Fiduciary

All
I am considering a CPA / Investment firm. My question is about Fiduciary responsibility: How important is it when choosing a firm?
thanks daben

Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

What do you mean? A fiduciary duty exists when an appointed agent is legally bound to in the best interest of the principal. Depending on the services being performed a fiduciary duty may or may not exist. Furthermore, you don't get to choose when it does and doesn't. Trustees, board members, real estate agents, and a wealth of other individuals are held to a fiduciary duty.
Fiduciary duties are extremely important but the level of dilligence applied by each firm is difficult to measure (which is what I THINK you are asking). I would consult friends, family, and associates that you respect as to whom they use.
If you enter into an engagement where a fiduciary duty does exists, understand that it is not unreasonable to have your agent thoroughly explain their actions. If he/she cannot explain why his recommendations are best for you and why the alternatives are not, then run.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Agreed, but with my 2 cents added in -
We also have to keep in mind that it can be difficult to measure compliance with a fiduciary duty because the nature of the relationship is subject to interpretation and application and requires untold amounts of personal preference. I like investment company A because I DO and as long as that company's investment is in line with your goals I probabaly have met my fiduciary duty in recommending that investment - EVEN if company B may be better for someone reason - EVEN if I'm not aware of company B's existence at all.
AND while a fiduciary responsibility may be created by a matter of law or regulation, most people won't know that it wasn't properly exercised until it is too late.
Additionally, just because a fiduciary duty does exist as a matter of rule of law DOES NOT MEAN that your best interests are not forefront in the professional's mind. Many advisors who are NOT bound by the legal parameters of fiduciary duty STILL put the client's needs first.
The important thing to remember is this - Caveat Emptor or Buyer Beware - the best defense you can have is a thorough understanding FIRST of your goals, then of the recommendations you get and how they fit in your portfolio.
Lastly, I would make one small change to Kastnna's final paragraph by saying Whenver you enter into an engagement of ANY KIND WITH ANY ONE, it is certainly reasonable to have your agent thoroughly explain themselves and if they cannot do so to your satisfaction, then take your business elsewhere.
Gene E. Utterback, EA, RFC, ABA
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Just a small addition: Many advisors who are bound by the legal parameters of fiduciary duty STILL DO NOT put their clients needs first.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Noted and Agreed - this brings us back to the crux of the issue. HOW does one tell if their advisor has their best interests at heart? Every investor should exercise due diligence - do your homework, make sure you understand the product, get to know your advior and remember, in the end, when the dust settles - ITS YOUR MONEY and YOUR DECISION.
Gene E. Utterback, EA, RFC, ABA
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Unfortunately, many people do not exercise that diligence, and even if they do, it often can be hard to tell if an advisor has one's best interest at heart. But I can think of a few clues and danger signals.
If an advisor immediately recommends some particular investment without knowning much at all about your financial situation, employment, taxes, previous debts, etc., it is a serious danger signal.
If an advisor appears to be exclusively concerned with a single type of investment, for example, the stock market, and doesn't seem to care about anything else, for example, home ownership, I would want to look for someone with a broader perspective.
If an advisor keeps emphasizing that you owe him or her nothing for the advice given, that is reason to stop and think. Remember the adage "He who pays the piper calls the tune."
The last point is especially relevant if the advisor invites you to a special meeting where free food and drinks are given out and then you listen to a speaker telling you about some fabulous investment opportunity. Guess who will eventually pay for all tlhe food and drinks, the speaker's fee, and rental of the auditorium.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
daben wrote:

Daben, are you considering working there, or being a client of the firm?
-Tad
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
Tad
IO am considering being a client of the form (actually for my parents). They inherited a large (for them) sum of money and are near retirement. I was looking for a firm that would look out for their best interest and have bee told that a firm with fiduciary responsibility is probably the best. I am also having my attorney look into them.
daben

Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

I think you are misunderstanding the application of fiduciary duty. All other things being equal, you are not going to find one company that has a fiduciary duty and another that does not. Fiduciary duties are not chosen by investment firms, they are requirements for given situations (almost universally). For example, the trustee of an irrevocable trust has a fiduciary duty to act in the best interest of the trusts beneficiaries. He/she doesn't get to choose whether or not they have a fiduciary duty based on the firm they represent. In that situation, even a non-professional trustee (like a family member) has a fiduciary duty. Certain types of financial arrangements are covered under FD and certain types are not.
To help with your real problem, selecting an advisor, I offer this: make any advisor explain themselves thoroughly and on every signifcant point. If they can't or won't they are not the right guy. Why you ask? Because the reason they don't explain is that they don't understand the concept themselves (which is bad) or they know that explaining it will make it clear that it is not in your best interest (which is also bad).
And while I might not like Don's unsubstantiated use of the word "many" his warning signals are all excellent indicators also.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

I guess whether "many" is appropriate or not is questionable, and I certainly do not know of any statistics as to what percentages of "advisors" go bad, or even how many advisors of various types there are to choose from in the first place. I am certain as can be, however, that the number is not so small and insiglnificant as to be of no concern to someone seeking financial advice. Selection of a person to give financial advice, I am sure, carries with it a substantial degree of risk. Without due diligence, that is just more unnecessary risk on top of the risk of various investment products themselves.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Agree completely. There are bad apples in every bunch. The only protection is education, due diligence, and caveat emptor.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

BeanSmart.com is a site by and for consumers of financial services and advice. We are not affiliated with any of the banks, financial services or software manufacturers discussed here. All logos and trade names are the property of their respective owners.

Tax and financial advice you come across on this site is freely given by your peers and professionals on their own time and out of the kindness of their hearts. We can guarantee neither accuracy of such advice nor its applicability for your situation. Simply put, you are fully responsible for the results of using information from this site in real life situations.