When was the last time you or a loved one needed to go to the doctor? Think about what you expected when you went: You probably wanted an accurate diagnosis, based on your doctor’s training and knowledge; you almost certainly wanted to know what you needed to do get better. How important was the element of trust in your interaction? How important was it for you to know that your doctor’s advice was based solely on what was needed for good health, rather than some other consideration?
Here’s another scenario: Think about the mechanic you trust to fix your car. If you’ve developed a relationship with a good mechanic, you know how reassuring it is to be able to take your car in and know that you won’t be sold a bill of goods: stuff that you really don’t need. You trust your mechanic to tell you what’s wrong with your car and provide only the service and parts required—not adding on things just to pad the bill for the shop. When your relationship with your mechanic is built on trust, you believe that the expert has your best interests in mind.
That foundation of trust is the basis for how we operate at Aspen Wealth Management. In fact, it defines the standard by which we govern our business: the fiduciary standard. This means that we act as a fiduciary on behalf of our clients. Every piece of advice we provide, every course of action we recommend, and every financial product we offer must meet the ethical and professional requirements of the fiduciary standard by which we operate.
But what, exactly, is the fiduciary standard? Why should it matter to you, and what difference does it make to your investment accounts and financial planning whether your advisor is a fiduciary or not?
Here’s a basic definition. The Merriam-Webster Dictionary defines the word “fiduciary” as “of, relating to, or involving a confidence or trust.” In other words, when a person is in a fiduciary relationship or acting in a fiduciary capacity, they are in a position of trust and obliged to perform in a trustworthy manner toward the other party in the relationship.
In the financial advising industry, this definition is perhaps best captured by the “fiduciary standard of care” as described by the Certified Financial Planner® (CFP®) Board of Standards. Here, a fiduciary financial advisor is professionally and ethically committed to “act in their client’s best interests at all times when providing financial advice and financial planning.” What does it mean to act in a client’s best interest at all times? Here are several examples of how a fiduciary advisor is expected to conduct business, according to CFP® standards:
- Placing the client’s interests above their own interests or the interests of their firm.
- Avoiding conflicts of interest with clients or obtaining informed consent and properly managing the conflict.
- Continuing to put the client’s interests first, even when acting under a conflict of interest.
- Complying with the terms of the client engagement letter and following client directions, so long as they are reasonable and lawful.
- Acting with care, skill, prudence, and diligence based on the client’s goals, risk tolerance, objective, financial status, and personal circumstances.
(Source: https:// www.letsmakeaplan.org)
This has several practical implications in our day-to-day interactions with clients. For example, a fiduciary advisor should never recommend a product or service to a client solely on the basis of how much profit it will generate for the advisor or firm. When that happens, the client’s interests become secondary to those of the advisor, so such actions are prohibited for a fiduciary advisor. Also, if costs or fees are involved in a recommended course of action, a fiduciary advisor is obligated to reveal those fees to the client in writing before any action is taken. This is the only way the client can have all the necessary information before making a decision. Perhaps most important of all, a fiduciary advisor should never recommend any course of action until they have a full understanding of the client’s financial situation, including their goals, needs, level of financial understanding, and priorities. In other words, a fiduciary advisor is professionally and ethically bound to know clients as thoroughly as possible before giving any advice or recommending any particular product or service.
Let’s assume that all the above sounds good to you and you’d like to make sure you’re working with a fiduciary advisor. One good way to do that is to simply ask the advisor, “Are you a fiduciary?” And there are other questions you can ask to explore this, including:
- How do you get paid for advising me and providing financial services?
- Will you inform me about any costs and fees before making a recommendation?
- How do you decide which investments are best for my situation?
- How often will you get in touch with me, and how soon might I expect you to return my calls or emails?
- What will you do to keep my costs and fees as low as possible?
- What professional credentials and training do you have?
If you’re talking to a fiduciary advisor, they should be able to give you straightforward answers to these questions that are free of insider jargon. In other words, if you don’t understand the explanation, your best interests are likely not being put ahead of everything else.
As a fiduciary financial planner and advisor, Aspen Wealth Management is committed to placing our clients’ best interest first in every action we take. We believe this is the best way to provide the type of help and service that our clients need in order to achieve their financial goals. By acting as fiduciaries for our clients in all we do, we strive to earn their trust, every day.
To learn more about our fiduciary standard and how it guides the way we work with clients, please visit our website.
