What is a Fiduciary?

Transcript

In recent years, tied to action from the Department of Labor and a provision of congressional Dodd-Frank bill, there's been a lot of discussion about the fiduciary standard. Now, what's called "'40-Act Investment Advisors" have been, for decades and decades, obligated to operate as a fiduciary. Most sellers of financial services one way or another, haven't been, but there's a general misunderstanding about what is and isn't a fiduciary. Simply said, a fiduciary, in some simple ways, puts the client's interests first, and by that, it is heavily about making things simply in the client's best interest, either in picking the things that are most appropriate to the client, as opposed to just good enough for the client, and then disclosure, so that the client will surely understand your interactions, any confusions, any conflicts of interest, etc., so that the client's interests are put there, not, in some respects, obscure from the client. The problem is that much of financial services has traditionally been operating under what's called a "suitability standard," which, more or less, could be said to say it's good enough, not necessarily what's in the client's best interest. Doesn't necessarily clarify for the client, doesn't necessarily clearly depict all of those features I just described, like conflict of interest. The fact is that the fiduciary standard is a kind of a bright line in the sand, and there's a lot of squabble that has been going on and will continue to go on about how that will be applied more broadly to financial products and services, and I don't know how that'll come out, and I don't believe anybody else does, either. Later this year, 2019, the SEC is to opine more on what they think should happen, and I'm not sure how that'll come out, but my point to you is the simple question of, "Are you a fiduciary or are you not a fiduciary?" is one of the most basic questions to ask and document, and, in writing, to find out if whoever you're dealing with actually has your best interests at heart.