Fiduciary Duty

Fiduciary Duty

To serve the client interests above everything else. We are held to a higher standard called “Fiduciary”, which means we put client interests ahead of our own. It is the highest legal and ethical standard under US law, meaning we are legally bound to look out for the clients’ best interests. A Fiduciary can be a family member administering a trust, a for-fee investment professional or another professional services individual such as lawyer.

The individual who undertakes fiduciary duty has a legal responsibility to the client or other benefactors. The fiduciary must analyze client goals and investment objectives and look at all available options. The option that is in the best interest of the client may not be in the best interest of the party who has taken the fiduciary duty.

For example, if the person works for an investment company that offers an investment product that will meet all the objectives of the client and there is another investment product in the market place that is better and cheaper, the fiduciary must select the best investment product even if it is from another company. A situation such as this occurs quite often in the investment industry. A stock broker who works for commission can be incentivized to sell a product that will generate a high commission. A fiduciary investment advisor cannot work for a commission and they work for a fee.

A better option individual investors is a fiduciary advisor because the compensation is transparent and not tied to the specific recommendation to buy a commission based product.

Other investment professionals and brokers can be held to a lower standard called “suitability”. The suitability standard requires a financial professional to recommend investments that are suitable for a client’s financial situation. An example could be when an advisor recommends a mutual fund their firm owns and operates. It is suitable for the client’s financial situation, but there may be better alternatives. Since this type of advisor isn’t legally bound as a fiduciary, it is legal for them to offer securities that may not be the lowest cost, or best fit their client’s financial situation.

Our firm follows a fee based model, which means we never accept commission and we always look for the strategy or investment that is in the client’s best interest. The fee-only model aligns our interests with client interests because when the client makes portfolio profits, our flat fee increases proportionally. The client’s portfolio performance and financial success is our top priority.