One of the challenges for Portfolio Stewards’, the registered portfolio manager for Wealth Stewards clients, is being perceived as an investment advisory firm, usually synonymous with brokers of financial products. That could not be further from the truth!
What we are is a portfolio manager with a fiduciary responsibility to our clients. Because new legislation requires that the financial services industry must now report the fees and commissions they earn from their investors’ assets, understanding what a fiduciary is becomes increasingly important. Whether the CRM2 legislation actually helps achieve the level of transparency and awareness of fees that was hoped for, or not, investors need to understand the responsibilities and differences of fiduciaries vs. financial advisors/brokers.
So what the heck is a fiduciary?
Essentially, a fiduciary is bound ethically and legally to act in the best interests of the clients they represent; in other words, a portfolio manager must manage their clients’ assets for the clients’ best interests, not to generate the highest profits for the firm. A fee based on a percentage of the assets managed is charged for the firm’s services, which is clearly outlined in the investment management contract and signed by the client.
By contrast, a financial advisor (broker) primarily benefits from the commissions and other fees they earn based on the choice of products they recommend; so, their advice can be inherently biased and conflicted.
Investors across the country have been opening their 2016 year end statements and likely are getting a shock. This is the first time they will see in detail what their advisors are earning from their investments, with many believing they pay no fees at all. Investors may start to wonder whether they receive proper value for the fees they pay and if they have put their money in the right hands.
Maybe it is time to ask their advisors some hard questions and learn more about the investment choices they make.
Is it time to choose to work with an ethically-bound fiduciary and not an incentivized financial advisor?
All examples are for illustrative purposes only and are not intended to provide individual financial, investment, tax, legal or accounting advice. This material is for general information and is subject to change without notice. Every effort has been made to compile this material from a reliable source. However, we cannot guarantee that information will be accurate, complete and current at all times. Before acting on any of the above, please make sure to see a financial professional for advice based on your personal circumstances.