Trusting Your Financial Adviser

    I justify my stash of New York Times newspapers (that never shrinks) when I run across an article  like the one in the Sunday, October 12, Mutual Funds and E.T.F.s section titled “Before the Advice, Check the Adviser”.  As the article points out, not all investment advisers act as fiduciaries.  Do you know the credentials of the person who is handling your money?  What does fiduciary mean?

    In the world of real estate, ALL Real estate agents have a fiduciary duty to their clients which obligates them to act at ALL times, solely in the best interests of their clients, excluding all other interests, including themselves.  Does this always happen?  Nope, but every real estate agent knows the rule and that disregarding it can result in serious consequences.

    In the world of investment brokers and advisers, it is a bit more complicated.  If you are looking for an investment person who acts an a fiduciary, the explanation below should offer some clarity as it describes the difference between a broker or registered representation and a registered investment adviser.  Please note that some people are registered as both brokers and investment advisers so you need to ask them which hat they are wearing and then get their response in writing.

    Okay, so here we go:

    “Brokers or Registered Representatives:  Required to make suitable recommendations to investors based on criteria like age, goals, time horizon and rise appetite.  Generally not required to put customers’ interest first at all times, a standard called fiduciary duty.”

    Suitable sounds ok, right?  Not always.  More on this later.

    “Registered Investment Advisers:  Required to put customers’ interests ahead of their own— that is, they are required to act as fiduciaries.  Advisers and their firms general register with the Securities and Exchange Commission or a state securities regulator.”

    If you have an account where a broker collects a percentage of total assets to manage an investment account, or when they are given full control of an investor’s account, the broker must act as a fiduciary.

    Next:  The Story of The Toffels.  Did the bank sell them a suitable portfolio?

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