What is your advisor’s standard of care and why does it matter?

Financial advisors fall into two categories when it comes to standard of care:  fiduciary and suitability.

An advisor with a fiduciary responsibility means he or she must do what’s best for the client, including always putting the client’s interests before the advisor’s. It also means disclosing possible conflicts of interest including compensation the advisor will receive for products or referrals. An adviser typically charges a percentage of assets or a fixed fee for his services. Only independent Registered Investment Advisors, like Scott Warner of Life Design Financial, are required to act in a fiduciary capacity.

Another type of advisor, a broker, acts with a suitability standard of care, meaning he has more latitude in his recommendations. He or she is only required to suggest products that are suitable to match a client’s objectives, income level and age. They don’t have to be the best products for the clients or the cheapest. A broker is not required to disclose conflicts of interest, including compensation received. A broker earns commissions or other transaction-based fees for his work.

Which type of advisor do you have – a broker or a true advisor? Which do you want? We recommend that you choose an advisor who acts with a fiduciary standard of care – a Registered Investment Advisor. This way you can ensure that your best interests are always first and foremost in your advisor’s mind, and you receive full disclosure of fees and potential conflicts of interest. Isn’t that the type of advisor you deserve?

To hear more about this topic, listen to Life Design Financial Radio on KBRT 740 AM each Saturday at 1 p.m. PST or listen to podcasts of previous shows.


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