Fiduciary standard of care
Fiduciary standard of care is the highest standard of care which an advisor could offer. We follow this fiduciary standard and are called Fiduciaries.
Fiduciaries are expected to offer advice that puts the best interests of clients above everything else, even their own. Fiduciaries have a duty of loyalty and care towards their clients. They avoid conflicts of interests that can undermine the quality of advice. Fiduciary standard is the ultimate guarantee of advice that is consistent with and aligned with the client objectives. Fiduciaries hence have the best chance of enabling desirable outcomes, for their clients. It is precisely due to this, one should seek out a fiduciary.
There is another standard called the suitability standard. This standard is followed by distributors, brokers, agents etc. Someone following this standard would only need to reasonably believe that their recommendations to clients are suitable in terms of financial needs, objectives & circumstances. However, under this standard, they are not bound to suggest the best & the most appropriate one for the client, including cost considerations.
In suitability standard, their duty & loyalty can very well be towards the firm they work for or the principal and not necessarily the client. They can very well promote the products of the firms they represent even if there are other company products which have better benefits to the clients or a lower cost structure. As long as they suggest broadly suitable products for their client, they have done their job.
For instance, if they suggest a pension product to a person for retirement planning, it is fine as per the suitability standard, though the product cost of the company they may represent may be high, the annuity rates from that company may not be the highest etc. But this would not meet the Fiduciary standard, where the choice of the product should clearly be the best from the client's view point, in every way. Fiduciaries represent only their clients & not any other company/ principal.
We are fee-only advisors and work in our client's best interests. It makes sense for you to choose a Fiduciary like us.
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