The Fiduciary Standard

Did you know that, when you interact with advisors at brokerage firms, banks, credit unions and insurance companies, they are not required to act in your best interest? They are merely required to meet a “suitability” standard. This means they must put you in financial products that are appropriate. The meaning of “appropriate” is far from clear and is subject to broad interpretation.

In contrast Registered Investment Advisers and Certified Financial Planners are held to a “Fiduciary” standard. This is a legal standard that requires these advisors to act in their clients’ best interest. It is the highest level of care extended by an advisor to a client.

Cascade Wealth Management is a Registered Investment Advisor. Aaron and I are both Certified Financial Planners. We act in a Fiduciary role with all of our clients all of the time.

The Obama administration has proposed holding brokers who give investment advice to the higher Fiduciary standard. These would require brokers to offer investments that are less costly and more tax efficient. They would also have to disclose conflicts of interest, past disciplinary actions, and to generally act to put their clients’ interests before their own.

I join the Financial Planning Association (FPA), the National Association of Personal Financial Advisors (NAPFA), and the Certified Financial Planner (CFP) Board of Standards in calling for the administration to hold all financial advisors to a “Fiduciary” standard of care.