All advisors in the East Bay Advisors Network owe you what is known as a fiduciary duty. A fiduciary duty is the highest duty owed to another person. It requires the fiduciary (the person with the obligation) to put the interest of the principal (the person to whom they owe the fiduciary duty) above their own.
This requirement to act in your best interest includes disclosing any conflicts of interest that may arise so they can be known ahead of time, leveling the playing field. Breaching the fiduciary duty can result in severe consequences for the advisor, including being barred from the investment industry.
The fiduciary duty differs significantly from the so-called “suitability standard,” which is a lower form of accountability. Under the suitability standard, the person or institution working with you need only make recommendations that are thought to be in your best interest. The suitability standard is a more lax requirement and is open to different interpretations that may not be in your best interest.
All of us in the East Bay Advisor network are Registered Investment Advisors who are required to abide by the fiduciary standard. We are also members of NAPFA, The National Association of Personal Financial Advisors, which takes the fiduciary duty seriously and adds another standard to do with fair and unbiased compensation.
This is the oath that all NAPFA advisors take to be members in good standing:
- The advisor shall exercise his/her best efforts to act in good faith and in the best interests of the client.
- The advisor shall provide written disclosure to the client prior to the engagement of the advisor, and thereafter throughout the term of the engagement, of any conflicts of interest, which will or reasonably may compromise the impartiality or independence of the advisor.
- The advisor, or any party in which the advisor has a financial interest, does not receive any compensation or other remuneration that is contingent on any client’s purchase or sale of a financial product.
- The advisor does not receive a fee or other compensation from another party based on the referral of a client or the client’s business.
Following the NAPFA Fiduciary Oath means we shall:
- Always act in good faith and with candor.
- Be proactive in disclosing any conflicts of interest that may impact a client.
- Not accept any referral fees or compensation contingent upon the purchase or sale of a financial product.
