Mon-Thur, 9am-5pm; Fri, 9am-1pm

(865) 691-0898

Picture, for a minute, the last time you went to the doctor for an illness or injury. Chances are, your doctor took your vitals, assessed your full battery of symptoms and when they started, and then used their expertise to diagnose and prescribe an optimal solution. They may have even presented you with several treatment options and then worked with you to select the best one. Without even knowing it, you have interacted with a fiduciary.

While the word fiduciary is often linked to financial services, Merriam-Webster notes that “fiduciary applies to any situation in which one person justifiably places confidence and trust in someone else and seeks that person’s help or advice in some matter.” Legally, what that means is the fiduciary must act on behalf of their client with good faith, care, and loyalty in fulfilling that professional obligation.

When you go to your doctor, you trust that they will prescribe a solution for you that is tailored to your medical history, current needs, and ability to pay. When you visit your lawyer, you trust that they will act in your best interest and be your unwavering advocate on all legal matters. …But what about your financial advisor? Do they have your best interests at heart?

You’d hope the answer would be “yes,” but in the United States, there are two differing standards of care that financial advisors can fall under: suitability and fiduciary.

A fiduciary advisor will have all the qualities discussed above: they will be legally and morally obligated to act in your best interest, with good faith, care, and loyalty. In the US, fiduciary advisors are governed by the Securities and Exchange Commission (SEC). Because fiduciaries are required to put your interests before their own, they are not allowed to accept commissions or engage in any sales activities that would result in a conflict of interest.

On the other hand, the suitability standard requires that an advisor or stock broker recommend investments that match your current goals and risk tolerance—but they are not required to recommend the optimal solution or even put your interests first. These advisors are governed by the Financial Industry Regulatory Authority (FINRA). As a result, they might recommend a mutual fund that is consistent with the type of investment you’re looking for, but with high fees and a commission that directly lines the advisor’s pockets, or an annuity that might work alright for you now, but really isn’t the optimal solution for your needs in the long run.

Can you imagine how disastrous it would be if doctors and lawyers only fell under a suitability standard? You could go to a doctor and end up in an expensive surgery when a medication might do the trick, just because both options were “reasonable” and the doctor wanted to make more money. You could seek council from a lawyer, who could choose a course of action that maximizes billable hours, not one that gets the best job done in the least amount of time.

I’m willing to bet that you wouldn’t tolerate that lower standard of care from your physician or legal counsel. So why should you accept it from your financial advisor?

At the Nalls Sherbakoff Group, we are proud to be a team of independent, fiduciary advisors. We take the advisor-client relationship seriously, not just because we are legally required to do so, but also because we are proud to hold ourselves to a higher standard. We believe clients deserve better from the financial services industry, and would therefore encourage you to research your existing advisor. You owe it to yourself to see whether your advisor is acting in your best interest—and if they’re not, consider seeking out someone who will.