Is your financial professional a fiduciary?


Despite all the fuss within the industry over the fate of the Ministry of Labor’s revised definition of “fiduciary,” commonly referred to as the fiduciary rule, many people are still unaware that there is a difference in the way. the various financial professionals are paid. , or that they are held at different levels of responsibility.

The rule, which was formally implemented on June 9, 2017, requires all finance professionals who work with pension plans or provide advice on retirement planning to be legally and ethically required to comply with a fiduciary standard of care.

What does this mean to you?

What does “fiduciary” mean to investors?

You may be somewhat familiar with the term “fiduciary”, but not necessarily in that context. First and foremost, this means that your financial professional is obligated to put your needs before their own when making recommendations on financial products and strategies.

In addition to acting in the best interest of the client, a professional held to the fiduciary standard must fully disclose his compensation and any conflict of interest to the client.

Beyond that, a fiduciary has a “duty of vigilance” and must constantly monitor not only the assets of his clients, but also any change in their financial situation.

Let’s say a client changed their mind after going through a rough market period and wanted to adjust their tolerance for risk. Or maybe a personal tragedy resulted in extreme medical expenses and a client needed a new strategy to alleviate that burden. A trustee is responsible for helping the client reassess their financial strategy and working with them to help them align their strategy with their financial goals and objectives.

If you’ve ever worked with a fiduciary, you know: the first client meeting is just the start. Beyond their legal obligation to you, your financial professional has an interest in your success because they are paid based on a percentage of your portfolio. If you are doing well, so is he.

Which finance professionals are not subject to the fiduciary standard?

If your financial professional is a stockbroker, they’re probably paid through commissions and fees, and they’re not held to that same standard.

A securities broker is defined as any person carrying out the activity of buying and selling securities on behalf of others. Brokers are generally not considered to have a fiduciary duty to their clients.

Instead of being forced to put the best interests of their clients before their own, a broker must deal fairly with them and adhere to a standard of care known as the “standard of adequacy”. A recommendation should be that suits for the client’s individual financial goals and objectives, but it is not necessarily the best or the cheapest.

What investors should do

If you are not sure whether your financial professional is required to meet the fiduciary standard, ask them. Look at how the individual is paid, if their primary obligation is to you or to the company they work for, and how often they contact you to see if your personal or financial situation has changed in any way.

For a younger person who is still in the accumulation phase – and can afford to risk the ups and downs of the market and what that could do for their portfolio – going to a broker may be an acceptable option. And for some, that might be the only option, as fiduciary-bound finance professionals often set minimum amounts on portfolios they’re willing to work with.

But for those who are going to retire in 10 years or less, or who are already retired, having a financial professional who is held to the fiduciary standard may be a wise choice. Now is the time to get your financial plan in order, and using the professional skills of an experienced financial professional could increase your chances of a successful retirement.

Kim Franke-Folstad contributed to this article.

Founder and Managing Director, Woloshin Investment Management

Michael Woloshin is an investment advisor, insurance professional and the founder and CEO of Woloshin Investment Management. Its priority is to help those who are about to retire or have already done so to pursue their financial independence using personalized income strategies. Woloshin has over 35 years of experience advising clients.


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