Is Your Financial Advisor A Fiduciary?

advisor a fiduciaryWho can you trust to give you reliable investment advice? If you are like most people, you assume that the people who provide investment advice are required to act in your best interest. Unfortunately, that’s only true for some advisors – those who are fiduciaries. But is your financial advisor a fiduciary?

Under financial laws and regulations, there are two sets of rules. One set is for people who sell financial products, generally brokers, and insurance company representatives.  These salespeople are contractually obligated to place the interests of their employer ahead of the interests of their clients.

Related reading: Before the Advice, Check Out the Adviser

The other set of rules is for those who are registered as investment advisers with the federal Securities and Exchange Commission (SEC) or comparable state regulators. Registered investment advisers are legally obligated to place your interests first. They are fiduciaries. That means they must not only be loyal to serving your exclusive best interests, they must also adhere to a high standard of professional competence.

Unlike other classic professions, such as law and medicine, anyone can call himself an investment or financial advisor even if they are really a salesperson. Recent financial reform legislation is attempting to change this situation but there are powerful and extraordinarily well-funded financial service company lobbying organizations working overtime to protect the status quo.

I am part of a grassroots organization of financial service professionals known as the Committee for the Fiduciary Standard. The Committee’s goal is to educate legislators, regulators and the investing public about the importance of protecting investors by extending the fiduciary standard to cover everyone who provides personalized investment advice. Interestingly, the Committee includes a number of brokers and insurance representatives, in addition to registered investment advisers, who recognize how important it is to investors and society at large for advice to be truly trustworthy based upon a uniform standard that requires advisors to be objective and competent.

Related reading: Find a financial adviser who will put your interests first

We are not willing to wait for legislators and regulators to do the right thing and you shouldn’t be willing to wait either. The Committee has drafted the very straight-forward oath (click here to view) that commits an advisor to adhere to a fiduciary ethic and, in so doing, to be accountable for the advice the advisor renders to you, the client. From this day forward, I will sign and commit to this oath every time I enter into an advisory relationship with a client.

I strongly recommend that you insist that any advisor you hire is willing to sign this oath. The commitment is as simple as “mom and pop and apple pie.” If they won’t sign the oath, you owe it to yourself to ask why you would trust your financial future to their care. I encourage you to share this letter and the oath with your family and friends.

Please call me if you would like more information about why it is so vitally important to work with a fiduciary when you seek advice. I would be delighted to discuss this subject with you further.

Learn more about our Financial Planning services for women.

Image: New York Times Bucks Blog

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Russ Thornton
Russ Thornton
Hi there! I'm Russ, and I help women in their 50s and 60s achieve and maintain their desired lifestyle leading up to and throughout their retirement years. Imagine being able to look forward to a comfortable and confident financial future...
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