Financial laws and regulations have two sets of rules. One set is suitability rules for people who sell financial products, generally brokers and insurance company representatives. The other is a fiduciary rule for independent advisors that are legally obligated to place your interests first.
What is a fiduciary?
According to the Cornell Law Dictionary, "A fiduciary duty is the highest standard of care." A fiduciary advisor must by rule act in the sole interest of his or her client, which requires the integrity, forthrightness, and honesty of the advisor. Fiduciary standards of an advisor are to:
- Act solely in the best interest of the client, even if doing so is contrary to the advisor's
- Owe duty of undivided loyalty and good faith
- Avoid all activity that conflicts with the client's best interest
The suitability standard of brokers and insurance company representatives does not require them to put their clients' best interests before their own or avoid conflicts of interest, even if they call themselves an advisor or financial planner. If your advisor isn't a fiduciary, they can---and likely are---steering you into products that put more money into their pocket, as long as they're considered suitable for you, potentially subtracting hundreds of thousands of dollars from your pocket over the lifetime of your investments. This makes the value of a fiduciary review well worth its cost.
If you're with a national brokerage house or big bank and are unsure of your investment arrangement, let us complete a fiduciary review.