Mar 25, 2010

Washington on the Fiduciary Standard: Consumers first, but not just yet.

Insurance companies and big brokerages wave their wallets in Washington and throw consumers under the bus! The “Restoring American Financial Stability Act of 2010” was passed on Monday by the Senate Committee on Banking, Housing, and Urban Affairs. The legislation left out a key detail. It allows financial salespeople to continue to put their own self interest and the good of their company above their clients.


Prior to the financial mess in 2008, the members of the Financial Planning Coalition began calling for a Fiduciary Standard for investment advisors and financial planners. This was met by major opposition from firms whose employees are commission based financial salesmen. The fiduciary standard would require these folks to act in the best interest of their clients at all times. Imagine that! Consumers deserve this basic protection.

Fiduciaries live up to a few simple standards:
  1. A client’s best interest is their first priority… By Federal Law.
  2. They seek the best investments and the best prices for their clients. When comparing equal investments, the one with the lowest fee is best for the client.
  3. Fiduciaries understand that they cannot control the market; instead they focus on providing impartial and unbiased consultative advice.
  4. Full disclosure of the fees they charge and the payments they accept. Consumers understand how their fiduciary advisor is paid. No hidden fees.
  5. Full disclosure of conflicts of interest. Consumers are fully aware of relationships that may benefit the advisor.
Although the terms of this legislation have been finalized, consumers can educate themselves on the fiduciary standard. The terms, “Fiduciary Financial Planner” & “Fiduciary Investment Advisor” should not be an oxy-moron. Professionals should always do what is in their client’s best interest…ALWAYS!
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