A Conversation With … Andrea McKinney

As a VP at Central Trust Co., what do your duties entail?
I primarily work in Springfield, Branson and Joplin and meet with people to find out their needs and determine if we are going to be the right match. We usually have a client relationship that can last 20 years or more, and we usually work with different members, generations, of a family. It’s really important we are on the same page.

We really focus on relationships that are $500,000 and above. Usually, our clients are going to be in the realm of business owners, multigenerational wealth or professional practices. We also work with a lot of people who have been frugal over their lifetimes.

Central Trust Co. adheres to the fiduciary standard. What does that mean?
Being a fiduciary means you are on a different playing field. We are regulated by the (Federal Deposit Insurance Corp.), the Missouri Division of Finance and our internal and external bank regulators. We are audited by them annually. So, there is a different level of oversight.

The other aspect is, when we work with people, we are not operating in a commission-based environment. We are fee-based providers. Fiduciaries are legally obligated to make recommendations that are in our clients’ best interest. That’s not transparent through the retail brokerage industry in the past.

The Department of Labor is considering a rule change to apply the fiduciary standard to all advisers. How would that affect the industry?
It will have large-scale ramifications on how retirement advice is provided. What they want is to make sure there aren’t any kind of backdoor payments, hidden fees and make sure the clients’ interest is forefront, not just relying on disclosures. A lot of times, people don’t read disclosures. There are a lot of proponents, like consumer advocates and investors themselves. A lot of people in the industry who are already fudicaries are advocating.

The DOL proposed something in 2010, following the crisis, then took it off the table. Now, it’s been almost six years and the DOL has heard over 300,000 comments during public hearings. The time is now.

The White House estimates shady practices by brokers cost Americans $17 billion a year, but The Wall Street Journal wrote the change would “hurt the very people it is supposed to help.” Why the industry divide?
[Brokers] stand to loose a lot of money. There are a lot incentives encouraging people to sell products that enrich their firms. There is a lot of money on the table. I don’t buy that argument. If you look at TheFiduciaryStandard.org, one of their arguments is there are over 30 million people already being helped in a fiduciary capacity. It’s already working.

A market that is more transparent, more liquid and lower cost for people is better overall. I can’t defend the argument that it would be bad.

Following the Federal Reserve interest rate hike, what’s the market going to be like for retirement savings this year?
Volatile. There are a lot of geopolitical forces going on with China, Saudi Arabia, Iran, the price of oil as low as it is, North Korea with the recent “bomb” test. We recommend to diversify to try and even out the experience for the investor. Over time, there are very few companies that provide pensions.

Now, the individual employee is going to be more responsible and need to be more educated in how they plan for retirement. It’s really up to you.