By Michael Gold, CFP®, MBA Founder & CEO – Wealth Advisor
When you trust an advisor with your hard-earned money and your family’s future, one critical factor that bears great importance is the professional standard of care they must meet when working with you. Every industry has standards, some legally regulated more extensively than others. In the financial world, you will hear and read about two distinct standards: the fiduciary standard and the suitability or best interests standard. It may seem very confusing so we will cover the difference in just a moment, but first, let’s touch on the implications from a client’s point of view.
Why The Standard Matters To You
Think about the first time you bought a car or anytime you made a significant purchase in your life. If you own your home, think about the first day you started to peruse the listings or the first time you drove out to tour a potential home. Making a major investment can be stressful, fraught with complications and a myriad of options. The process can easily become overwhelming, compounded with the fear of making the wrong decision. The quality of your buying experience, for better or worse, more than likely stemmed from the trustworthiness and competence of the professional who served you. You might also think about the best and worst buying experiences you’ve had in the past and think about the contrast between them.
The Link Between Standards And Trust
When making any important investment or decision that will have a significant impact to your life, you obviously want to work with professionals with high-integrity, comprehensive knowledge and a level of mastery in their field. Think what you would want if you or a loved one needed a medical procedure. You want the best doctor or surgeon with the most experience, expertise, a good bedside manner and unquestionable integrity. This should also be the standard you should not only expect, but demand of those who are the stewards of your financial life.
Unfortunately, in other industries including the financial and investment field, other factors come into play, separate from moral character. A salesperson or financial advisor may be completely honest and want nothing more than to give you the best service, but conflicts of interest may still arise. Sometimes there are advisors operating under specific mandates from their employers which can conflict with their customers’ interests, such as a requirement to sell or promote only specific product lines—even when the salesperson knows of an option that would better serve the customer. Such conflicts can easily occur in the financial world. How do you know if these conflicts exist? How do you know what standard of care your financial advisor is delivering to you?
The Fiduciary Standard Vs. The Suitability Standard
A financial advisor bound to a “fiduciary” standard1 is legally obligated to put the client’s interests ahead of his or her own. By contrast, a “suitability” standard is more relaxed. An advisor in the “suitability” standard world might tell you about a product that satisfies the requirements you stated, knowing all the while about a superior option that pays a lower commission. A suitability standard allows an advisor in this case to tell you only about the higher-priced product, which is perfectly “suitable” but does not serve you best.
In financial planning, clients who lack financial knowledge may find themselves easily confused by the different scenarios and investment vehicles available. That’s why it is important to work with a fiduciary—an advisor who is ultimately responsible for your financial success. A fiduciary will strive to minimize conflicts of interest and to disclose potential conflicts when they arise. A fiduciary must present the best options to serve your interests. Typically, fiduciaries are paid a fee structure based on the performance of your portfolio, which strengthens the relationship by aligning the interests of the advisor and the client.
The Bottom Line
Just as we would only want to work with the best doctors and surgeons with unquestionable integrity, we also know that all doctors take an oath which is why there is a high degree of trust. Since it is not as clear in the financial world, to ensure this standard of care and level of trust, my suggestion is to get in writing from your advisor if they are in fact held to the fiduciary standard of care. If you’re interested in teaming up with a financial/wealth advisor who will put you first, reach out to Gold Family Wealth at [email protected] or (800) 303-2533 to schedule a complimentary consultation. Allow us at Gold Family Wealth, LLC to help you start taking control of your finances!
Michael Gold is the Founder and CEO, Wealth Advisor of Gold Family Wealth, an independent wealth management boutique and named one of the Top 100 People in Finance. Michael has 20 years of experience in the financial industry and has a bachelor’s degree in business and economics from the State University of New York College at Oneonta, an MBA from NYU Stern School of Business, specializing in Quantitative Finance and Leadership and his CERTIFIED FINANCIAL PLANNER™ (CFP®) credential. He serves business owners and entrepreneurs by stress-testing their financial plan to identify red flags and missed opportunities. Michael strategically outsources professionals from various fields, such as tax, insurance, retirement and trust and estate law to collaborate on potential solutions to help position his clients to pursue their desired goals.
Michael currently lives in Westport, CT. When he’s not working, you can find him spending time with his wife, Giselle, their three children, Sebastian, Aria, and Pierce, and their dog, Charly. To learn more about Michael, connect with him on LinkedIn.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Gold Family Wealth, LLC), or any non-investment related content made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Gold Family Wealth, LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Gold Family Wealth, LLC is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Gold Family Wealth, LLC’s current written disclosure statement discussing our advisory services and fees is available upon request. If you are a Gold Family Wealth, LLC client, please remember to contact Gold Family Wealth, LLC, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services.
Investment advisory services offered through CWM, LLC, an SEC Registered Investment Advisor. Carson Partners, a division of CWM, LLC, is a nationwide partnership of advisors.
“Top 100 Magazine selections are made utilizing proprietary software, which employs an algorithm to search a variety of online resources for industry-specific terms and key words. These resources include social media, blog posts, peer reviews, and Google indices. In addition, wealth managers must also the following criteria: 1. Registered with the SEC as a registered investment adviser or a registered investment adviser representative; 2. Not more than 1 filed complaint and never been convicted of a felony. Listing in this publication and/or award is not a guarantee of future investment success. This recognition should not be construed as an endorsement of the advisor by any client.”