa in contrahendo has long been viewed as a source of the obligation of good faith in civil law jurisdictions, in the context of negotiations to form a contract, only recently have our common law courts chosen to embrace good faith in contract formation. In 1808, Justice Sedgwick of the Massachusetts Supreme Judicial Court observed, in disregarding a pretense by a party in securing a contract which resulted in fraudulent concealment, that "not only good morals, but the common law, requires good faith, and that every man in his contracts should act with common honesty." Bliss v. Thompson, 4 Mass. 488, 492 (1808).

Each of our neighbors possesses a choice - to engage with a person in an arms-length transaction, or to go further and secure the services of a fiduciary. Yet, during this process, our neighbor is not to be fooled by misleading titles, false statements, or other designs amounting to fraudulent concealment. Indeed, given the expectations of our fellow citizens (as evidenced by so many surveys of consumers over the past decade) that they will place trust in those who provide financial and investment advice, full and complete frankness of the nature of the relationship must be undertaken.

Hence, we require full and frank disclosure of the nature of the relationship to be assumed. "If dual interests are to be served, the disclosure to be effective must lay bare the truth, without ambiguity or reservation, in all its start significance.” See “Will the Investment Company and Investment Advisory Industry Win an Academy Award?” remarks of Kathryn B. McGrath, Director of the SEC Division of Investment Management, at the 1987 Mutual Funds and Investment Management Conference, citing Scott, The Fiduciary Principle, 37 Calif. L. Rev. 539, 544 (1949).


There must be no attempts as obfuscation of the nature of the relationship, when an arms-length relationship exist and trust and confidence is neither placed nor accepted. As stated by the U.S. Securities and Exchange Commission (SEC) early on in its history: "The necessity for a transaction to be really at arm's-length in order to escape fiduciary obligations has been well stated by the United States. Court of Appeals for the District of Columbia in a recently decided case: ‘[T]he old line should be held fast which marks off the obligation of confidence and conscience from the temptation induced by self-interest. He who would deal at arm's length must stand at arm's length.  And he must do so openly as an adversary, not disguised as confidant and protector.  He cannot commingle his trusteeship with merchandizing on his own account…." Seventh Annual Report of the Securities and Exchange Commission, Fiscal Year ended June 30, 1941, at p. 158, citing Earll v. Picken (1940) 113 F. 2d 150. [Emphasis added.]

Yet, the very use of titles, such as "financial advisor" or "financial consultant" or "wealth manager," or designations such as "Chartered Financial Consultant" or "Certified Financial Planner(tm)," are indicative of an advisory relationship. Someone forgot to tell Wall Street that trust-based marketing, without acceptance of fiduciary status, can rise to the level of intentional misrepresentation.

The view that one holding out as an advisor should be governed by the fiduciary standard of conduct finds recent support in academic literature: “The relationship between a customer and the financial practitioner should govern the nature of their mutual ethical obligations. Where the fundamental nature of the relationship is one in which customer depends on the practitioner to craft solutions for the customer’s financial problems, the ethical standard should be a fiduciary one that the advice is in the best interest of the customer. To do otherwise – to give biased advice with the aura of advice in the customer’s best interest – is fraud. This standard should apply regardless of whether the advice givers call themselves advisors, advisers, brokers, consultants, managers or planners.” James J. Angel and Douglas M. McCabe, Georgetown University, Ethical Standards for Stockbrokers: Fiduciary or Suitability? Sept. 30, 2010. [Emphasis added.]

See also Arthur B. Laby, Reforming the Regulation of Broker-Dealers and Investment Advisers, 65 Bus. Law. 395, 400, 413-17 (2010) (arguing that the broker-dealer exclusion from the definition of "investment adviser" in 15 U.S.C. § 80b-2(a)(11)(C) should be lost if a broker-dealer markets itself or otherwise holds itself out as an "adviser" in light of the connotation of the word).

The SEC, over five decades ago, warned against the use of any attempt to obscure the nature of the relationship by brokers. In its 1963 comprehensive report on the securities industry, the SEC stated that it had “held that where a relationship of trust and confidence has been developed between a broker-dealer and his customer so that the customer relies on his advice, a fiduciary relationship exists, imposing a particular duty to act in the customer’s best interests and to disclose any interest the broker-dealer may have in transactions he effects for his customer … [BD advertising] may create an atmosphere of trust and confidence, encouraging full reliance on broker-dealers and their registered representatives as professional advisers in situations where such reliance is not merited, and obscuring the merchandising aspects of the retail securities business …. ” 1963 SEC Special Study on the Securities Markets. [Emphasis added.]


The form of payment must also be consistent with one's status as a fiduciary. If an asset-based fee is to be charged, then there exists a reasonable expectation of the client of an ongoing advisory relationships.

In reality, in many contexts, 12b-1 fees are "investment advisory fees in drag.”  They are utilized to compensate registered representatives and their broker-dealer firms for services of an investment advisory nature.

The anti-fraud provision of the Advisers Act, 15 U.S.C. § 80b–6, Prohibited transactions by investment advisers, forms the basis on which fiduciary duties have been applied to investment advisers, states: “It shall be unlawful for any investment adviser by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly— ….”  (Emphasis added.)  Broker-dealers who receive “special compensation” -  generally, anything other than a commission at the time of a product sale or upon the deposit of funds into the product, appear to fall outside of the broker-dealer exclusion from the Advisers Act.  See Philadelphia Suburban Water Co. v. Pennsylvania Public Utility Commission, 2002 PA 3603 (PACW, 2002) (“’Indirectly’ signifies the doing by an obscure circuitous method something which is prohibited from being done directly, and includes all methods of doing the things prohibited except the direct one. Farmers' State Bank v. Mincher (Tex. Civ. App.) 267 S.W. 996. State v. Pielsticker, 225 N.W. 51, 52 (Neb. 1929). Moreover, in Amicable Life Insurance Co. v. O'Reilly, 97 S.W. 2d 246, 249 (Tex. Civ. App. 1936), the Texas Supreme Court noted that ‘indirectly’ cannot be treated as surplusage; this word must be given its meaning in the adjudicated case.”)

Noting hat the ill-advised fee-based accounts rule was overturned in Financial Planning Ass'n v. S.E.C., 482 F.3d 481 (D.C. Cir., 2007), I can only wonder why no judicial challenge to 12b-1 fees as impermissible special compensation has not yet arisen. One cannot do indirectly what one cannot do directly.


While other blog posts have addressed other aspects of the fiduciary obligation, including the inability to "switch hats" at will and the impossibility of wearing "two hats" for the same client, in this post I have directed my attention at the harm caused, in the business practices today, during the contract formation stage.

The SEC and FINRA have, for far too long, permitted this harm to occur. Yet, through the Dodd-Frank Act, the SEC has the ability to right these wrongs.

For the sake of all of our neighbors, let us hope that the SEC will proceed down the path of correctly applying, and then enforcing, fiduciary obligations. Let us hope that the SEC will choose to respect the rights of our fellow Americans to honesty and good faith, as they enter into contracts for the receipt of personalized investment advice.

Ron A. Rhoades, JD, CFP(r) serves as Chair of the Steering Group of The Committee for the Fiduciary Standard. He is an Asst. Professor at Alfred State College, where he serves as Program Director of its B.B.A. Financial Planning program.