With few exceptions, stockbrokers, investment advisors, and insurance agents act as fiduciaries for their clients. Therefore, they are required to place the interests of their clients ahead of their personal goals. How can you determine whether your advisor is a fiduciary who must act in your best interest or a stockbroker who is subject only to a “suitability” requirement?
Here are some questions to ask your financial advisor to determine whether they are really putting your best interests first:
Are you a licensed or registered investment advisor?
The answer to this question is very telling. If your advisor is registered with the SEC and/or your state’s securities regulators, he likely owes you a fiduciary duty. If your advisor only is registered with FINRA, he currently may not owe you a fiduciary duty.
Do you consider yourself a fiduciary?
Even if your advisor is a stockbroker subject only to the “suitability” rules, how he treats his clients is critical. If your financial advisor does not consider himself a fiduciary, you can’t be certain he is putting your interests before his own.
Is your fiduciary’s status available online?
Advisors who follow a “suitability” standard can be found on the “Broker Check” link on the FINRA website, www.finra.org. Advisors who are fiduciaries will be found on the SEC website, using the “Investment Advisor Public Disclosure” link at https://adviserinfo.sec.gov/IAPD/Default.aspx
How are you compensated?
Financial advisors who earn fees or commissions based on the size of your investment or by investing you in certain products have a financial incentive that may cloud their judgment as to what really is best for you. Make sure you understand exactly how your advisor is compensated. Some fees are included or hidden within the cost of the investment, so they might not be listed separately in promotional materials. Ask to see a list of the fees and commissions your financial advisor receives from you or from other sources based on investments made on your behalf.
Our legal team specializes in all aspects of fiduciary disputes, representing individuals, executors, trustees, investors, shareholders, and financial institutions in complex fiduciary disputes involving wills, estates, trusts, guardianships, businesses, and securities. For reliable legal guidance, contact us to schedule a consultation.
Did you miss part 1 of this blog series? Find out how to determine if your financial advisor is a fiduciary.