A fiduciary standard of care is the highest degree of business responsibility a person or company can have to another. It means that an advisor must put your interest ahead of their interest.
A long-standing federal law, the Investment Advisers Act of 1940, requires Registered Investment Advisors to meet this fiduciary standard of care.
Be aware that many companies and their employees that call themselves advisors are not Registered Investment Advisors and are, therefore, not bound by a fiduciary standard. These brokers are only required to operate under a “suitability standard” which simply means that any recommendations they make only needs to be suitable for someone in your circumstances even if it isn’t in your best interest.
Recently, the Department of Labor enacted what is commonly referred to as “The Fiduciary Rule” which requires anyone giving advice to retirement accounts (IRAs, Roth IRAs, etc.) to meet a fiduciary standard of care. While we believe this is an important first step to ensure that ALL investors are treated fairly, there are exceptions that allow the rule to be circumvented and it does not apply to non-retirement assets.
Regardless of who you work with to provide financial and investment advice, we recommend making sure that they are either bound or agree, in writing, to work under a fiduciary standard of care 100% of the time.