Is Your Advisor a Fiduciary?

The distinction between a non-fiduciary broker and a fiduciary advisor is hugely significant, and pivots mainly around the level of care and loyalty owed to the client.  Allegiant Private Advisors chose the path of fiduciary early in our history.  

Fiduciary discussions can go down a legal rabbit hole pretty quickly, but here is a (hopefully) simple explanation of why being a fiduciary is such a core part of who we are at Allegiant.

The CFP (Certified Financial Planner) Board’s Code of Ethics and Standards of Conduct for CFP® Professionals defines fiduciary duty this way:

At all times when providing Financial Advice to a Client, a CFP® professional must act as a fiduciary, and therefore, act in the best interests of the Client.”  They go on to describe three basic duties owed to the client:

1. Duty of Loyalty - Client interests come first, above the interests of the advisor and the advisor’s firm; advisors shall avoid or fully disclose conflicts of interest; advisors must act without regard to their own financial interests, the financial interests of their firm, or any other individual or entity other than the client.  Client interests, and only client interests, are the basis for providing all advice.

2. Duty of Care - The fiduciary advisor must act with the care, skill, prudence, and diligence that any prudent professional would exercise in light of the client’s goals, risk tolerance, objectives and personal circumstances.

3. Duty to Follow Client Instructions - a fiduciary advisor must comply with all objectives, policies, restrictions, terms of any agreements, and all reasonable and lawful directions of the client.

These are very high standards, and in fact, they are legally binding standards.  As your fiduciary advisor, by law as well as by the CFP Board Standards (all advisors working for Allegiant have earned their CFP® certification at a minimum), we must always do what is in your best interest. Period.  Additionally, Allegiant team members have also earned the Accredited Investment Fiduciary® (AIF®) designation, which is another professional certification focusing strictly on best fiduciary practices. 

By contrast, advisors not working as a fiduciary have no legal obligation to provide the best advice, or advice that considers the clients’ best interests. The obligation simply ends at providing a “suitable” solution. FINRA, the self-regulatory organization that oversees brokers’ licenses such as the Series 7, has a lower standard of care for brokers: brokers’ recommendations must merely be “suitable” for the client. The fiduciary is held to the highest legal standards; the broker/non-fiduciary only has to come up with a suitable solution.

A broker or salesman working on a commission basis has a vested financial interest in the client purchasing something.  That “something” only has to be suitable - it does not have to be best-in-class, or tax efficient, or inexpensive, or even top-performing - again, it only has to be suitable. 

At Allegiant, our Wealth Advisors (as well as 100% of our staff) do not work for commissions. We do not represent any company’s products, and we are all fiduciaries working everyday with our clients’ best interest in mind.  

Is it a good idea for anyone to depend on an advisor who has no legal obligation to provide best-in-class advice without conflicts of interest? We didn’t think so, and that’s why we choose to act as fiduciary for all clients when giving advice, 100% of the time.  It’s a rather boring legal distinction that we believe makes all the difference.  

If you have any questions about this article or to connect with Allegiant Private Advisors to discuss any matters, please contact our team: 941-365-3745.