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WHAT IS A FIDUCIARY?
What is a Fiduciary?
A fiduciary is bound by federal and state laws to put client interests first.
The Committee for the Fiduciary Standard outlines five fiduciary principles:
A FIDUCIARY ALWAYS PUTS THE CLIENT’S INTERESTS FIRST.
A FIDUCIARY ACTS WITH PRUDENCE; THAT IS, WITH THE SKILL, CARE, DILIGENCE, AND GOOD JUDGEMENT OF A PROFESSIONAL.
A FIDUCIARY WILL NOT MISLEAD THE CLIENT, AND PROVIDES CONSPICUOUS, FULL, AND FAIR DISCLOSURE OF ALL IMPORTANT FACTS.
A FIDUCIARY AVOIDS CONFLICTS OF INTEREST.
A FIDUCIARY FULLY DISCLOSES ANY UNAVOIDABLE CONFLICTS, AND FAIRLY MANAGES THEM IN THE CLIENT’S FAVOR.
What is An Independent RIA?
Would you rather work with someone that works first for their Broker-Dealer...? Or someone that must put your interests ahead of all else?
A Registered Investment Advisor (RIA) is a person who gives investment advice. Federal and state regulations say that Registered Investment Advisors have a fiduciary duty to their clients. This means they must always act in their clients' best interests.
The law requires Registered Investment Advisors to adopt a code of ethics that guides all their business dealings. That includes disclosing conflicts of interest, and making sure clients understand them. A client may confront an advisor over the suitability of an investment. When this happens, the advisor must prove that he or she acted as a fiduciary. Registered Investment Advisors work directly with the clients.
By contrast, regulations are less strict for Registered Representatives. Registered Representatives work for a Broker-Dealer. Their recommendations need to be “Suitable." This means that a representative will make "reasonable efforts" to collect client information they use to make recommendations.
Representatives can collect this information on as little as one sheet of paper. Regulators may consider that enough effort for the “Suitability” standard. That one piece of paper may prove that the representative gave good advice.
Independent Registered Investment Advisors do not have any affiliation with a Broker- Dealer. They are bound by the fiduciary standard. Like the golden rule, they must give advice as if that advice were for themselves.