Putting Your Interest First
“Courts have imposed on a fiduciary an affirmative duty of utmost good faith and full and fair disclosure of all material facts,” – US Supreme Court decision: SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180 (1963)
In today’s current economic times, consumers need to know that when they engage a financial advisor/planner, that they have engaged a professional who not only holds the highest standards of proficiency in the industry and is comprehensive in their approach to financial planning but is also unconflicted when it comes to their investment recommendations.
What is a fiduciary?
A fiduciary is generally defined as an individual or entity that:
- Acts on behalf of another person or persons to manage assets
- Holds themselves to be an expert, by education and experience, in a particular field of study or specialty.
- Is obligated under the law to serve the best interest of their clients (beneficiaries) and avoid conflicts of interest. In the event of a conflict of interest they are obligated to disclose it in writing.
No one is held to a higher standard of care under the law than a fiduciary. In some instances, a fiduciary may need and is often required to engage an expert in the areas of investment selection and management.
This is the case with a company executive who is appointed the fiduciary of the company’s 401(k) plan. The executive would hire an experienced and qualified investment advisor to oversee the specific selection and management of the plan’s investment options. In fact, ERISA Section 402(c)(3) expressly authorizes named fiduciaries such as the plan sponsor to appoint investment manager(s) known as independent fiduciaries.
Serving as Your Fiduciary
Triton Financial is an SEC Registered Investment Advisor. Founded in 1995 by Robert K. Gustafson, Certified Financial Planner CFP®, Triton Financial is a fee-based, independent financial advisory firm and serves as a fiduciary for clients. This distinction as a fiduciary is an important one. By law, all of a fiduciary’s actions are performed for the advantage of the beneficiary.
Recent problems in financial markets, combined with sensational stories of greed, corruption and incompetence have combined to produce a new outcry to hold those in the financial industry to a higher standard. One of the most outspoken proponents of holding brokers and advisors accountable is the Committee for the Fiduciary Standard. Their proposal outlines five principles that should be embodied in any Fiduciary Standard:
- Put the client’s best interest first.
- Act with prudence; that is, with the skill, care, diligence and good judgment of a professional.
- Do not mislead clients; provide conspicuous, full and fair disclosure of all-important facts.
- Avoid conflicts of interest.
- Fully disclose and fairly manage, in the client’s favor, unavoidable conflicts.
To us, these principles seem basic. The Fiduciary Standard should be about loyalty and trustworthiness. It is about doing what is right, especially when no one is watching.
We support the Fiduciary Standard. We believe in the Fiduciary Standard. We practice the Fiduciary Standard. We encourage you to learn more about the Fiduciary Standard and to make sure that it is the level of care that is being taken with your money.
How to know if your financial advisor is a fiduciary
If you want to know where you stand, you’ll need to be proactive and ask the following questions of anyone giving you financial advice:
- Are you legally obligated to act in my best interests at all times? If so, are you willing to put that in writing? Anyone who purports to uphold a fiduciary standard should be willing to stand behind that claim.
- Will you disclose all potential conflicts of interest? A fiduciary should be willing to disclose any relationship, compensation, incentive or other factor that potentially could interfere with his or her ability to act in your best interests.
- In what ways are you compensated? Ask if the advisor receives commissions, referral fees or other financial incentives. Some advisers tout themselves as “fee-based,” but also accept other payments that could influence their recommendations.
Long term financial success does not happen by accident nor will it happen on its own. It requires customized planning and frequent review that only comes from the services of a competent and unconflicted advisory firm. Contact us to schedule a free, no obligation introductory consultation. It’s your family. It’s your money. It’s your future. It’s your responsibility.
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