Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
What is the fiduciary standard?
#1
When it comes to financial reform, individuals should pay the most attention to the regulations surrounding the fiduciary standard. It sounds complicated, but it essentially refers to the guidelines that spell out the obligations financial services professionals have to their clients.

 
Currently, there are two standards that advisers and financial planners are held to -- the suitability standard and the fiduciary standard. The suitability standard gives advisers the most wiggle room: It simply requires that investments must fit clients' investing objectives, time horizon and experience.
 
"You can satisfy the suitability standard by recommending the least suitable of the suitable options, as long as it falls within the general suitability test," says Barbara Roper, director of investor protection for the Consumer Federation of America.
 
The suitability standard invites conflicts of interest pertaining to compensation, which can vary greatly from one product to another.
 
"And you don't have to disclose your conflicts of interest. You don't have to appropriately manage your conflicts of interest or minimize your conflicts of interest. So what that means is often the products that are best for the broker have higher costs for the investor," Roper says.
 
The other standard of care, the fiduciary standard, basically charges advisers with putting their clients' best interest ahead of their own. For instance, faced with two identical products but with different fees, an adviser under the fiduciary standard would be compelled to recommend the one with the least cost to the client, even if it meant fewer dollars in the company's coffers -- and his or her own pocket.
 
Unfortunately, many investors can't distinguish among financial planners and advisers. Studies have shown that individual investors don't know who is a fiduciary or what a fiduciary actually is.
 
Read more: http://www.bankrate.com/finance/investin...ard-1.aspx
 
A fiduciary duty is a legal duty to act solely in another party's interests. Parties owing this duty are called fiduciaries. The individuals to whom they owe a duty are called principals. Fiduciaries may not profit from their relationship with their principals unless they have the principals' express informed consent. They also have a duty to avoid any conflicts of interest between themselves and their principals or between their principals and the fiduciaries' other clients. A fiduciary duty is the strictest duty of care recognized by the US legal system. https://www.law.cornell.edu/wex/fiduciary_duty
 
Choosing A Financial Adviser: Suitability Vs. Fiduciary Standards
 
The Fiduciary Standard
Investment advisers are bound to a fiduciary standard that was established as part of the Investment Advisers Act of 1940. They can be regulated by the SEC or state securities regulators, both of which hold advisers to a fiduciary standard that requires them to put their client's interests above their own. The act is pretty specific in defining what a fiduciary means, and it stipulates that an adviser must place his or her interests below that of the client. It consists of a duty of loyalty and care, and simply means that the adviser must act in the best interest of his or her client.
 
Read more: http://www.investopedia.com/articles/pro...z3WFzgd1w8
 
The application of the fiduciary standard when applied to a trust as opposed to a charitable foundation. Very simplistic description but effective.
https://www.youtube.com/watch?v=X614NQ3XzRg


VIDEO LINKS TOO

https://www.google.com/search?q=FIDUCIARY&oq=FIDUCIARY&aqs=chrome..69i57.166562545j0j0&sourceid=chrome&es_sm=93&ie=UTF-8#q=FIDUCIARY&tbm=vid
Reply




Users browsing this thread: 1 Guest(s)