Updates

For many people, the term fiduciary isn’t a part of their regular vocabulary. But, it’s important. Being able to trust the person who is managing your financial legacy to put your goals and preferences first is vital. I think we can all agree on that.

So, what exactly is a “fiduciary,” you might ask?

A fiduciary is a person or entity responsible for acting in the best interests of others. In the case of an investment advisor, their responsibilities or duties are both ethical and legal. When an investment advisor knowingly accepts a fiduciary duty on behalf of their clients, he or she is required to act in the best interest of the client, the person(s) whose assets they are managing.

Common Sense

This may seem common sense to most people. Shouldn’t all investment advisors hold a fiduciary duty? But, that simply isn’t the case. In the case of a broker-dealer, they are held to a suitability standard of conduct. So, their investment recommendations must be suitable for investors based on their financial profiles, but those advisors are not required by law to act in their clients’ best interest. Broker-dealers are often compensated by commissions on transactions that can put them in conflict with the interests of their clients.

Highest Standard of Care

On the other hand, fiduciary duty is one of the most revered and powerful aspects of the financial industry. Fiduciary duty requires an investment advisor to act in the best interest of his or her clients, and when a named fiduciary does not do so, the consequences can involve civil or even criminal penalties. In fact, according to the Cornell Law Dictionary, “A fiduciary duty is the highest standard of care.” It entails always acting in your beneficiary’s best interest, even if doing so is contrary to yours.

According to the Securities and Exchange Commission, which regulates registered investment advisors as fiduciaries, the fiduciary duty also entails:

Acting with undivided loyalty and utmost good faith
Providing full and fair disclosure of all material facts, defined as those which “a reasonable investor would consider to be important”
Avoiding conflicts of interest (such as when the advisor profits more if a client uses one investment instead of another) and disclosing any potential conflicts of interest
Never misleading clients
Never using a client’s assets for the advisor’s own benefit or the benefit of other clients

How will I know?

You may wish to know how you could tell if the person managing your assets is a fiduciary. It’s really pretty simple. Investment advisors are registered with the SEC or a state securities regulator and are fiduciaries – meaning they are subject to the duty of loyalty and due care with their clients. They are typically compensated by asset management fees (“fee-only” or “fee-based”) and are expected to act in the best interests of their clients.

On the other hand, Stockbrokers, broker-dealer representatives, insurance agents and others who provide investment advice are regulated by the private-sector organization Financial Industry Regulatory Authority (FINRA) or by state insurance regulators and are subject only to a “suitability” standard of conduct. And, you might be aware that the new regulation raising the responsibility bar for brokers, has been effectively canceled after a review in March.

In conclusion, everyone should be aware of whether the person or firm who is responsible for their investment management is a fiduciary or not. You can simply ask your advisor, or you can look up their registration with the SEC or FINRA

Vision

The partners of AP Wealth Management are proud to be a registered investment advisor and to be held to a fiduciary standard of care. As a fiduciary, our team personalizes a plan of action for our clients and collaborates with all who are involved in the client’s financial life in order to provide the best care for them. We always prioritize client objectives, rather than institutional initiatives. When developing the vision for our firm, our partners realized the weight of this responsibility and felt it important to capture that in our vision.

We strive to provide uniquely crafted, personalized financial management solutions that empower our clients to ATTAIN their financial objectives, build their wealth, and PROTECT their legacy, while embracing the highest standard of excellence.

In fact, our fiduciary duty is why we follow a disciplined process to focus on generating TOTAL RETURN, by emphasizing investment income rather than relying solely on capital appreciation. Our custom portfolios form a balanced and methodical approach to investing.

We achieve success through our two-fold strategy – seeking overlooked opportunities in our asset allocation as well as customizing portfolios for each client.

If you’d like to learn more about how the partners at AP Wealth Management could help you, please give us a call at (706) 364-4281 or send us an email at [email protected].

Even if we’re not the right firm to fit your needs, we’re happy to help you learn so that you can make an educated decision on who could best help you reach your goals and build a financial legacy.

Additional Resources

What is a Fiduciary? Why Does it Matter?

Gene McManus, CPA, CFP
Managing Partner
[email protected]