Broker Check

Are We Fiduciaries?

June 29, 2017
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“Are you a fiduciary?” This is a question our advisors get a lot these days. Interestingly, 2 years ago we rarely received this question. Now we get it all the time.

The shift has to do with a recent ruling by the Department of Labor (parts of which have been put on hold until the Trump administration has a chance to fully review it). It brings to light a controversial issue in our industry as it relates to how financial advisors are paid. But let’s not get ahead of ourselves, we’ll start by reviewing how advisors have historically been paid.

How do financial advisors get paid?

There are two ways advisors can get paid, either through selling commission-based products (paid by mutual fund companies), or through a flat fee (paid by you) which is typically a percentage of your portfolio.

It is often argued that commission-based investments can present a conflict of interest, as advisors may be tempted to move their clients’ money around more often than necessary, just so the advisor gets paid more.

This is why the DOL came out with a ruling to try and eliminate the conflict of interest. In their ruling, the DOL said that all advisors and their registered representatives who help manage retirement accounts can only receive fees for their service, not commissions, and they must act as fiduciaries. Again, this applies to retirement accounts only.

What is a fiduciary?

In simple terms, a fiduciary is someone who acts in the best interest of their clients and are legally required to do so. Not only are they required to make investment decisions that are in the best interest of their clients, but the financial advice they provide must be in their clients’ best interest as well.

Are Summit’s advisors fiduciaries?

Long before the DOL ruling, Summit has emphasized the importance of acting in the best interest of our clients. While in many cases we are legally required to act as a fiduciary, we also believe it is our moral obligation.

Our clients are our top priority — they always have been — and we strongly believe the rapid growth we’ve seen at Summit over the past several years is a reflection of the quality of service we provide, and the high standard we expect out of each of our advisors and employees.

In addition to our company values and moral obligations is the legal aspect of being a fiduciary. ALL of Summit’s senior advisors are CFP®s which, according to the CFP code of ethics, requires advisors to act as fiduciaries. 

Bottom line, we sit on the same side of the table as our clients so we can fully immerse ourselves in their oftentimes complex financial situations, guiding them to make the best decision.

In our opinion, the DOL ruling is well-intentioned. It increases transparency in fees and requires all advisors to act in the best interest of their clients when dealing with retirement accounts.

We recognize our industry has been trending towards fee-based advisory services for some time now, and Summit is on board. As always, we will continue to provide the highest level of service to all of our clients. If you have further questions about what a fiduciary is or how it works, please give us a call. Any of our advisors are happy to explain further.