There’s a lot of misunderstanding among consumers about who exactly is – and is not – a fiduciary advisor. To separate the two you must understand the two standards of care and client responsibility in the financial services industry:
- Suitability Standard of Care. This is the lowest standard of care in the industry. The Suitability Standard says that your financial advisor or broker must perform reasonable due diligence on investment and insurance products, must reasonably understand them, and have a reasonable basis to believe that an insurance or investment product is suitable for you as an investment strategy. This is like going to JC Penney and getting sold a suit off the rack, the salesperson will help make sure it fits you but that’s about it.
- Fiduciary Standard of Care. The fiduciary standard of care requires the highest level of responsibility to you and your financial planning. By embracing a fiduciary standard of care your financial advisor must put your best interests ahead of their own at all times regardless of compensation. This is similar to the responsibility your accountant, attorney, or doctor has. Working with a fiduciary is like going to Nordstrom’s and the salesperson custom tailoring a suit for you, not only does it simply fit but their job is to make sure you actually look good in it!
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Very few financial advisors will accept the liability that comes with a fiduciary standard of care. The fiduciary standard exposes an advisor to a much higher level of responsibility and puts them at greater risks for lawsuits.
You’ve worked hard for every dime you have, shouldn’t you require a fiduciary standard of care in writing from your financial advisor? We embrace our fiduciary responsibilities in writing to all of our clients in writing, because words are only words until their backed by a promise with a signature behind it!