Fiduciary status is a controversial issue in the financial services industry. The issue is the ethical standards that apply to your relationship with your financial advisor and investment sales representatives. The higher the standard the more you are protected from conflicts of interest that damage your goals for financial security.

You have a choice, but you may not know this choice exists. Advisors who are held to lower ethical standards withhold this information from you. It is up to you to obtain the information you need to select competent, ethical advisors who are held to higher ethical standards.

Who is a Fiduciary?

According to the dictionary it is a person or firm that holds a position of trust. Who holds a bigger position of trust than the person who influences or controls the investment of your assets, in particular assets you are accumulating or preserving for a secure, comfortable retirement.

In the financial services world, a fiduciary is held to the highest ethical standards in the industry. For example, they are required to always put your financial needs first. This is a critical distinction. You need to achieve your financial goals. Financial advisors need to maximize the revenue and income they produce from your assets. You should avoid this major conflict of interest if your advisor is a financial fiduciary.

Who are the Fiduciaries?

About 30% of the advisors who sell investment advice, services, and products are. 70% are not acting in a fiduciary capacity when they sell investment products.

They are Registered Investment Advisors (RIAs) or Investment Advisor Representatives (IARs). RIAs are firms and IARs are professionals who are registered with the firms. These registrations create fiduciary status for these firms and advisors. Plus, the registrations make it possible for RIAs and IARs to provide financial advice and ongoing services for fees.

Who are the Non-Fiduciaries?

70% of the people who sell investment products are not. They are salesmen who are paid commissions to sell products to you. They are held to a lower ethical standard called suitability. That is, they are supposed to make suitable recommendations based on their knowledge of your situation, goals, and risk tolerance. This standard is vague, varies by investor, and is very difficult to enforce.

Wall Street

The big banks and insurance companies, that own financial service firms, are spending tens of millions of dollars fighting fiduciary status for stockbrokers, reps, and agents. Why? These standards impact Wall Street’s ability to sell you the products that make them the most money. Consequently, higher ethical standards for sales reps will damage their revenues and profits.

There is a good chance Wall Street interests will win this battle. It has the money and political influence to make sure industry rules favor Wall Street and not you.

Select a Financial Fiduciary

You can protect your financial interests by asking the right questions and requiring written responses. When your assets are involved, it pays to trust what you see and not what you hear.

How do you make sure your financial advisor is a fiduciary? Ask the following questions:

  • Are you an RIA or an IAR?
  • Do you provide financial advice and ongoing services?
  • Are you compensated with fees?
  • Are you a financial fiduciary?

Four “Yes” answers means your advisor is held to the highest ethical standards in the financial service industry.

You have the power to determine who controls or influences the investment of your assets.