WHAT IS A FIDUCIARY?
The financial industry can be confusing with its many professional titles, including some common ones like brokers or Registered Investment Advisers (RIAs). You may have heard the term “fiduciary investment adviser” but investment professionals rarely define this industry-specific term.
At its most basic level, a fiduciary is a person or firm who is required to put their clients best interests first at all times. RIAs are required to register with the Securities and Exchange Commission (SEC) or the states in which they do business in, depending on how much in assets they manage. In either case, they are held to the fiduciary standard to act in clients’ best interests.
However, not everyone providing financial advice is a fiduciary. Brokers, for example, are generally not currently held to the fiduciary standard and often may call themselves “advisors” or "financial advisors". Brokers often earn sales commissions for the financial products they sell to investors. Because of this, some brokers may have incentives to recommend products that aren’t necessarily in your best interest, but may earn them a larger sales commission.
How to Choose the Right Investment Professional
Some investors try to find their investment manager by hiring an RIA held to the fiduciary standard. This is a good place to start, because these types of advisers are obligated to act in your best interests. However, there are other important aspects of a good adviser to keep in mind and the best one for you likely depends on your personal situation and preferences.
To make sure a financial professional is a good fit for you, you should ask the right questions. Some important topics to cover are an adviser’s investment philosophies, sources of compensation and any potential conflicts of interest. Proper firm structure enables advisers to act on their values, and includes factors like fee arrangements and investment strategies geared to meeting your needs. If your adviser sells commission-based products or values their bottom line over client goals, they may not always serve your needs first.
At the heart of a good client-adviser relationship is trust, and it can be difficult to have that trusting relationship if your financial professional may be recommending products that aren’t in your best interest. That’s why C&D has been held to the fiduciary standard since our founding.
We are a fee-only adviser and don’t earn any commissions by trading in your account. While some brokers may call you to sell products or earn sales commissions, we only place trades in your account based on our forward-looking market forecast. For example, if we forecast that non-US stocks will outperform US stocks, we may overweight non-US stocks in your account. Similarly, if we believe a sustained market downturn has begun, we may choose to take a defensive positioning for our clients in order to sidestep some of the losses.
C&D also works with third-party custodians to house our clients’ assets. This relationship helps provide transparency and instill trust in our asset management relationships. When C&D first began managing client assets, our founder Jack Chisholm knew that having a third-party who provides regular client reporting was crucial to fostering client relationships. This means that, though C&D generates its own client reports, your custodian also provides regular reporting for your accounts, so you know exactly what’s going on.
As a client of C&D, you receive a dedicated Investment Counselor, who knows your long-term goals, financial situation and answers any questions you might have. Your Investment Counselor is your resource to ask any questions you might have about your portfolio or other market-related topics.
By working with a fiduciary like C&D, you can be assured you’re getting investment advice from a firm that has a legal duty to disclose conflicts of interest and put your interests ahead of its own.