Some time ago an article appeared in Forbes Magazine that listed a number of questions you should ask a financial advisor.
Over the next several weeks our blog will answer these questions for our firm.
The first question asks “Are you a fiduciary”?
A fiduciary is a legal or ethical relationship of trust between two or more parties. Typically, a fiduciary prudently takes care of money for another person. One party, for example a corporate trust company or the trust department of a bank, acts in a fiduciary capacity to the other one, who for example has entrusted funds to the fiduciary for safekeeping or investment. Source.
Acting as a fiduciary has two primary meanings: First, the advisor always puts the client’s interests ahead of his or her own. Secondly, it is all about disclosure. All information about compensation and fees needs to be given to the client.
Typically, an advisor who is paid fees, and discloses these fees along with any potential conflicts of interest, is considered a fiduciary. Such advisors are taking responsibility for the advice they give.
Conversely, advisors who are compensated by commissions and don’t disclose the source and level of their compensation are not considered fiduciaries. Such advisors are really sales people who aren’t responsible for being transparent with their clients. Those advisors who are compensated by commissions, but who disclose this to their clients can still be considered fiduciaries.
Thus, whether or not an advisor is a fiduciary is all about full disclosure and transparency.
At Sampson Investment Management we always act as fiduciaries in our relationships with our clients. We also look to the standards required of Certified Financial Advisors when we provide service to our clients. As such, we always aim to only provide service in those areas where we have competency, and fully disclose the scope of how we work with clients along with the way we are compensated for our services.