Investment Advice and the Fiduciary Standard

Fiduciary Standard

This past Monday, President Barack Obama proposed new Fiduciary Rules that could require ALL Investment advisors to follow fiduciary standards when giving investment advice on retirement accounts.

Currently, investment advice is given under two standards.  The first is the “suitability standard” which simply requires that investments must fit a client’s investing objectives, time horizon and experience.  If two identical products are available but with different costs, the advisor could recommend the higher cost product and still meet the suitability standard.  On the other hand, an advisor giving investment advice under the “fiduciary standard” must put their clients’ best interest ahead of their own.  In this case, if two identical products are available with different costs, then the advisor must recommend the lower cost product in order to meet the fiduciary standard.

Advisors that have designations such as Certified Financial PlannerTM (CFP®), Registered Investment Advisor (RIA) or other designations that indicates a fiduciary responsibility will not be affected by Obama’s proposed new Fiduciary Rules as they are already held to the fiduciary standard.  However, if an advisor is not a fiduciary, then they are currently held to the suitability standard and they would be affected by these proposed new Fiduciary Rules.

If these new Fiduciary Rules are approved, then ALL Investment advisors will be on the same playing field in regards to retirement accounts and operating under the higher level fiduciary standard.  In the meantime, investors may want to review their retirement accounts to see if they are receiving investment advice which adheres to the fiduciary standard and is in their best interest.

  1 comment for “Investment Advice and the Fiduciary Standard

  1. March 2, 2015 at 3:42 am

    Interesting article, thanks

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