What is a Fiduciary?

The fiduciary standard in question requires that a Registered Investment Advisor conduct business in a prescribed manner and to prescribed standards. It is a form of business practice that requires complete transparency and disclosure. It also requires that the advisor avoid conflict of interest and in all efforts place the client’s interest before their own. It means that advisors can not instruct their clients to purchase certain securities because it provides higher levels of compensation to them. It means advisors can not accept indirect non-disclosed payments or compensation from third parties. It means advisors define their business practice in writing; say what you do and do what you say.

In addition to the fiduciary standards, a Registered Investment Advisor is subject to separate and possibly additional regulatory oversight.  Brokers may not want the added complexity and legal risk. To be a Registered Investment Advisor means you willingly accept the responsibility of being held to a higher standard of due diligence and transparent investing.

Investors should understand that working with an advisor that is a fiduciary does not guarantee that they will experience greater investment performance or reduced losses as compared to working with an advisor that is not acting as a fiduciary.