Nov 10, 2009

Fiduciary – The New Industry Standard


We still hear horror stories about folks who have diligently saved for years and company who locks them into a bad product and receives a large commission. Unfortunately, in the financial industry there are still individuals and companies that are working to line their pockets and to make sure the company meets sales quotas.

This is unacceptable. Thankfully, many professionals including doctors and lawyers are held to certain standards within their industries requiring that they put the interest of their clients first. Professionals legally obligated to put their client’s interest first are known as Fiduciaries. This standard does not apply to all industries.

Over the past few years there has been more and more news regarding this topic. The financial industry is currently suffering growing pains as organizations such as the Financial Planning Association and the Certified Financial Planner Board work tirelessly to bring this industry standard to financial professionals.

Within the financial industry you will find professionals who are fiduciaries, those who are legally obligated to do what is right for clients. In the same industry you will find individuals who do not act in a fiduciary capacity. Organizations that represent broker dealers and financial sales-people have been working to oppose the fiduciary standard.

It is important to make sure that your financial professional is interested in your well being instead of his own. Is he a broker, or is he an advisor? Does she get paid when she sells you a product or when she gives you advice that fits your needs? Does he receive commissions that are hidden within the product, or is he a fee-only financial planner that offers transparent fees? Does your advisor offer advice on making your entire financial picture more efficient (such as tax strategies, retirement planning, investment management and estate planning) or do you rarely hear from him?

Now is the time to ask if your financial professional is truly a fiduciary - working for your best interests.

Here are a few questions to consider asking your financial professional:

1) When you are dealing with me and my finances are you held to a fiduciary standard?
2) Does your company disclose all conflicts of interest that could affect my relationship with you?
3) Do you receive compensation on a fee-only basis and offer full disclosure of these fees, or do you accept commissions for selling products?
4) Do your services include financial planning to meet my needs as well as investment advisory services?
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