The 411 on Fiduciary Duty

oathLately there has been a lot of talk about Fiduciary Duty and the proposed legislation on the part of the SEC that will more clearly define and regulate the practices of financial advisers and create a more stringent set of rules. For some previously exempt financial service providers, the adoption of such legislation might drastically change the way they do business. So, why is it important that our country enacts such legislation – and why are some advisors crying foul?

In a nutshell, fiduciary duty is defined as the responsibility to act in the best interest of another person or party. For example, in the case of a publicly held business, the board of directors has a fiduciary duty to act in the best interest of all parties that are impacted by the organization’s business dealings. In general, this responsibility exists any time a business relationship requires the client to have a particular level of confidence in and reliance on the decisions made on their behalf. In essence, the client trusts that the fiduciary / advisor / board member will act in their best interest and will make decisions that have the greatest chance of leading to a positive outcome.

As fee-only financial advisers, we applaud the efforts of the SEC to regulate some of the sticking points in fiduciary obligation. We take this duty very seriously when working with our clients. While some people feel that regulation might actually hurt the investor, I would argue that the only people who will be affected by the regulation are advisors who are not currently following the standard.

Fiduciary obligation legislation will also serve to more clearly define the differences in fee-only vs. fee-base financial advisers. The subtlety in the name often causes confusion among clients. To simplify the confusion – remember this…a fee-only adviser does not sell products – they make recommendations to their clients. They do not receive commissions; they only receive payment for the services they provide.  By comparison, a fee-based advisor typically gets a kick-back or commission for selling the customer certain products. And, like all commission based sales, some products are more lucrative than others. 

So, you can see the importance of a more stringent regulation in fiduciary duty standards. The bottom line is that the most important person in the equation – the client – would be protected, and would get exactly what they deserve – the best possible recommendations, with no strings attached.

About Objectively Speaking

Tom Batterman, founder of Vigil Trust & Financial Advocacy and Financial Fiduciaries, LLC is in the business of representing the best financial interests of his clients. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest or expertise to manage such matters on their own. As an objective, unbiased professional who takes on a fiduciary responsibility to his clients, he guides clients to the financial decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options. Founded in 2010 as an outgrowth of Vigil Trust & Financial Advocacy, Financial Fiduciaries, LLC is a financial management solution for individuals and mutual insurance companies who recognize they do not have the time, interest or expertise to properly attend to their financial matters on their own. While there are many financial “advisors”, most of them have investment products to sell and the “advice” they provide is geared toward getting their clients to engage in a purchase. As one of the rare subset of advisors known as “fiduciary advisors”, Financial Fiduciaries does not sell any investment product so its guidance is not compromised by conflicts of interest which plague ordinary advisors. Prior to his employment in the financial industry in financial advocacy and trust positions, he worked at a private law practice in the Wausau area in the areas of estate planning, tax, retirement planning, corporate organizations and real estate. He is a graduate of the University of Wisconsin-Madison and the UW-Madison Law School and has during his career held Series 7, 24 and 65 securities licenses. A longtime resident of the Wausau, Wisconsin Area, Tom is active in the community. He enjoys golf, curling, skiing, fishing, traveling and spending time with his family.
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4 Responses to The 411 on Fiduciary Duty

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