The Fiduciary Standard or Duty – let me explain to you what that is. There are a variety of people in the financial services industry who provide financial advice. There are stock brokers who give you advice on buying investments. There are insurance agents who give you advice and sell you insurance products. There are people who work in banks who give you advice in the bank branch lobby. Then there are registered investment advisors: people like me at The Financial Coaching Group who give you advice.
The different types of people involved in the industry are subject to different licensing: insurance agents are licensed under state insurance rules, brokers are licensed under FINRA – the Financial Industry Regulatory Authority – and registered investment advisors – people like me – are regulated by the Securities and Exchange Commission. And the different regulators have different standards, different sets of rules guiding our behavior.
Only those who are subject to SEC rules – only those who are required to behave in accordance with registered investment advisory rules are subject to what’s called the fiduciary duty. The fiduciary duty means we must work in your best interests. We are legally obligated to make decisions and offer investments and solutions that are in our client’s best interests. That’s a very different standard from brokers who merely have what’s called a suitability standard or insurance agents who have to work in utmost good faith. Anyone other than a fiduciary advisor is not required to work in your best interests.
They’re very different sets of standards and it is widely acknowledged that the highest legal standard is the fiduciary duty. Is your advisor legally obligated to work in your best interests as opposed to his own best interests or those of his employer?