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Fiduciary Rule Puts Investors First

Is your advisor a fiduciary? Why should you care?

A fiduciary is a person in a position of trust who is charged with acting in the best interest of another.

If an advisor is a fiduciary they must understand a client’s investment needs and risk preferences. They review and recommend investments that are in the client’s best interest and that best address those needs. Finally, fiduciaries monitor investments, recommending them with care using reasonable criteria.

In addition, fiduciaries are charged with minimizing conflicts of interest. For example, when it comes to paying a fiduciary on a retirement plan, that compensation must be reasonable and not excessive. The compensation is fully disclosed and clear to all involved.

Although an advisor that is not a fiduciary may act in the same manner, there is another approach, which is the broker relationship. Think of the real estate broker who shows you a home they listed. That person represents the seller and may seek to close the deal on a house that is “suitable” for you, but not necessarily the best house for you, and at as high a price as they can get for the seller.

Today some advisors work as brokers, some as fiduciaries, and sometimes both. Starting next year, according to the Department of Labor’s 2016 fiduciary rule, if a professional advises a retirement plan with regard to investments, he or she is a fiduciary to the participants. This includes individual IRAs, which many people have. The advisor is charged with putting the employees’ interests first.

If that sounds like what you would expect as a client from a financial advisor…we agree completely.

So how can you know which type of advisor you have? At least two credentials signify that the advisor is knowledgeable and conducts themselves as fiduciaries: the Accredited Investment Fiduciary® or AIF® and the CERTIFIED FINANCIAL PLANNER™ professional or CFP®.

So check to be sure that your advisor embraces the fiduciary standard today and enjoys working with clients in this capacity. We believe it better aligns the interests of the clients and the professionals with whom they work.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Private Advisor Group, LLC, a registered investment advisor. Private Advisor Group, LLC and Brightworks Wealth Management, LLC are separate entities from LPL Financial.

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