What it means to be a a FiduciarySubmitted by Elite Asset Management on June 9th, 2017
The client advisor relationship is sacred and is built on trust. It’s why we started a registered advisory firm (RIA) that is independent and fee only. Below you'll understand the difference and why investors seek out a fiduciary to manager their investment portfolio.
Below is an excerpt also taken from Investopedia which explains some of the history of this new rule and it's significance.
It comes down to would you rather work with someone who has to put your interests above their own, or someone who put's their interest above yours?
Fiduciary vs. Suitability Standard
A fiduciary is a legal standard adopted by a relatively small but growing segment of independent financial professionals who made the decision to become a registered investment advisor, RIA.
These professionals get paid for financial advice and, by law must remove any potential conflicts of interest (or, at a minimum, disclose them) and put the client’s needs above their own.
It doesn't matter who benefits more, the client or advisor. As long as an investment is suitable.
The system is designed to reward those for selling, not providing conflict free advice.
Common job titles are Registered Representatives, Financial Advisors, Wealth Advisors, Vice President of…
Breaking Down the Fiduciary Rule
The Department of Labor’s definition of a fiduciary demands that advisors act in the best interests of their clients, and to put their clients' interests above their own. It leaves no room for advisors to conceal any potential conflict of interest, and states that all fees and commissions must be clearly disclosed in dollar form to clients. The definition has been expanded to include any professional making a recommendation or solicitation — and not simply giving ongoing advice. Previously, only advisors who were charging a fee for service (either hourly or as a percentage of account holdings) on retirement plans were considered fiduciaries.
Fiduciary is a much higher level of accountability than the suitability standard previously required of financial salespersons, such as brokers, planners and insurance agents, who work with retirement plans and accounts. "Suitability" meant that as long as an investment recommendation met a client's defined need and objective, it was deemed appropriate. Now, financial professionals are legally obligated to put their client’s best interests first rather than simply finding “suitable” investments. The new rule could therefore eliminate many commission structures that govern the industry.
Advisors who wish to continue working on commission will need to provide clients with a disclosure agreement, called a Best Interest Contract Exemption (BICE), in circumstances where a conflict of interest could exist (such as, the advisor receiving a higher commission or special bonus for selling a certain product). This is to guarantee that the advisor is working unconditionally in the best interest of the client. All compensation that is paid to the fiduciary must be clearly spelled out as well.
Read more: DOL Fiduciary Rule Explained as of June 9th, 2017 | Investopedia http://www.investopedia.com/