Senator Elizabeth Warren is onto something with her recent letter to the SEC about fiduciary duty.
As a fee-only, fiduciary-bound investment adviser, I wholeheartedly agree that my clients’ interests should always be placed ahead of other competing interests.
This fiduciary duty mindset is not universal in my industry.
In too many circumstances, advisers who hold themselves out as financial service providers for their clients are not duty bound by a fiduciary obligation to their clients.
Instead, a certain subset of professionals in the financial services industry are held to a simpler and, I believe, lower, standard of “suitability”, rather than a fiduciary duty.
In other words, many non-fiduciary duty bound advisers only need to offer products and services that are only just suitable enough for their clients.
Following this suitability standard may invariably lead to higher compensation to them or their firms and higher costs to their clients. That’s okay, as long as what’s been offered to them is suitable enough.
In contrast, the fiduciary-bound adviser has a higher hurdle to leap in their dealings with clients and the public.
In the linked article, Senator Warren is right to point out the contradictory statements of some companies in the financial services industry.
My belief is that all advisers should uphold and practice as fiduciaries to their clients. Investment advisers, like my firm, are required by law to be fiduciaries at all times and under all circumstances when they provide services to their clients.
It’s simple to do and, more importantly, simply the right thing to do.
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