There’s a lot of misunderstanding among consumers today 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 today:
- 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. Can you imagine your broker losing a ton of money and defending themselves in court saying “those pork-belly contracts seemed a reasonable fit for their long term growth goals!” Pretty much every investment or insurance product “could-be” deemed reasonable with the right “spin”.
- Fiduciary Standard of Care. The fiduciary standard of care is the highest level of responsibility a financial advisor can hold themselves to regarding you and your financial and investment planning. By embracing a fiduciary standard of care, your financial advisor (similar to your accountant, attorney, or doctor) must put your best interests ahead of their own at all times regardless of compensation. Very few financial advisors will accept the liability that comes with a fiduciary standard of care because they open themselves up to greater liability.
You’ve worked hard for every dime you have, when it’s time for your dimes to work hard for you – 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!