Fiduciaries and Why They Matter

john oliver

(pictured above: a recent “Last Week Tonight” segment by John Oliver on fiduciary duty)

Following is a Q&A with Linda Taylor, Portfolio Manager at Carlisle Financial Group, on the term fiduciary, why you’re probably hearing it used a lot lately, and the one question you cannot afford to skip.

1) What is the meaning of the term fiduciary and why should I care? The word fiduciary comes from the Latin word fiducia for trust. Simply put, a fiduciary puts their clientsʼ interests first, always acts with the utmost good faith to provide full and fair disclosure of all material facts, never misleads clients, and fully discloses any and all conflicts of interest. This provides a significant level of protection for a client as a fiduciary must never act in a way that unfairly benefits them at the expense of their client.

2) But aren’t all financial advisors looking out for their clients’ best interests? Not necessarily. It’s important to know that financial and investment advice comes from two different types of professionals. Registered Investment Advisors already meet a fiduciary standard. Almost all the others — stockbrokers, broker-dealer representatives and people who sell financial products for banks or insurance companies are held only to a “suitable investment standard.” Since many brokers or insurance agents now call themselves “advisors” this leaves a lot of gray area. Receiving commissions or other incentives to sell particular financial products means that a broker may be prioritizing their own commission or their company’s revenue which might not be acting in your best interest at all.

3) Why am I hearing the word fiduciary so much recently? Because this past April, the Department of Labor finalized a rule to address the many conflicts of interest by non-fiduciaries (such a brokers) who give retirement advice. The new rule states that these “financial advisors” must begin to uphold a fiduciary standard when the rule goes into effect in April 2017 –– they can no longer steer these assets into high cost investments, instead they must put their clients’ best interests ahead of their own.  Note: at the moment, this only applies to retirement accounts such as 401Ks and IRAs.

4) Why is this ruling so important? It will hold thousands of brokers, insurance agents and other financial advisors who have been operating under the suitability rules to a higher standard of care. Many firms will try to fight this new rule as this change will cause the income they receive to go down dramatically –– as more money stays in clients’ retirement accounts.

5) What’s the most important takeaway for consumers? Always ask the person giving you investment advice this question: Are you operating under the fiduciary standard at all times while giving advice and/or managing my money?

Carlisle Financial Group is a Registered Investment Advisor and has always operated under the fiduciary standard. As a value oriented investment firm, our mission is to help clients build and preserve wealth. Questions about this post? As always, please email us at or call us at 978-505-5799. And If you haven’t seen John Oliver’s show from last week where he talks about fiduciaries, check it out here. Just a word of caution, his language is at times colorful to say the least. If you’re easily offended, perhaps one to skip.

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