My wife and I recently located a townhouse in Wilmington that we wanted to buy. Despite having located the property ourselves, we decided to engage a buyer’s agent to help with the final decision and with the negotiations and many other issues that come up prior to closing. This was a wise decision.
This experience reminded me that Armor has done the same thing with each of its three office leases since 2005 (yes, we have reached our tenth anniversary!). Even though in each case we identified available office spaces ourselves on the internet, we hired an agent to work for us in negotiations. Again, this proved invaluable, because the details were beyond our knowledge.
Some time ago, in describing Armor’s fiduciary role to a client, John Purrington referred to us as the client’s “buyer’s agent.” A light bulb came on in the cartoon balloon above my head. Eureka! The word “fiduciary” sadly has become so over-used and misused that most people pay little attention to it. John wrote about this in our last newsletter, but I want to elaborate because it is so crucial to the way we do business.
“Disintermediation” is one of Jeff Miller’s favorite words. The internet is “disintermediating” many businesses, including some functions of real estate brokerages and investment brokerages. We experienced it when we bought the townhouse and when we negotiated the office leases. We located the properties on the internet. There rarely is a shortage of people trying to sell things, and the internet helps to identify and sort them out. If I’m buying a pair of shoes, I can “one-click” and they show up at my front door. If the purchase is a major one with consequences that are beyond one-click, though, I know enough to get help.
We at Armor often say that we “sell nothing” except our advice and that we adhere to the fiduciary principle of putting the interests of our clients ahead of all others when giving advice. In an investment world that is still dominated by people trying to sell things, though, Armor’s role might be hard to understand (or believe). John gave it practical meaning when he called us “buyer’s agents.” It is the reason that we can welcome the disintermediation brought by the internet. We use it, and our clients use it, but when the purchase decisions are significant and need to be coordinated with larger-scale plans, our role as buyer’s agents becomes more important than ever.
Afterword: Before writing this, I was going to write about two new developments in the expansion of fiduciary rules. One is anticipated Labor Department standards for rollovers from retirement plans to IRAs by investment brokers. In short, these are expected to require that brokers do more than sell retiring individuals investments that, while arguably suitable for them, are not in the best interests of the purchasers. We welcome such rules because we already apply this standard to our own advice (as “buyer’s agents”). Another is a Pennsylvania Supreme Court rule that prohibits Pennsylvania lawyers from selling products to their clients in which they or their families have “financial stakes.” To this, I say, “Duh!” Obviously, what should be obvious is not always obvious when self-interest is involved. As Parcival asked in ancient lore, “Whom do you serve?”