Financial advisor, financial planner, financial consultant, wealth manager, etc. – there are many names used by investment professionals today. But what’s more important than the title that a professional gives him or herself is the standard of care the investment professional is held to a fiduciary standard or a suitability standard.
A fiduciary standard of care requires that an advisor put the client’s interest above his or her own. Recommendations are only made once an advisor has completed his or her due diligence and analysis, and all recommendations must be in the best interest of the client. Conflicts of interest are disclosed and the advisor is required to execute and implement recommendations efficiently and cost-effectively.
On the other hand, a suitability standard merely requires that any recommendation be suitable for the client. The recommendation does not necessarily need to be consistent with the investor’s personal objectives and risk profile and the advisor does not need to disclose conflicts of interest. The client’s interests do not need to be put ahead of the professional making the recommendation.
Consider the following example: there are two investments that could potentially make sense for a client, but one is significantly more expensive than the other. An advisor who is only bound by a suitability standard can recommend the investment that would pay a higher fee to him or her and the advisor has no obligation to disclose that to the client. An advisor governed by a fiduciary standard would need to disclose the difference in fees to the client, and if all else is equal, recommend the less costly investment.
Investment professionals who are held to a suitability standard are regulated under the Securities Exchange Act of 1934 and include agents, stockbrokers, and registered representatives. These advisors are typically compensated through commissions.
Investment Advisor firms regulated by the Investment Advisors Act of 1940 are held to a fiduciary standard. These firms along with their Investment Advisor Representatives (IARs) are regulated by the Investment Advisors Act of 1940. RIAs are typically compensated by fees that are disclosed upfront to the client.
Core Wealth Management is organized as an RIA, and our business is built upon a longstanding commitment to providing our clients with the only highest standard of care. We utilize the resources, expertise and collective knowledge of our team of professionals to offer comprehensive advice and integrated solutions.
Our interests are aligned with those of our clients – our goal is to help our clients determine and achieve their goals as efficiently, effectively and simply as possible. We pride ourselves on always acting with complete integrity and as a trusted partner and fiduciary.
