{"id":7860,"date":"2016-09-08T04:44:37","date_gmt":"2016-09-08T11:44:37","guid":{"rendered":"http:\/\/blog.paladinregistry.com\/?p=7860"},"modified":"2024-04-05T02:22:54","modified_gmt":"2024-04-05T06:22:54","slug":"whats-fiduciary-matter","status":"publish","type":"post","link":"https:\/\/www.paladinregistry.com\/blog\/advisors\/whats-fiduciary-matter\/","title":{"rendered":"What\u2019s a Fiduciary and Why Does It Matter?"},"content":{"rendered":"

There\u2019s been a lot of media coverage lately re: The Department of Labor\u2019s (DOL\u2019s) soon-to-be new rules for financial advisors to act as fiduciaries for clients, especially when dealing with specific types of retirement accounts<\/a><\/span><\/strong>.  I\u2019m sure the question that almost everyone is asking is \u201cWhat\u2019s a fiduciary<\/strong>\u201d, followed closely by \u201cWhy does it matter\u201d?  Well, let\u2019s explain further so everyone can understand why it\u2019s important.<\/p>\n

The definition of a fiduciary<\/strong> is one who acts in the best interests of another.  There is obviously an implied sense of trust with a fiduciary<\/strong> when entering into an arrangement with one.  The responsibility that the fiduciary<\/strong> has to the principal or beneficiary (ex: that\u2019s the client of a financial advisor who acts as a fiduciary<\/strong>) is called the fiduciary<\/strong> duty.<\/p>\n

Now \u2013 in financial advisor land \u2013 there have been 2 different (but not necessarily separate) standards of care when it comes to clients:<\/p>\n

    \n
  1. The suitability standard<\/span><\/strong><\/a> \u2013 this says that the financial advisor can recommend the client do something (ex: buy a certain type of investment, pay off their debts, etc.) as long as it is suitable (makes sense) for the client (it may not be the best thing for the client to do, mind you)<\/li>\n
  2. The fiduciary<\/strong> standard \u2013 this is the highest standard of care that a financial advisor can apply to his\/her dealing with clients; the recommendations are to be in the absolute best interest of the client re: the client\u2019s specific financial situation (extra care and prudence is needed when operating in this capacity for clients)<\/li>\n<\/ol>\n

    When you read those two standards of care up above, ask yourself this very important question:  Which of those two standards of care seems best for financial advisors to adhere to when practicing?  When a financial advisor recommends you buy XYZ product for your retirement portfolio, is it because it\u2019s suitable or the absolute best choice for your situation (perhaps it\u2019s because he gets a bigger commission by recommending that product, instead of a very similar one that is less expensive to you)?  If you can\u2019t be sure that your advisor is acting in a fiduciary<\/strong> capacity, it might be time to look for a new firm and advisor that always adheres to the fiduciary<\/strong> duty when dealing with their clients.<\/p>\n

    Now that you\u2019ve got an understanding of what you should want in a financial advisor (one who always has a fiduciary<\/strong> duty to his\/her clients), don\u2019t just settle for someone who sometimes operates in a fiduciary<\/strong> capacity \u2013 make sure that they always are acting in your best interests.  Hiring the right financial advisor can make all of the difference over the long term, and now that you know that \u2013 you\u2019re welcome!<\/p>\n

    Find an experienced financial advisor who always operates in a fiduciary<\/strong> capacity, works for an RIA firm, earns his\/her money from fees (NOT commissions), believes in having an abundance of investment choices for clients, and has the heart & demeanor of a teacher, NOT a salesman, and chances are you\u2019ve found the right financial advisor to help you prepare and plan for your financial goals.<\/p>\n

    To learn more about Martin Federici, view his Paladin Registry research report<\/a><\/span><\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

    There\u2019s been a lot of media coverage lately re: The Department of Labor\u2019s (DOL\u2019s) soon-to-be new rules for financial advisors to act as fiduciaries for clients, especially when dealing with specific types of retirement accounts.  I\u2019m sure the question that almost everyone is asking is \u201cWhat\u2019s a fiduciary\u201d, followed closely by \u201cWhy does it matter\u201d?  Well, let\u2019s explain further so everyone can understand why it\u2019s important. The definition of a<\/p>\n","protected":false},"author":12,"featured_media":7865,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[325],"tags":[],"class_list":["post-7860","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-advisors"],"yoast_head":"\nWhat\u2019s a Fiduciary and Why Does It Matter? - Paladin Registry<\/title>\n<meta name=\"description\" content=\"The question that almost everyone is asking is \u201cWhat\u2019s a fiduciary\u201d, followed closely by \u201cWhy does it matter\u201d? 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