Fiduciary Financial Advisor “Financial Advisor” is a bit of a nebulous signifier these days. If someone tells me they are a financial advisor that could mean they do financial planning, investment management, securities trading, insurance sales, financial coaching, tax management, wealth transfer, 401(k) administration, and/or a variety of other tangential tasks in the world of personal finance. In addition to this, and more pertinent to this post, someone claiming they are a financial advisor can have disparate ways in which they are regulated and compensated.
Generally, financial advisors fall into one of three camps:
- Investment Adviser Representatives – Employees of a Registered Investment Adviser, regulated by individual states or the SEC. These advisors must always act as fiduciaries in the best interests of their clients. This is what Ferguson-Johnson Wealth Management and our advisors are.
- Registered Representatives – Employees of a Broker-Dealer regulated by FINRA. These advisors are held to a suitability standard when making recommendations to clients (more on this later).
- Dual Registered – Employees of Hybrid firms that can ‘switch hats’ to be an Investment Adviser Representative or a Registered Representative as wanted/needed.
Only individuals that act as #1, 100% of the time, are true fiduciaries that must act in the best interest of their client at all times. Personally, I think it is ridiculous that individuals can call themselves a “financial advisor” and not hold themselves to this standard.