Long has been a debate over uniform fiduciary rules in the investment world.  Should Broker/Dealers and Registered Investment advisors continue to have different standards of care when providing personalized investment advice to clients? Or should fiduciary standards be implemented for all regardless of whether the provider is a registered investment advisor, a broker/dealer, or another type of investment professional?

At present the playing field is not consistent, many brokers and insurance agents may not have a fiduciary duty instead they only need to recommend financial products that are “suitable”. Unfortunately, many investors do not understand the difference between fiduciary and suitability standards.

Let’s first explain the duties of a fiduciary Advisor. – They have a legal obligation to act in the best interest of a client and must set aside personal agendas and conflicts of interest in order to provide the most suitable outcome for the client’s unique situation.

Many brokers and insurance agents do not have a fiduciary duty and may not be required to put the client’s best interest first.  They need only to provide you with “suitable” financial products. The “suitability standard” is hard to define in many cases and difficult to enforce. This may allow them to recommend a particular product over a better choice as long as it is determined to be a “suitable” investment. In many cases, this is done to benefit the broker and not the client.

The good news is federal regulators and the Securities and Exchange Commission are studying this issue and hopefully will decide to impose uniform fiduciary standards.  Until then, my advice is to seek the advice of a fiduciary advisor as they are required to act in your best interest.

Answers from AZ