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What is a fiduciary?

Legal Disclosure: Tony Robbins is the Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity based on increased business derived by Creative Planning from his services. Accordingly, Mr. Robbins has a financial incentive to refer investors to Creative Planning.

Did you know that your financial advisor is not legally obligated to act with your best interests in mind? Or that they do not have to disclose to you if they have a conflict of interest? As David Swensen, Yale’s chief investment officer and manager of its nearly $24 billion endowment states, “Your broker is not your friend.”

The hard truth is that financial advisors are only legally required to sell you products that are deemed “suitable.” Essentially, as long as the investment meets the general direction of your goals and objectives at the time it was placed for the client, the advisor is held free of liability. And, it means that they can sell you a product that they or their company receives financial compensation for selling.

While many honest people work within the financial services industry, they work within a system that is set up in order for the house to win. It’s not an evil system – just one created to grow the assets of corporations, not individual investors. However, now there is an alternative – one that has been created to serve the investor without conflict. It is called a fiduciary, and it has been in the news a lot so far in 2015 due to the Department of Labor’s proposal to raise standards and be more transparent about broker’s interests.

Article header image©Dragon Images/Shutterstock 

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