WHAT IS A FIDUCIARY?

An investment advisor stands in a special relationship of trust and confidence with their clients. As a fiduciary, an investment advisor has an affirmative duty of care, loyalty, honesty, and good faith to act in the best interests of their clients, and to make full and fair disclosure of all material facts, especially where the advisors’ interests may conflict with the Client.

The obligation of an investment advisor’s duty depend on the scope of the advisory relationship and generally include:

  • the duty at all times to place the interests of clients first
  • the duty to have a reasonable independent basis for investment advice
  • the duty to seek best execution for client securities transactions where the advisor directs such transactions
  • the duty to make investment decisions consistent with any mutually agreed upon client objectives, strategies, policies, guidelines, and restrictions
  • the duty to treat clients fairly
  • the duty to make full and fair disclosure to clients of all material facts about the advisory relationship, particularly regarding conflicts of interest, material financial and disciplinary matters or any unfair terms in an advisory agreement, such as materially higher fees
  • the duty to protect the confidentiality of clients’ personal confidential information
  • A duty to obtain best execution for clients’ securities transactions where the advisor is in a position to direct brokerage transactions
  • A duty to ensure that its investment advice is suitable to the client’s objectives, needs, and circumstances.

What’s the difference between a Broker and a Registered Investment Advisor?

Short video from the National Association of Personal Financial Advisors (NAPFA) promoting the need for a fiduciary standard in the financial services industry.