We are held to a different standard of care than many other financial advisors. Not all financial advisors operate the way we do, and we believe investors should understand the difference.
There are typically two standards that govern how financial advisors may work with their clients … “fiduciary” and “suitability.” As fee-only investment advisor representatives, we are held to a fiduciary standard in all of our investment recommendations for all types of accounts. One of the legal duties of a fiduciary is to serve your best interest. However, many other financial advisors may operate under a suitability standard which allows them to consider how much they might earn when recommending investments. Depending on the type of account, they may recommend investments that are “suitable” for you but not necessarily in your best interest.
Recently there have been some improvements in the area of investor protection due to the U.S. Department of Labor’s Conflict of Interest Rule. This Rule now imposes a fiduciary duty on all “retirement advisors” including many brokers and insurance agents when making investment recommendations for certain retirement accounts and retirement plans. While we believe the Rule is a step in the right direction, it does not apply to many other types of investment accounts and products where brokers and insurance agents can continue to operate under a suitability standard.
A more thorough discussion of this topic can be found at The Institute for the Fiduciary Standards’ website. Please see www.thefiduciaryinstitute.org for more information.