CHICAGO, Dec. 7, 2016 /PRNewswire/ -- In light of an uptick in media coverage and social media mentions about the term "fiduciary," the National Association of Personal Financial Advisors (NAPFA) released today "Fiduciary 101" to increase understanding of this important consumer protection.
"Consumers are hearing the term 'fiduciary' more often, but increased awareness doesn't necessarily equal increased understanding," explains NAPFA CEO Geoffrey Brown. "As an organization that has been dedicated to advancing fiduciary principles for more than 30 years, we are committed to helping consumers make informed decisions when choosing a financial advisor."
Nearly half of Americans mistakenly believe that all financial advisors are required to follow a fiduciary standard when providing advice, according to research from Financial Engines. This misconception can be costly for consumers. The White House's Council on Economic Advisers estimates that non-fiduciary advice costs investors $17 billion a year.
"As consumers of financial services, we all owe it to ourselves to remain diligent – to understand our options and the standards our financial professionals are held to," said Brown. "Consumers should expect a fiduciary standard of care from their financial advisor and that begins with education. Just as you expect zealous representation by your attorney, you should expect financial advice that is delivered in your best interests."
NAPFA is the leading organization representing Fee-Only financial planners – advisors who are compensated directly by their clients and not by commissions earned from the sale of financial products. Since 1983, all NAPFA members have been required to follow a Fiduciary Standard of Care, and each year members renew their Fiduciary Oath, promising to provide unbiased financial advice to their clients.
- What is a fiduciary? A fiduciary is a professional entrusted to manage assets or wealth while putting the client's best interests first at all times. Financial advisors who follow a fiduciary standard must disclose any conflict, or potential conflict, to their clients prior to and throughout the advisory engagement. Fiduciaries will also adopt a code of ethics and will fully disclose how they are compensated.
- Non-fiduciary financial professionals can recommend investments with higher fees, riskier features and lower returns because they earn more money for the advisor, even if those investments are not the best choice for their clients.
- Who is a fiduciary? Registered Investment Advisors (RIAs) are held to a fiduciary standard of care. By law, they must act solely in the best interest of their clients. To ensure your advisor or a potential advisor is following a fiduciary standard, request to see the advisor's ADV (a form filed with the SEC) or ask if they will sign a Fiduciary Oath.
- How can you find a fiduciary? Accountability is important in financial planning. While there are many people in the financial industry who profess to have the client's best interests at heart, they still may have conflicts that impact their recommendations. It's important for consumers to ask the right questions of any potential advisors. Check out NAPFA's Comparison Tool for tips on choosing advisors and a sample advisor Fiduciary Oath.
Since 1983, The National Association of Personal Financial Advisors has provided Fee-Only financial planners across the country with some of the strictest guidelines possible for professional competency, comprehensive financial planning, and Fee-Only compensation. With more than 2,700 members across the country, NAPFA has become the leading professional association in the United States dedicated to the advancement of Fee-Only financial planning. Learn more at www.napfa.org.
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SOURCE National Association of Personal Financial Advisors (NAPFA)