What is a Fiduciary? And why is it Important to You?

The fiduciary standard is a code of conduct for registered investment advisors who are regulated under the Investment Advisors Act of 1940.  I am a registered investment advisor so therefore I am held to the fiduciary code of conduct.  This important standard requires me to: 

• always put your interest first
• act with prudence
• never mislead you
• provide full disclosure
• avoid conflicts of interest
• and fully disclose and fairly manage (in your interest) any unavoidable conflicts. 

This is a strict code of conduct and I am proud that I am a fiduciary and held to these high standards.   However, not all financial advisors are required to follow this standard.  Hard to believe but it is true.  Advisors who work for brokerage firms and insurance companies have to follow a "suitability" standard which only requires them to show that a proposed transaction is "suitable" for their clients.  This leaves the door wide open for big problems and abuses in the industry.  And we have seen many of these abuses in the recent years.

Brokers are not required to show conflicts of interest, details of his/her fee structure (which would be pretty shocking if disclosed) or to make sure that the product being sold or offered to the client is truly best for that client.  And if a client is wronged by a broker, the burden of proof is on the client to show the damage.  As a fiduciary, the burden on proof is for me to show that I am right or wrong.

So...who would you trust to manage your portfolio, make recommendations, help you to retire etc....?    A broker or a true fiduciary who sits on the same side of the table as you! 

The House-Senate Conference Committee is grappling with this issue right now and deciding whether all financial advisors should be held to the fiduciary standard.  This is a no-brainer, in my opinion.  We all should be fiduciaries.  The brokerage and insurance industries are working hard to strike the fiduciary provision from the reform bill.

Let your voice be heard.  Contact the committee members today and let them know that a Fiduciary Standard is the best thing we can do for financial reform.