“Suitable” or In Your Best Interest: What Is Your Financial Advisor’s Standard of Care?

Posted by Broome Associates on May 14, 2019

When it comes to the person who manages your money, do you expect he or she is required to make decisions in your best interest financially?

I’m guessing that you said yes and you probably assume your current advisor is already doing that. Not all financial advisors, however, are equal when it comes to the standards they are held to keep.

What you may not know is that most financial advisors are not required to do what is in your best interest but are only required to do what is “suitable” for you. This means that the advisor can choose an inferior product for you that pays them a higher commission, or one that their employer restricts them to select, as long as it fits with your financial objectives. Suitability is a very vague and often stretched standard of conduct. This low bar results in consumers often being sold a lot of expensive and unnecessary investment products that typically only benefit the advisor and company selling the investment product.

The good news is, there are financial advisors who you can count on for a higher standard of service, called fiduciaries. The fiduciary standard of care requires that a financial adviser act solely in the client’s best interest when offering personalized financial advice. This means providing clients with the right advice and best investments without regard to their own compensation. It’s a very simple concept, but unfortunately not a very common method for working with clients in the financial services industry.

So, you may be asking yourself, how do you know if a financial advisor is a fiduciary? One way is to ask the advisor you work with or are meeting with if he or she is a fiduciary. The response should be an unequivocal “yes,” and make sure to get the answer in writing as well. Another easy way to tell if you are working with a fiduciary is to check their title. Are they a CFP® Pro? CERTIFIED FINANCIAL PLANNER™ professionals have met the most rigorous requirements in the financial industry and are required to work in a fiduciary capacity. It seems like a no-brainer, right? Go with a fiduciary who is committed to serving your best interests. Visit www.letsmakeaplan.com to find a CFP® pro near you.

This blog post was written by Deaton Smith, CFP®, ChFC® of Thayer Financial, LLC for Broome Associates. Thayer Financial is an independent investment management and financial planning firm that is dedicated to our clients success and working as fiduciaries. For more information visit www.thayerfinancial.com.

Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Securities and investment services offered through SagePoint Financial, Inc (SPF), member FINRA/SIPC. SPF is separately owned and other entities and/or marketing names, products or services referenced here are independent of SPF.

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