There are two standards to which financial advisors are held: the suitability standard and the fiduciary standard. The suitability standard requires advisors to give advice that is “suitable”, i.e., that it fits the client’s investment objective, time horizon and experience. It does not require advisors to recommend the best investment; only one that is “suitable”, and there is no requirement to disclose compensation or conflicts of interest.
The fiduciary standard goes well beyond offering suitable advice – it requires an advisor to always act in the client’s best interest, to disclose compensation arrangements and to avoid conflicts of interest. Whether the advice pertains to investments, whether to pay off a mortgage, roll over a qualified plan, contribute to retirement accounts, or anything else, the fiduciary standard requires that an advisor always place the client’s interest ahead of his or her own.
If you have a question about whether an advisor is a fiduciary, ask! And ask if he or she will put that in writing.