FEATURE — Making investments can be scary, and it is often difficult to know which financial advisers can be trusted to handle your hard-earned money.
In the financial industry, there two standards of ethics – the fiduciary and the suitability. Fiduciary is the latest buzzword in the industry, and Ben Chappell of Foresight Wealth Management said it is a “big deal” and can really affect the way your financial adviser helps with your investments.
Learn more about how Foresight Wealth Management can help you in the Ask a Local Expert video in the media player above.
Of the two standards, Chappell said most financial advisers are held to the higher fiduciary standard, which requires them to act completely according to their client’s wishes and to give sound investment advice regardless of possible compensation.
“If there is ever a conflict of interest, like an investment that pays a commission, they need to disclose that plainly,” he said.
The second, a more “loose” standard of ethics is known as the suitability standard, only requires that advisers reasonably believe in their recommendations and are not required announce if they are aware of a possible conflict.
Just like with a doctor or lawyer, you want to make sure your financial adviser is working with your best interests at heart. Unfortunately, those held to a lower standard have the freedom to act like “investment salesmen,” Chappell said, and will often recommend investments that pay the highest commission, regardless of the consequences for their clients.
There have been a few proposed regulations that will require all advisers to act both morally and legally for their clients, Chappell said, but for now, when it is time to start looking for help with your investment portfolio, it is best to find a fiduciary like the team at Foresight Wealth Management.
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