When you walk into McDonald’s and order a sandwich, do they recommend the best food for your health based on your medical history, your weight and what ever else you have eaten that day? Of course not; instead, they ask, “Would you like fries with that?” McDonald’s is not responsible for ensuring you eat a healthy balanced diet.
Similarly, most Wall Street firms and insurance companies do not have a legal responsibility to look out for your best interests. They are merely required to ensure proper disclosure. Unfortunately, like with the food industry, if the consumer does not have the expertise or the will power to use that information properly, they soon find themselves in poor financial health.
A fiduciary can help!
A fiduciary in the financial services industry has a legally binding affirmative duty of utmost good faith to act solely in their client’s best interest. That means they are legally bound to be on your side and look out for your interests. Unfortunately, since many firms don’t want the legal liability of being a fiduciary, but want the benefits of being perceived as fiduciaries, they purposely muddy the waters. The result is that it is virtually impossible to tell who is a fiduciary and who is not simply by job title, firm or compensation method.
So how do you actually know if the financial professional you are dealing with is a fiduciary? The simplest method is to ask whether they would be willing to sign a statement saying they are acting as a fiduciary for you. For those who are already fiduciaries under the law or those who are just willing to be held to a higher standard, providing this will be no problem. However, if this request causes any consternation, you have your answer.
And yes, I am a fiduciary in both the legal sense and in my commitment to you.