How Many Advisors are Clueless About Fiduciary Obligations?

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Based on my anecdotal experience, I’ve come to the reluctant conclusion that many advisors are clueless about what it means to be a fiduciary.

Those advisors embrace the term in their marketing to differentiate themselves from brokers who are held to a lower standard.

Unless you understand the ramifications of your fiduciary status, you’re ignoring legal liability that could have devastating consequences for you and your firm.

If you believe I’m overstating the risks, look no further than the spate of 401(k) lawsuits that interpreted what it means to be a fiduciary in a way no one contemplated. Hundreds of lawsuits have been filed against plan sponsors over excessive fees, inadequate disclosure, inappropriate investment choices, self-dealing and other issues, resulting in substantial settlements.

The principles governing the fiduciary obligation of plan sponsors apply with equal force to any advisor’s fiduciary duty to your clients.

It’s a very high standard, as I discuss below.