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Accountants, Doctors & Lawyers Are Fiduciaries. Your Care Salesman Isn’t.

Last Updated:  August 15, 2022

What is a Fiduciary Financial Advisor?

The definition of Fiduciary:

The Board of Directors, representatives, and financial advisors comprising NAPFA (The National Association of Personal Financial Advisors) have adopted the following definition of “fiduciary”:

fi-du-ci-ar-y: A financial advisor held to a Fiduciary Standard occupies a position of special trust and confidence when working with a client. As a Fiduciary, the financial advisor is required to act with undivided loyalty to the client. This includes disclosure of how the financial advisor is to be compensated and any corresponding conflicts of interest.

There’s a lot of misunderstanding among consumers about who exactly is – and is not – a fiduciary financial 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 “basic” 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.
  • Fiduciary Standard of Care. The fiduciary standard of care requires a high 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, perks, or other benefits. This is similar to the responsibility your accountant, attorney, or doctor has.

Why Isn’t Every Financial Advisor A Fiduciary?

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.

If being a fiduciary is appropriate for your 401k or IRA, why isn’t it appropriate for your joint or trust account? While the law is a good first step, it doesn’t protect all investing consumers from the perils of shady brokers.

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 to all of our clients in writing, because words are only words until they are backed by a promise with a signature behind it!

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