What is the standard of care that you expect from your financial professional or wealth adviser?
Many investors assume their financial salesperson, a friendly, outgoing person they like, is always going to do their very best for them, the investor
Well, that is not always the case.
A large number of financial professionals are licensed as stockbrokers, who sell products and services and are paid commissions based on the revenue they generate from customer accounts. Often these people are held to a “suitability” standard, meaning the bar is whether the investment is reasonably appropriate for the client based on the broker’s knowledge of the client. The recommendations might not be the best solution, but as long as it’s “suitable,” it is permitted.
Today, there is a move toward a “fiduciary standard,” under which the advisory firm has a duty to do the very best thing for the client. Typically, the financial professionals affiliated with a Registered Investment Advisory firm are obligated to do what’s right for the client; “suitable” is not good enough.
Does this mean that every broker-type is to be avoided? One of the best financial professionals I know (and over 35 years, I know quite a few!) is a commission-only stockbroker. Though he is only required to offer suitable investments, he is filled with integrity and compassion for his clients and he always does the right thing. What’s more, he does it very well.
The bottom line is this: If you feel like your financial progress is on track and that your financial adviser or advisory team is always looking out for your best interests, congrats! No changes needed.
However, if you are not sure about your progress or feel less than confident that you are always getting the best recommendation, consider a review of your circumstances. Get a copy of The Eight Points of Financial Confidence, take a couple of hours to read it, and evaluate your financial life. It could have a significant impact on your life and the lives of everyone you love.
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