FIDUCIARY STANDARD or duty

  • J. Bradford Investment Management operates to an independent fiduciary standard for clients.
  • We don't receive commissions for any products or services we sell or recommend, so we are not incented to sell you something you may not need.
  • We have a fiduciary duty to give you advice and guidance exclusively in your best interest.

Rather than charge a commission on a product we sell or share revenue from companies that pay us, we offer independent advice and investment management for a fee. It's very transparent.

Many people pay a broker or an agent a commission for a financial product such as a mutual fund or life insurance product that you purchase through them. Many people also pay sales loads and management fees to investment management companies for their mutual funds and other financial products which can be very high and erode returns over time.

There are many different commission and fee structures, but often a commission is paid indirectly through some sort of fee sharing arrangement -- that is, rather than taking the entire fee for themselves, an investment company shares some of the fee they receive from you with the broker or agent. Other companies may charge a sales load or above average management fees. Fully understanding exactly what you are paying and to whom can be daunting to figure out and is not always transparent.

MISALIGNMENT OF INTERESTS

A significant issue of not having a fiduciary as your advisor is the potential misalignment of interests between the person selling the product for a commission and you, the client. Brokers selling a product for commission often have an incentive to sell more products to make more money. Or they may sell you something they they receive a commission on when there is very similar less expensive alternative. Those competing interests may lead someone to sell you a product that may not necessarily be in your best interests.

Independent, feel only, advisors are held to the fiduciary standard and must act in your best interest at all times. That doesn't necessarily mean buying you the products with the lowest cost or lowest fees. It means making the best possible recommendation given many potential factors in addition to cost, such as service, liquidity, business risk and suitability among others.

This article from Think Advisor outlines some of the conflicts broker-dealers and those not operating to a fiduciary standard face.

The issue of the "fiduciary standard" has also reached the U.S. Congress and the Department of Labor is considering new rules to hold retirement advisors to the higher fiduciary standard.

KEY TAKEAWAY: You should ask anyone giving you financial advice if they are operating to a fiduciary standard. And if they are not, ask why not. You can also ask them to sign the Fiduciary Oath.