Recently, the Department of Labor has stirred a heated debate over a proposed rule-making on whether or not financial advisors, brokers, and insurance salespeople working on a commission basis should be held to the fiduciary standard versus the suitability standard when dealing with retirement accounts.
What is a fiduciary?
According to the Cornell University Law School’s definition, “A fiduciary duty is the strictest duty of care recognized by the US legal system.”
A fiduciary must always act in the client’s best interest and disclose any conflicts of interest. A fiduciary may only profit from their relationship with their client’s expressed informed consent. Examples of a fiduciary relationship include those between a lawyer and client, a doctor and patient, or a guardian and his or her ward.
Currently, most advisors, brokers, and insurance salespeople working under the “suitability standard” are required to have a reasonable basis for recommending investments to the client based on an examination of the client’s position. Although the suitability standard requires advisors, brokers, and insurance salespeople to deal fairly, it does not require them to act solely in the client’s best interest. As long as a product is deemed suitable, it is considered to be "good enough." When acting as a fiduciary, an advisor must figure out what is the BEST option for the client, not just what is "good enough."
This is why we strive to interact with all clients in an investment program where we would be held to the Fiduciary standard.
At Chatterton & Associates, our team of expert financial advisors value each of our clients with the upmost respect and duty to provide the in-depth analysis and ongoing recommendations needed to achieve financial success and stability. To request more information about our full suite of financial planning services or to speak with our staff directly, contact Chatterton & Associates today.