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Form CRSWorking with a Fiduciary
Definition of a Fiduciary
According to Merriam Webster, a fiduciary is one often in a position of authority who obligates himself or herself to act on behalf of another (as in managing money or property) and assumes a duty to act in good faith and with care, candor, and loyalty in fulfilling the obligation.
IFA's Commitment as a Fiduciary
As a Registered Investment Adviser, IFA is required by law to act as a fiduciary and only make investment recommendations that are in the best interest of our clients. This is the highest standard of care required and exceeds the less stringent suitability standard followed by non-RIA financial services firms. Fiduciaries are required to act with undivided loyalty to their clients. They are required to disclose how they get paid and reveal any corresponding conflicts of interest. The Committee for the Fiduciary Standard states the five principles of fiduciary standard, as follows:
- Put the client's best interest first
- Act with prudence; that is, with the skill, care, diligence and good judgment of a professional
- Do not mislead clients; provide conspicuous, full and fair disclosure of all important facts
- Avoid conflicts of interest
- Fully disclose and fairly manage, in the client's favor, unavoidable conflicts
All investors should ensure they have an independent financial team to reduce conflicts of interest, including an independent registered investment adviser, an independent estate planning attorney, an independent CPA, and an independent insurance advisor.
Serving the best interests of our clients
Why Working with a Fiduciary is Important
It should go without saying that the financial services industry should be built on a foundation of trust. Entrusting someone else with your precious resources is a big decision and one that needs to be taken with the utmost care and diligence.
The unfortunate reality is that this commitment to do what is in the best interest of the client is not universal or required in our industry. While a medical doctor is a medical doctor regardless of which physician you decide to visit, a “financial advisor” is a loose term that can describe brokers and advisors alike.
A broker is someone who earns a commission on a product they sell to you. They are not held to the legal standard of a fiduciary. In fact, they are held to a lesser and more flexible standard of suitability. To most accurately describe the difference between suitability and fiduciary, it might be “suitable” for someone to be invested in an aggressive stock mutual fund, but only the fiduciary has to recommend the one that is more cost effective for the client.
What further compounds the situation is many “financial advisors” are both brokers and advisors. In other words, they wear “multiple hats” and it is hard for investors to know whether they are talking to the salesman or the one acting in good faith and with care, candor, and loyalty.
Fiduciary and Retirement Plan Services
For employer-sponsored retirement plans, IFA acts as a 3(38) investment manager, which mandates that we act in a fiduciary capacity as required by the Employee Retirement Income Security Act (ERISA).
Working with a fiduciary begins at the bedrock of any good partnership: trust! By sitting on the same side of the table as our clients, we are able to deliver high quality service with the sole purpose to serve the best interests of our clients. As an independent wealth advisor, we are not beholden to any particular product or service since our compensation comes from our expertise as retirement plan experts.
By working with you as your fiduciary, you can expect the following:
- Independent and unbiased advice in regard to both investment and service provider recommendations
- Complete transparency in terms of cost structure and expectations
- Unwavering commitment in educating plan participants and increasing chances of achieving retirement readiness
- Professional best practices in regard to monitoring and reviewing plan processes and documentation to help ensure compliance with federal regulations
IFA's Vision for the Fiduciary Standard of Care
Beyond the legal requirements for acting in a fiduciary capacity, IFA believes the definition should be taken even further when it comes to providing financial advice. Just like every other major policy decisions our country makes, financial advice should be based on evidence.
Our industry has come a very long way in terms of understanding how financial markets work, what strategies do work and what doesn't, as well as the many factors that drive investment success and failure. In fact, there is an entire academic discipline dedicated to solving these problems. Ideas should be debated vigorously in order to come to a solution that gives our clients the greatest probability of having a successful investment experience.
We have implemented this approach in our own practice and we hope that all fiduciaries in our industry move towards an evidence-based approach to giving financial advice.
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TermsDisclosuresIndex DescriptionsForm CRS The data provided in charts referring to IFA Index Portfolios is hypothetical back-tested performance and is not actual client performance. Performance data for the IFA Index Portfolios is shown net of IFA's highest advisory fee and the underlying mutual fund expenses. IFA Indexes when shown individually do not reflect a deduction of advisory fees. None of the data reflects trading costs or taxes, which would have lowered performance by these costs. See more important disclosures at ifabt.com.
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