So, you hired a financial advisor to help with your retirement planning. You would want to know that your advisor is acting in your best interests, not their own.
This is where fiduciary duty comes in. A fiduciary is someone entrusted with the care of another's assets. They have a legal responsibility to act in the best interests of the person or entity they serve.
This is why hiring an accredited investment fiduciary (AIF) is vital. An AIF has met the requirements set by the Securities and Exchange Commission (SEC) to ensure they will always act in their clients' best interests.
What Is Fiduciary Duty?
Fiduciary duty is the legal responsibility to act in another's best interests. The Obama administration passed this law through the Department of Labor in 2015.
It is considered the highest standard of care in the financial services industry. All accredited investment fiduciaries must adhere to this standard.
How Does Fiduciary Duty Apply?
The Department of Labor's fiduciary rule applies to anyone who provides "investment advice" for a fee or other compensation. This includes financial advisors, brokers, and insurance agents.
If you work with any of these professionals, they must adhere to the fiduciary standard. This means they should always act in your best interests, not their own.
For example, let's say you work with a financial advisor to create a retirement plan. The advisor must put your best interests first and recommend appropriate investments for you.
They cannot push products that would benefit them instead of you. It is against the fiduciary rule to advise a product that does not fit your goals in exchange for a commission.
What Is an Accredited Investment Fiduciary (AIF)?
The AIF is a professional certification that demonstrates an advisor or other person serving as an investment fiduciary has met specific requirements to earn and maintain the credential.
To become an accredited investment fiduciary, one must:
Why Should You Hire an AIF?
You should hire an accredited investment fiduciary because they have a legal responsibility to act in your best interests. This means they will always put your needs first and recommend appropriate investments for you.
They also passed a rigorous exam and adhered to a code of ethics. This ensures that they are qualified and trustworthy professionals.
If you are looking for financial advice, it is crucial to work with someone with your best interests at heart.
The Bottom Line
An accredited investment fiduciary is entrusted with the care of another's assets. They have a legal responsibility to act in the best interests of the person or entity they serve.
The Department of Labor's fiduciary rule applies to professionals that provide services and advice for a fee or other compensation. They are legally required to adhere to the fiduciary standard and act in their clients' best interests.
The AIF is a professional certification that demonstrates an advisor or other person serving as an investment fiduciary has met specific requirements.
To become an accredited investment fiduciary, one must pass a rigorous exam and abide by the code of ethics.
You should hire an accredited investment fiduciary because they have a legal responsibility to act in your best interests and are qualified professionals.
If you are looking for financial advice, it is essential to work with someone who puts your needs above theirs.
FAQs
1. What happens if my financial advisor does not adhere to the fiduciary rule?
If your financial advisor does not adhere to the fiduciary rule, they violate the law. This could result in penalties or even losing their license. You can file a complaint with the Department of Labor if you believe your advisor is not acting in your best interests. You can also switch to a different financial advisor that does adhere to the fiduciary rule. Make sure you do your research and only work with accredited investment fiduciaries.
2. How to identify an accredited investment fiduciary?
An accredited investment fiduciary will have the AIF designation. This means they have completed the AIF training program, passed a thorough exam, and have the required experience.
3. What are the benefits of working with an accredited investment fiduciary?
The main benefits of working with an accredited investment fiduciary are: they have a legal responsibility to act in your best interests and recommend appropriate investments for you, and they passed a rigorous exam and adhered to a code of ethics. This ensures they are qualified and trustworthy professionals.
4. Is it expensive to work with an accredited investment fiduciary?
No, it is not expensive to work with an accredited investment fiduciary. In fact, they may be cheaper than working with a financial advisor who does not adhere to the fiduciary rule.
5. Can they still earn commissions from products they sell?
Yes, an accredited investment fiduciary can still earn commissions from products they sell. However, they must disclose any potential conflicts of interests to their clients.
