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What is a Fiduciary?

The High Standard That Large Wirehouses Have Fought to Avoid for Decades

Fiduciary BW.jpeg | Bogart Wealth

not everyone providing investment advice is held to the same standard by regulators

Broker-dealers are regulated by the Financial Industry Regulatory Authority (FINRA), which holds them to a lower standard, called the suitability standard. As the DOL explains, this is costing Americans Billions of dollars in hidden fees and bad investments.

the suitability standard

A system where firms can benefit from backdoor payments and hidden fees often buried in fine print if they talk responsible Americans into buying bad retirement investments with high costs and low returns instead of recommending quality investments isn’t fair.

Some of the nation’s largest investment firms have been held to this lower standard for decades. The standard, which requires only that investment advice be suitable to the client, has shown to produce conflicts of interest, primarily when considering fees. 

commissions and hidden fees

Because the client’s interest is not above his own, the broker-dealer advisor, who is loyal to the broker-dealer, may have more incentive to generate fees than to provide the best investment advice available to his client. This core distinction enables suitability advisors to sell products and services that profit their companies through commissions and hidden fees regardless of what’s best for their clients. All without running afoul of regulators.

Registered Investment Advisor (RIA)

Our independence means your interests are placed above all else. RIA firms are registered with the Securities and Exchange Commission and are subject to the Investment Advisers Act of 1940, making RIAs some of the most highly regulated entities in the financial industry.

RIAs have a fiduciary duty to act in the best interest of their clients. RIAs use institutional custodians (like Charles Schwab) to hold and safeguard their clients’ investments. RIAs work with complex portfolios and address unique needs that require a highly customized level of investment expertise.

Disclaimer: This material is provided for informational and educational purposes only. Nothing herein should be construed as the provision of personalized investment advice. There is no guarantee that the views or opinions expressed herein will come to pass. This material contains certain forward-looking statements that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of their dates. Additionally, this material contains information derived from third party sources. Although we believe these third party sources to be reliable, we make no representations as to the accuracy or completeness of any information prepared by any unaffiliated third party incorporated herein, and take no responsibility therefore. Investing in the stock market involves gains and losses and may not be suitable for everyone. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

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