Special Invitation to Dinner! (Part One)

by Jeff C. Johnson

Dinner invitation

At my home address, I received a “special invitation” to a free dinner at a local restaurant. I love free food!

In the invitation, the host of this so-called “elegant evening” identified himself, and I quote, as a “fiduciary advisor … legally bound to work with the highest integrity and transparency, and to always put your needs above all else.”

Though a free Filet Oscar (a menu option shown on the invitation) is appealing, I didn’t intend to accept. Having hosted more than a few of such seminar dinners myself, I realized there were likely a lot of people who would attend only for the meal, with no intention of anything more. I certainly wasn’t a prospect.

But I am very interested in the topic of “fiduciary advice.” I investigated the host’s website and discovered he specialized in retirement strategies that involved selling annuities and life insurance, and that he held licenses to sell mutual funds and variable annuities. This generally is not what I think of as a “fiduciary advisor,” though in some transactions or engagements, it’s possible he acts as a fiduciary.

It started me thinking: If I was John Q. Public, how would I really know for sure that my adviser is a fiduciary required to do what’s best for me all the time? Gosh, that’s not always easy to figure out for sure. Registered Investment Advisory firms are retained by clients who sign an Investment Advisory Agreement, which would normally state the fiduciary nature of the work performed for a client. But it may be possible for an adviser to blur the fiduciary standard of care with the suitability standard of care, which states that the sale of investments must generally meet the needs of the client but do not have to be the best solution.

But, wait! There are adviser organizations committed to the fiduciary standard, and NAPFA is one of them.

The National Association of Personal Financial Advisors (it’s a mouthful, so NAPFA works better) is a group of financial planners dedicated to the fiduciary standard and to working for clients in an unbiased way, being compensated only by fully disclosed advisory fees and never collecting sales commissions. Every NAPFA-registered adviser accepts responsibility as a fiduciary for every client in every transaction or recommendation.

I’m proud to be a NAPFA member and honored to be active as a leader in the organization.

If your advisory firm or prospective advisory firm is not affiliated with NAPFA, find out why. Then consider going to www.napfa.org and searching for a NAPFA-registered adviser in your area. 

More on NAPFA in my next post.