Fiduciary Duty: Acting in Your Best Interest
A fiduciary is a person or firm who acts on behalf of others and is obligated to put their clients’ best interests first at all times.
However, not everyone providing financial advice claims to be a fiduciary. For example, brokers are regulated primarily under the Securities Act of 1933 and the Securities and Exchange Act of 1934 as either issuers or sellers of securities.
While they may also provide portfolio management or advisory services, brokers often earn sales commissions for the financial products they sell to investors—meaning their incentives may not necessarily aligned with their clients' objectives.
*Fisher Investments is registered with the Securities and Exchange Commission (SEC), but this registration is not an SEC endorsement of Fisher Investments or its services, nor does it indicate that Fisher Investments has attained a particular level of skill or ability.
How to Choose the Right Investment Professional
A good place to start in your search for an investment manager is a registered investment adviser who adheres to the fiduciary standard. There are, however, other important aspects to keep in mind. The best adviser for you likely depends on your personal situation and preferences.
To make sure a financial professional is a good fit, we believe you should ask the right questions. Some important topics to cover are an adviser’s investment philosophies, sources of compensation and any potential conflicts of interest. The answers can help you determine whether a potential financial professional is really acting in your best interest. Below are a few examples:
Aside from what I pay you directly, what other compensation or commissions do you receive?
Many financial professionals earn some or all of their money from commissions, sales charges and other fees linked to buying and selling particular investment products. This can create a conflict of interest—an incentive to recommend products or services that can lucratively compensate the financial professional, even if these products and services may not necessarily be in your best interests. This can also make it hard to understand how much you’re actually paying.
Is actively communicating with clients your main priority or do you have other roles and responsibilities within the firm?
Brokers and other financial professionals often have multiple roles: sales, research, day-to-day operational tasks, client service calls, staff management and so on. That means they might need to manage hundreds of client relationships. These factors can make it difficult for them to keep up with all of their responsibilities—or to master any one of them. A financial professional with a wide range of responsibilities might not proactively keep you up-to-date with the latest market and portfolio changes or regularly check in to discuss changes to your personal situation.
Who will help me determine my long-term goals, and how will those goals affect my portfolio’s asset allocation and investment strategy?
You have unique goals for your investments, and your portfolio should be tailored to help you achieve them. There are many factors that should help drive portfolio decisions, including financial goals, time horizon, age, personal preferences, and understanding of and preferences for investment risk. Many financial professionals focus on some of these factors, but few provide comprehensive and ongoing personalized portfolio construction and maintenance services. Even fewer provide clients with the resources and support they need to maintain investing discipline over time.
Who makes the investment decisions for my portfolio and how will changes to my financial situation be taken into account?
Some financial professionals often aren’t the actual decision makers for their clients’ investments. A broker might recommend owning multiple mutual funds, claiming this would adequately diversify your portfolio. They may even outsource investment management to a third party. This means multiple fund managers’ strategic decisions are combined to determine your overall portfolio success. Each might naturally make different decisions for your portfolio without coordinating their strategies—and without taking your personal financial situation and objectives into account.
Fisher Investments’ Fiduciary Approach: When You Do Better, We Do Better
Trust is at the heart of a good client-adviser relationship.
By operating as a registered investment adviser, Fisher Investments holds itself to the fiduciary standard because of the clear signal it sends to our clients. Our clients can take comfort in knowing we always act in their best interests and disclose any potential conflicts of interest. Upholding the fiduciary standard also helps ensure that our firm’s structure, values and culture are designed so that we always do what is right for our clients.
Below are a few ways that our fiduciary duty is reflected in our structure and services:
We Have a Transparent Fee Structure
We are a fee-only adviser. Our fee is simple: It’s determined by the size of the portfolio we manage for you. This aligns our incentives with yours—we do better when you do better. While you pay transaction charges directly to a third-party custodian who holds your investments, we do not receive those commissions. So while some financial professionals may call you to sell products or earn sales commissions, we only trade in your portfolio when we believe it is in your best interest based on our forward-looking market forecast.
We Have a Specialized and Dedicated Service Organization
Since we began managing discretionary assets in 1979, we’ve been structured to minimize conflicts of interest common in our industry. We intentionally separated our sales, client service and portfolio management responsibilities, allowing us to focus our employees' efforts and build efficiencies in each area. We are solely an investment manager and we do not engage in other business activities such as investment banking, insurance sales, custodial services, or other activities that attempt to sell you additional financial products. This specialization and investment management focus helps ensure our clients’ best interests and long-term goals are best served.
We Don’t Have Custody of Client Assets
We work with third-party custodians to house our clients’ assets. This relationship helps provide transparency consistent with our fiduciary duties and instill trust in our asset management relationships. When Fisher Investments first began managing client assets, our founder Ken Fisher knew that having an independent third party who provides regular client reporting was crucial to fostering client relationships. This means that, though Fisher Investments generates its own client reports, your custodian also provides regular reporting for your accounts, so you know what’s going on.
We Provide Personalized Advice
We believe good investment advice focuses on your long-term goals and your best interests as a client, which is why we offer a holistic approach to help you reach your long-term financial goals. As a client, you have access to an array of services. Whether it’s helping define our initial investment strategy, mapping out the impact of different investment decisions, helping create an estate plan or even navigating life’s major non-financial decisions—like transitioning into retirement—we can help. We take the time to understand you, your family and your overall financial situation. Then, we work with you to help identify and evaluate your investment goals and objectives so we can provide resources and help you take specific, actionable steps toward achieving your goals.