Recently there has been a lot of press around the fiduciary standard. Investment advisors who are held to the fiduciary standard must act in the best interests of their clients. However, if you are looking for an advisor, choose wisely—because not everyone is required to follow the standard.
Many advisors, broker-dealers in particular, must follow a “suitability standard”. With the suitability standard, investment advice only has to be suitable for a client, not necessarily the least expensive option. If there are two equally appropriate investment options and one of them pays the advisor a big commission, he or she can recommend that one—even if it means higher fees for the client. The investment with lower fees may be preferable to the client. However, broker-dealers may not have to recommend it under the suitability standard.
Advisors who bear the CERTIFIED FINANCIAL PLANNER™ (CFP®) designation must swear to a fiduciary standard. Registered Investment Advisor firms (RIA) follow a fiduciary standard as well. Therefore, when recommending investments, representatives of RIA firms are required to act in your best interests.
Even with the best intentions, it is difficult for advisors not to be influenced by how they are compensated. Fee-only advisors take the fiduciary standard a step further by foregoing third-party compensation that might influence recommendations they give to clients.
When you come to us at Goldman Financial Planning, there’s no need to wonder if the recommendations you receive are in your best interests. Our firm is an RIA and only advisors with the CFP® designation are on our team of coaches. In addition, everyone at Goldman Financial Planning is strictly fee-only, so we are committed to following a fiduciary standard.