Financial Planners and the Fiduciary Standard

by Michael on Sep 19, 2012

Photo of a Calculator, Pen, and Paperwork

Here’s an interesting take on financial planners and the fiduciary standard by Allan Roth, who is a CFP (and financial writer) himself:

“On paper, CFPs who provide financial-planning services are held to a fiduciary standard, defined by the CFP Board as ‘one who acts in utmost good faith, in a manner he or she reasonably believes to be in the best interest of the client.’ While that may appear to settle the matter, this rather lofty standard must also be enforced to make it a reality in practice.”

He goes on to talk about the challenges associated with putting someone else’s interests first and details a current client’s horror story with a former advisor who was supposedly acting as a fiduciary, but ended up double-dipping on an annuity to the tune of 5.29% annually in fees and a huge penalty for bailing out.

Though the client was eventually made whole, the planner got off without so much as a slap on the wrist. Amazing. And troubling for those who rely on a CFP for advice. This isn’t to say that all (or even most or many) CFPs are bad. They’re (probably) not. But how do you tell the good from the bad?

This is especially worrisome if the governing body isn’t upholding the standards of the profession. Sure, you can ask around for recommendations, but let’s be honest… Do you really trust you friend, neighbor, coworker, or whoever to have checked out their CFP thoroughly enough to ensure that your interests will be protected?

I sure don’t. Remember: Nobody cares about protecting and/or growing your money as much as you do. You really do need to look out for yourself.


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