October 21, 2012

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. The parameters 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 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
  • the duty to respect the confidentiality of client information.

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.