You may be familiar with the term “fiduciary,” but what exactly does it mean?
A fiduciary is an individual who is ethically bound to act in another person’s best interest. Fiduciary financial advisors must avoid conflicts of interest, such as recommending products that benefit them more than the client, and disclose any potential conflicts of interest to clients. They must also provide advice that is prudent, loyal, and in the client’s best interest.
So, knowing that, why would you ever work with someone who is not a fiduciary? Let’s look at the difference between fiduciary and suitability standards.
Are All Financial Professionals Fiduciaries?
No, not necessarily. Some financial professionals do not have this standard when presenting investment options. The standard that applies to them is “suitability.” The suitability standard requires financial professionals to make appropriate recommendations for clients’ specific circumstances, including their financial needs, objectives, and risk tolerance.
While a recommendation must be “suitable,” it does not necessarily mean it’s the best option for the client, and the advisor isn’t required to act in the client’s best interest.
A fiduciary, on the other hand, is not just a financial advisor, but a proactive caretaker of your financial well-being. They must provide their clients with the most accurate and complete financial and investment advice. Additionally, fiduciary advisors must ensure reasonable costs, monitor client investment options regularly, and disclose their own fees and how they are compensated.
Which Type of Advisor Would You Prefer?
There is nothing inherently wrong with working with a non-fiduciary on certain financial transactions. If you are fully informed, have a comprehensive knowledge of the product, and are comfortable with how each transaction works together to reach your goals, great! However, our experience at Carlson Investments is that few people have this confidence.
Bottom line: Make sure you have a comprehensive and achievable plan for an enjoyable retirement, and execute an investment strategy that implements this plan. This is what we aspire to for each of our clients!
If you’re searching for a fiduciary advisor, reach out today to learn more about what this responsibility means to us. We’ll be happy to discuss your investment options.
Carlson Investments does not provide tax, legal, or accounting advice. This content has been written for informational purposes only. Always consult your individual tax, legal, or financial professionals for advice tailored to your situation.
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