Why a Fiduciary?

What is a fiduciary?

A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties.

When selecting a financial advisor you want to be sure you’re working with a fiduciary: someone that is bound to act in your best interest first.

Am I a fiduciary? Yes.

The Fiduciary Rule

Per the Financial Planning Coalition, “The fiduciary standard of care requires that a financial adviser act solely in the client’s best interest when offering personalized financial advice.”

I operate as a fiduciary advisor AND strongly support that the fiduciary standard of care be the standard for the entire financial planning profession.

You can find out more information regarding the fiduciary standard of care at the Financial Planning Coalition’s website.

Who Abides By the Fiduciary Standard of Care?

Under the Investment Advisers Act of 1940, federal law, investment advisers are regulated by the Securities and Exchange Commission (SEC) or appropriate state authorities and are required to provide services to their customers under the fiduciary standard.

In short, someone must be an investment advisor representative that isn’t dually registered. Dual registration would mean an advisor is an agent of a broker-dealer.

Furthermore, CERTIFIED FINANCIAL PLANNER™ professionals that provide financial planning services must also abide by the fiduciary standard of care, as defined by CFP Board.

Broker-dealers are also regulated under federal law, including under the Securities Exchange Act of 1934, but ARE NOT required to provide services to their clients under the fiduciary standard. Instead, broker-dealers provide services under “Regulation Best Interest” which is an attempt to make conflicted brokers more fiduciary-like.

This has further muddied the water, especially for consumers. When in doubt, ask your financial advisor (or potential financial advisor) if they operate by the “fiduciary standard of care” and have them procure their fiduciary oath.

The quickest way to determine if someone is a fiduciary is to ask, “Are you registered representative or an agent of a broker-dealer?”. If the answer is yes, then they aren’t a fiduciary.

You may also check their website for language specifying an affiliation with a broker-dealer. Finally, you can check to see if an advisor or firm is a broker at Broker Check. If “Broker” is specified then they aren’t a fiduciary.

Why is This Important?

Countless individuals and families are harmed every year by financial advisors not acting in their best interest. This is why the industry has such a sullied reputation. A uniform fiduciary standard that applies to all financial professionals who give personalized advice is necessary in order to protect consumers AND raise the quality of the profession.

Individuals deserve to receive high-quality advice that’s in their best interest.