Now this Investment Advisor is throwing his hat into the ring, offering his opinion from a philosophicalmoral
point of view. The industry is at a crossroads; do we have the ethical fortitude
to treat our clients with the same high regard that other industries
do?
Lets review; The Fiduciary Standard requires that the advisor put their clients interests ahead of their own, their firm, commission http://www.eaglesfootballpro.com/Wes-Hopkins-Eagles-Jersey/ , or product. An RIA or Registered Investment Advisor must follow this standard
the Trust standard, the highest known in law, and fulfill critical fiduciary
duties of trust and confidence and must provide its best advice.
In contrast, The Suitability Standard does not require a Financial Advisor to place
the interests of its clients ahead of its own, their firm, commission or
product. This is commonly known as a sales oriented or non fiduciary Financial
Advisor. Even if a non fiduciary Financial Advisor wanted to follow the trust
standard and become a fiduciary to its clients, it cannot do so because of the
contract it has with the BrokerDealer. Such contracts require the Financial
Advisor to place the interests of the BrokerDealer before the interest of the
client. In other words, if a client qualifies for an investment, the Financial
Advisor can sell it to them while ignoring the Know your client rule. This means
that a Financial Advisor can make recommendations and sell products based on
which ones pay the highest commission.
Unfortunately http://www.eaglesfootballpro.com/Wendell-Smallwood-Eagles-Jersey/ , most clients and the public at large dont have a clue that standards exist, let
alone the difference between a Fiduciary Standard and a Suitability
Standard.
In the medical profession, the Hippocratic Oath is taken by doctors, swearing them to ethical practices of medicine. Most people know that
doctors are held to a higher standard, so why shouldnt Financial Advisors be
held to a higher standard that the public is well aware of. Would you accept a
doctor to take care of your health who had a lesser standard? Of course not, so
why would you accept a Financial Advisor with a lesser standard to take care of
your financial health? Most people in their right mind wouldnt, but as I
previously stated most people just arent aware or informed that there is a dual
standard in our industry.
I believe that to solve this problem the industry has to first start changing the way it hires its financial advisors.
Can anybody be a doctor? Of course not, if it was easy everybody would do it. So
should be the same with the way Financial Advisors are hired and trained. The
norm today among the large brokerdealers is to hire a lot of advisors, get them
to pass their licenses http://www.eaglesfootballpro.com/Vinny-Curry-Eagles-Jersey/ , provide basic training, and then make them essentially sales peopleorder takers
to bring in the required amount of AUM in the stated amount of time. Dont worry
about investing the clients money, we have experts who will take care of that.
Not that there is anything wrong with delegating those duties, but you still
have to know how to manage the money managers if your not doing it yourself. A
football coach manages his players and knows when one of them is underperforming
he is ready to pull him out and send in another replacement.
Heres what we can do start by hiring fewer new Advisors. Next, in addition to the licenses
currently required, introduce a new FiduciaryEthical license thats a requirement
not only in the financial services industry, but in other industries as well
such as; mortgage lending, banking, real estate http://www.eaglesfootballpro.com/Trey-Burton-Eagles-Jersey/ , insurance, etc. Spend more money on intensifying the training including how to
manage money. Then place them with a seasoned Advisor or team to mentor them.
Finally, they all should be Fiduciaries. Anything less is a disgrace to our
industry and our clients.
Even now the Fiduciary Standard is not much defined beyond your best interest will come first. Even if you claim to be a
Fiduciary in name, you have to actually perform like a functional fiduciary. We
need high standards, not watered down ones. We need to be the stewards of our
clients money, and we need to be transparent, driven by a code of ethics and
principles and a standard of professional conduct that makes us
accountable.
Whether your fee based or commissioned, selling one product line or many, you still can be a fiduciary to your client.
Just for a moment imagine if all the people who were involved in selling mortgages during the real
estate boom had took the time to know their client http://www.eaglesfootballpro.com/Torrey-Smith-Eagles-Jersey/ , explained the pitfalls of the mortgage they were seeking and had held their
lending requirements high, they would have made fewer sales, but they may have
helped avoid or dampened the housing collapse.
With the spotlight on the financial industry right now, we have an opportunity to show the public we are
capable of doing the right thing. Proactively, we can adopt a single higher
standard for the industry and educate the public to accept only this
standard.
By monitoring and legislating from within, we can demonstrate to the public that our industry possesses the integrity and discipline to put
the clients best interest ahead of its own.
Author's Resource Box
Thomas G. Chipain President Investment Advisor Founder of http:ReviewMy401k LLC & T.G. Chipain Financial Group LLC After 25 years as a successful
business owner, Thomas Chipain entered into theScouts Starting Pitchers On Trade
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