Fiduciary Duty: CERTIFIED FINANCIAL PLANNER™ vs. other advisors

Recently, the CFP has changed the standard of care under which advisors operate. When asked about the standard of care under which they operate, most advisors reply that their liability, or fiduciary standard, is to the company for which they work. In other words, if I work for a big wirehouse, my standard is to work for them. I obviously want to take care of my clients, but a conflict always exists between the different institutions: the client and the company. The CFP says if you are going to use the marks of the CFP, you must operate under a fiduciary standard of care that basically says you will do what is in the client’s best interest whether or not it is in your best interest. This comes into play in terms of compensation. Clients often wonder if their advisor is doing something to actually earn a commission.

We hope all the people in the financial services business care about the customer first, but the reality is they do not. A fiduciary relationship is one of “utmost trust” as defined by law, one in which you must take care of your client’s needs long before, or if you ever, consider your own interests. In our personal lives, we want neither our financial expert nor our physician thinking about anything other than what is best for us. We want them to consider our unique set of problems, questions, fears, goals, ambitions, and hopes. This is what financial service people are all about, trying to help people accomplish their personal goals.

The fiduciary standard of care has caused a big uproar in the industry because it has changed the duty of care under which people operate. As CFP’s, we must do whatever is in the client’s best interest, period.

When choosing a CFP, you definitely want someone who is held to a fiduciary standard of care because then you know, no matter what, he or she is doing what is in your best interest. This fiduciary standard really ties into what we believe because, for years, we’ve always done what was in the best interest of our clients, regardless of compensation. I believe most advisors do what it is in their clients’ best interest—that is what makes them good advisors. We see the Suzy Ormans of the world pounding on and bashing brokers because, at the end of the day, how do you as a consumer really know? As CFPs, we take on a lot of liability for that fiduciary standard.

I know other well known companies have required their CFP’s to cease the use of their designation because the company does not want to be held to that standard of care. They are basically saying, in my opinion, that they don’t want to do whatever is in the client’s best interest. This creates a great opportunity for us since we’ll gladly accept and adhere to that fiduciary standard; after all, we’ve always done it that way. Consumers want to know that their advisor is looking out for their interests.

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