Written by Courtney Grusendorf, White Oaks Intern:

In financial planning, there is an “F” word that circulates throughout the industry: fiduciary.  However, most people don’t know the importance of the word and how it should impact their decisions when exploring options for financial advice.  Pursuant to federal law, Certified Financial Planner™ or CFP® professionals and investment advisors regulated by the SEC are obligated to abide by the fiduciary standard.

But what does this mean?  The fiduciary standard says a CFP® must put the client’s interests before her own.  Doing so would include recommending the best-suited products for that client by disregarding the interest of the advisor, being transparent concerning compensation, and disclosing all conflicts of interest that may arise within the relationship.

It is important for consumers to look for professionals under the fiduciary standard so they are getting the “best bang for their buck”.  If a consumer were to go to a professional who wasn’t under the fiduciary standard, such as a broker-dealer registered with Financial Industry Regulated Authority or FINRA, he or she would be receiving services under the “suitability standard of care”.  In this case, the advisor would only have to give advice he believes is suitable for the client, but not necessarily in the best interest of the client.  I once heard the metaphor that outlines the difference very simply: fiduciary is a tailored suit fit for one person only, and suitability is a suit anyone that size could wear.

Until very recently, a new rule was going to be enacted that expanded the range of professionals who would be subject to the fiduciary standard.  The new group would have included those that manage retirement money including defined-contribution plans, defined-benefit plans and 401ks to add more protection for the accounts where most Americans have their savings.  Even though the Labor Department will not be pursuing such a rule, the SEC is considering how to revive the rule on its own.

Since White Oaks was founded over 30 years ago, the fiduciary standard has been our number one priority.  We ensure that our clients are receiving the best care with their finances and that their needs are the main driver of our recommendations.  Our firm was cultivated to ensure that we would always be on the client’s side, and that will never change.

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