What’s Different About a Fiduciary Advisor?

I recently read a post by Kate McBride regarding the differences between an advisor held to a fiduciary standard and a broker held to a suitability standard.  It was short, accurate and to the point.  Therefore, I credit her entirely for the comments below:

What’s so different about a fiduciary advisor as compared to an advisor who meets the minimum requirements of the suitability standard?

It’s the legal duties to the client.

The suitability standard is a business standard, similar to the standard of a salesman, where you know you have to look out for yourself.

The fiduciary standard requires an advisor, like your family doctor, to be loyal and always put the client’s best interests first. This best interest requirement has practical consequences for investors. The fiduciary (best interest) standard means advisors must:

• Use the judgment of a professional to only select and recommend products in the investors’ best interest
• Either avoid or disclose and manage conflicts of interest
• Describe, before beginning work, all compensation, incentives, commissions, and expenses
• Ensure expenses are fair and reasonable
• And, of course, do only what’s best for investors.

An advisor only required to meet the suitability standard is not required to do any of these things.