You might think it goes without saying - We put our clients' interests first. We are your Fiduciary. Turns out, it's not as obvious as you might expect. In fact, there are many kinds of financial companies, employing many types of professionals, and many sorts of possible relationships between them and you.
Our primary engagement with you is as your investment adviser. Under the SEC rules, we act as your fiduciary: providing discretionary portfolio management and financial planning advice for a fee, usually based on the assets we are managing for you (though for very complex planning additional fees may apply). Assets we manage for you are held at third-party custodians - TD Ameritrade, Fidelity and Schwab. We do not charge commissions for these services, however, your custodian may charge a small commission or quarterly asset based fee (typically less than 10 basis points annually or between 4.95 and 6.95 per transaction). We have negotiated special pricing for our clients at several of these national custodians.
Many of our clients occasionally require help with insurance, municipal products and investments that require a FINRA registration or insurance license. Because of this, we maintain our brokerage credentials and an affiliation with United Planners Financial Services LLC., our independent broker dealer partner. Likewise, we maintain insurance licenses to be able to offer solutions to our clients for risk management needs, including life, disability and long-term care insurance, as well as certain types of annuities. When these rare and specific needs arise, we may by necessity provide a commissioned product. In those cases we will discus alternatives and disclose the compensation to you.
As a consumer, it can be nearly impossible to differentiate between financial professionals who are putting your interests first - or acting as your fiduciary - and those who are not. In fact, a host of government and industry regulatory agencies are struggling to refine the rules and definitions around when your financial professionals must act as a fiduciary, and how they must disclose their relationships and conflicts of interest, while providing you financial products and advice.
Broadly speaking, financial professionals provide services and products under three different regulatory systems - the SEC, FINRA and state insurance departments. Financial professionals usually operate under one or more of these regulators, though most are licensed with two if not all three of the major regulators. It is possible for financial professionals to be regulated directly by their state government if their activities fall below a certain threshold, so it's wise to ask anyone involved in helping you with your money these questions:
Investment Advisers’ Fiduciary Duty
The final recent interpretation by the SEC reaffirms the special relationship of trust and confidence an adviser has with its clients. As fiduciaries, investment advisers have an overarching duty to act in clients’ best interests, as well as the affirmative duties of care and loyalty. Investment advisers must make full and fair disclosure of their conflicts of interest and ensure that their conflicts do not taint their advice. These standards – affirmed by the Commission -- have served investors, the capital markets, the economy, and our profession well for decades and will continue to do so.
Specifically, the SEC articulates the adviser’s fiduciary duty in the Interpretation as following:
An adviser’s fiduciary duty means the adviser must, at all times, serve the best interest of its client and not subordinate its client’s interest to its own. In other words, the investment adviser cannot place its own interests ahead of the interests of its client. This combination of care and loyalty obligations has been characterized as requiring the investment adviser to act in the ‘best interest’ of its client at all times. In our view, an investment adviser’s obligation to act in the best interest of its client is an overarching principle that encompasses both the duty of care and the duty of loyalty.”
Citation: Investment Adviser Association 9/01/2019
Click here for more information from FINRA on types of investment professionals.
Imagine visiting your doctor knowing she is primarily compensated by a large pharmaceuticals company. Would you then feel comfortable knowing that your prescriptions came exclusively from that company? Might another drug company offer a better solution for your treatment? Even if the prescribed medication is the right one, the potential for conflict of interest is unavoidable in this situation, and that would be unacceptable where your health is concerned.