Who is a Fiduciary?

The hot word these days in the world of investing is “fiduciary.” In noun form, fiduciary is a person or organization that owes to another the duties of good faith and trust. An attorney owes these duties as well as the duty of confidentiality to their clients. Someone serving as a trustee owes similar duties to the trust creator. In the world of investing and financial planning, Registered Investment Advisors owe a fiduciary relationship to their clients, but brokers and insurance agents do not.

Research, by digital wealth manager Personal Capital, found nearly half of Americans falsely believe all advisers are legally required to always act in their clients’ best interests. The reality is that brokers and insurance agents are not required to act in their clients’ best interests. Many investment advisers are dually licensed as brokers as well. Often these dual licensed brokers will claim that they are a fiduciary yet earn commissions for selling investments to their clients.

Those that are dually licensed often switch hats without the client ever becoming aware the individual they hired as an adviser had suddenly strayed from the fiduciary standard to the suitability standard. It’s wise to ask your adviser, do you act as a fiduciary at all times or only under certain circumstances?

For instance, if your adviser gets a commission for selling certain investments through a broker dealer, they aren’t acting as a fiduciary for that transaction. That doesn’t mean that the advice to buy commission investments can’t be suitable, but the potential commissions could be a factor in the product being recommended and therefore, in that instance, you can’t necessarily rely solely on the adviser’s advice to make a decision because it may be biased.

At Singer Wealth Advisors we don’t accept commissions on investments. Whenever a financial investment product pays a commission to the adviser, we have that commission assigned to the client’s account. By doing this, we remain unbiased and avoid potential conflicts of interest.

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Keith Singer

Keith Singer, a well-known financial advisor in Florida, is both a CERTIFIED FINANCIAL PLANNER™ (CFP®) practitioner and a licensed Florida attorney.

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