May 06, 2021
Fiduciary, Suitability, and Attorney Standards
Know the difference between Fiduciary, Suitability, and Attorney Standard, in this episode of Daily Wisdom.
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Episode Transcript
Suitability Standard
Hi, this is Chris Berry with Castle Wealth Group. And today we’re going to talk about the different levels of being a fiduciary. The difference between suitability standards, fiduciary standards, and attorney and client privilege. With that, please make sure to subscribe to our YouTube channel and comment down below.
Christopher Berry is a leading and state attorney and advisor in the area of retirement and legacy planning. He has been featured in publications, such as Forbes, Kiplinger’s, Crain’s Detroit, and more. He’s the host of the weekly radio show and podcast, The Chris Berry Show. He’s a national thought leader as it relates to retirement and legacy planning. And has authored the Amazon best selling book, The Caregiver’s Legal Guide.
You’re working with a professional advisor, a financial advisor, financial professional and they say they’re working for you. Are they really? This is a big area of confusion for the public and it’s an area that’s really going through governmental review right now. And so understand that I would say a majority of the financial professionals out there, they have what we call a suitability standard. They have to operate and sell you something that’s suitable for you.
Some keywords to know whether the person you’re talking to is working from the suitability standard would be if they work with a broker-dealer, if they have a Series 7 license, if they’re working for one of the big wirehouses, I don’t want to name those any specifically but typically they’re tied to banks and they put together… They sell you on stocks and investments. And a lot of these individuals are operating from a suitability standard. Which means they have to sell you something that’s suitable.
True Fiduciary
They work for a broker-dealer. They’re a stock broker, they’re selling stocks. They work for a dealer, like a car dealership, okay? It’s a stock dealership. That’s what a broker-dealer license is like. They have to sell you something so it’s responsibility for them to sell, sell you something, sell you a stock, sell your bond, right? Sell you life insurance, sell you annuity. Their responsibility is to sell you something that’s suitable.
That’s very different than a true fiduciary. And now a lot of times you ask them directly and they’ll ham and haul around this or make up some type of story to make it seem like they’re a fiduciary. But to be a true fiduciary it depends on your licensing. And so, the key licensing would be what’s called a Series 65. If you’re a Series 65 then you’re an investment advisor representative or a RIA, and you have a financial fiduciary standard, okay?
I have a Series 65 meaning I have to serve as a fiduciary. I have to work in my client’s best interest versus a lot of those wirehouses, brokerage firms, working with the banks they have to sell you something that’s suitable. Insurance salesman, annuity salesman they sell you something that’s suitable for you versus my role as a fiduciary. It’s like the difference between walking into a butcher shop, the butcher will sell you something that’s suitable for you. The meat will not be rancid, it won’t be horrible. Hopefully it doesn’t get you sick.
My role as a true fiduciary is that of more of a dietician where I would say, “Maybe you should not walk into that butcher shop maybe you should go have a salad.” Now that’s the difference between fiduciary standard and suitability. A majority of your financial professionals operate at the suitability standard. They’re typically working for insurance companies working for broker-dealers. Okay. There’s fewer of us fiduciaries where we have to act in the best interest of our clients. Now there’s even fewer of us who have a standard even above that and that’s called attorney client-privilege.
So as a practicing attorney and certified elder law attorney, I cannot take off my attorney hat as I’m talking to clients about things like taxes or investments or insurance or anything else, otherwise I might lose my license and I don’t want to do that. So, I’m always working with my clients not only from a suitability standard but on top of that as a true fiduciary and then on top of that owing clients attorney-client privilege. So understands and you should always ask at what level are you working with when you’re talking to a financial professional?
Best Interest
And guess what, a lot of those people at that suitability standard they’re going to have a good story of why make it seem like they’re at a higher standard than what they really are. And if you have questions more than happy to go over with this and peel back the curtain on these different licensing issues. And this is something that’s actually going through government right now, where if any of these suitability people are talking to clients about IRAs or 401(k)s, they want to now elevate that to the best interest standard.
So you’re going to see a lot of these insurance only guys really trying to make it seem like they’re operating in the best interest of their clients when in reality that might not be the case. So it’s an interesting area that a lot of people don’t really understand, but more than happy to basically pull back the curtain on how this works from the financial investment world of things. Understand the difference between suitability standard, fiduciary, attorney and client privilege.
And I’m not saying that anyone’s that operating from the suitability standard they don’t have your best interests at heart, but legally they don’t have to. Versus someone that’s a fiduciary or obviously attorney and client privilege legally and by our licensing we have to, that’s not even a question. So hopefully that’s helpful. This has been Chris Berry with Castle Wealth Group. Please make sure to subscribe down below.
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