When looking for financial advice, seek a fiduciary

wise-money-with-kevin-theissenBy Kevin Theissen
Skygate Financial Group, LLC

If you were to stand out on the street and ask a handful of people the meaning of fiduciary and how it relates to financial services, you would likely get a bunch of responses like, “I don’t know” and maybe a few like, “I don’t care.”

If you are an investor, you should know and you should care. A fiduciary takes care of money or other things of value on behalf of another person and always acts in that person’s best interest. This isn’t always the case with firms selling investments.

Even with the recent rulings from the Department of Labor concerning this issue as it relates to some types of retirement accounts, the difficulty for investors is to find a bona fide fiduciary who will continue for some time to come. Reports of settlements, court rulings, paying fines for breaching client trust and other shenanigans from and against wirehouses (i.e. Morgan Stanley, Merrill Lynch) and regional broker-dealers (i.e. Edward Jones, Raymond James) continue on a regular basis.

Under financial laws and regulations, there are two sets of rules. One set is for people who sell financial products, generally brokers and insurance company representatives. These salespeople are set up to place the interests of their employer ahead of the interests of their clients.

The other set of rules is for those who are registered as investment advisers with the federal Securities and Exchange Commission or comparable state regulators. Registered investment advisers are legally obligated to place your interests first. They are fiduciaries. That means they must not only be loyal to serving your exclusive best interests, they must also adhere to a high standard of professional competence.

A fiduciary is not only responsible for managing the assets of another but for taking on the ethical and legal obligation of acting in the best interest of the party whose assets they are advising and/or managing. This becomes extremely difficult for an adviser at a wirehouse or regional broker-dealer to balance the undeniable conflicts of selling company products with hidden and/or confusing fees and structures. In many cases, the client becomes the mark within a sales process.

Unlike other classic professions, such as law and medicine, anyone can call himself an investment or financial adviser even if he is really a salesperson.

Steps you can take

As an investor, you can use this version of a Fiduciary Oath (created by The Committee for the Fiduciary Standard) — print it, and take it to your current financial intermediary. If they sign it, it’s an indication that they are serious about placing your investment interests before their own. If they won’t sign, or say they cannot — well, let’s just say there are plenty of bona fide fiduciaries that would be glad to sign it.

We strongly recommend that you insist that any adviser you hire is willing to sign this oath. And we encourage you to share this letter and the oath with your family and friends.The commitment is as simple as “mom and pop and apple pie.”

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Filed Under: Business & Personal FinanceWise Money

About the Author: Kevin M. Theissen, principal and financial advisor at Skygate Financial Group LLC, has more than 20 years of experience as an investment advisor, wealth manager and tax professional.

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