With differences in the definition of the term “fiduciary” between various governing bodies in the accounting, securities, and investment advice worlds, it can often be very difficult to determine who is really operating with your clients’ best interests in mind. But regardless of the somewhat arbitrary definitions of the regulators, it often helps to consider how the relevant service provider is being compensated in determining whose interests are truly being served. When it comes to your clients’ investment-related services, consider the following:
- Are your clients still working with a transactional commission-only stockbroker, and do your clients understand the nature of this relationship?
- Are your clients working with an independent “fee-only” Registered Investment Adviser, or does their service provider also represent a Broker-Dealer under a “hybrid” arrangement?
- Are you worried about the conflicts of interests in your client's relationship with their hybrid (commission + fee) financial "advisor"?
- Are your clients paying undue commissions, fees and other expenses to a big old-guard “wirehouse” firm that’s stuffing their investment portfolio with high-cost, high-commission (possibly proprietary) products?
While there are certainly a limited number of situations in which working with a commission-based service provider is warranted, for most clients the alignment of advisor incentives with investor goals provided by a fee-only investment advisory and/or financial planning arrangement is usually the most appropriate solution when it comes to abiding by a fiduciary standard that is most similar to that followed by CPAs. The only way to provide such services under the current regulatory framework is as an independent fee-only Registered Investment Adviser (RIA).
If you’d like to learn more about differentiating between the various types of financial services providers, or you’d like to partner with an independent Registered Investment Adviser that is equipped to help your clients, please contact 4Thought Financial Group Inc.