Acting in Your Best Interests

Most logical and reasonable people take actions that are in their best interests. They avoid unnecessary risks like using a blow dryer in the bathtub and smoking while filling the lawnmower with gas. And, those same people typically seek out and engage other persons where their best interests are optimized.

How can one be sure that a financial advisor has a client’s best interests in mind? To be sure, there’s no ironclad method of ensuring against the bad acts of others. But, engaging an advisor who will act as a fiduciary – seeking and securing your best interests – can be your best bet.

The National Association of Personal Financial Advisors (NAPFA) and a number of other financial planning and investment advisor organizations are promoting the idea of a fiduciary code or oath that an advisor would pledge in connection with providing financial services. Here’s the oath developed by NAPFA.

Will you sign the Fiduciary Oath below?

• Yes
• No

FIDUCIARY OATH The advisor shall exercise his/her best efforts to act in good faith and in the best interests of the client. The advisor shall provide written disclosure to the client prior to the engagement of the advisor, and thereafter throughout the term of the engagement, of any conflicts of interest which will or reasonably may compromise the impartiality or independence of the advisor. The advisor, or any party in which the advisor has a financial interest, does not receive any compensation or other remuneration that is contingent on any client's purchase or sale of a financial product. The advisor does not receive a fee or other compensation from another party based on the referral of a client or the client's business.
What the Fiduciary Oath means to you - the client:

• I shall always act in good faith and with candor.
• I shall be proactive in my disclosure of any conflicts of interest that may impact you.
• I shall not accept any referral fees or compensation that is contingent upon the purchase or sale of a financial product.
  
  ________________________________ Signature
  

This oath seems reasonable to most folks. Who wouldn’t want an advisor willing to exercise best efforts to act in good faith and in the best interests of the client? Who wouldn’t want an advisor without undisclosed conflicts of interest? To know if your current or prospective advisor shares this belief is as easy asking for his or her signature. Handing this oath over to an advisor can be a very telling moment. Don’t be surprised to see a sudden paleness, cold sweats, and stammering. It can be like holding a cross up to Dracula. The true advisor who is willing to act as your fiduciary will readily sign the oath. The non-advisor will attempt to discredit the fiduciary concept or cite employer policy against signing such an agreement. In other words, the non-advisor can’t assure you that his or her actions will ever be in your best interests. What should you do? Since you’re one of those logical and reasonable people I first spoke of, I’ll let you figure that out.