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How Investor’s Are Getting Strong Armed

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You need to sit up and pay attention. As if managing money weren’t hard enough already, there’s some fine print I want you to understand. The issue is whether your investment advisor/broker works under a fiduciary or suitability standard. There’s a big difference between the two.

When you work with a broker, he is guided by the weaker suitability standard. It basically means putting you into the best product suitable to you that’s he’s selling. Think of it like going to McDonald’s. You’re getting something your way, but it’s still basically a burger, chicken, or piece of fish.

But what if you’re a vegetarian? And you can’t possibly stomach another one of their so-called salads? You need to move on to another venue.

An investment advisor, on the other hand, must follow a strict fiduciary standard or diet, if you will. That means it’s the investment advisor’s responsibility to find the best investment for your situation, no matter what.

In my example, that may mean packing the fam back into the car to find a new place to eat.

Suitability versus  fiduciary standard is the fierce debate going on behind closed doors down in Washington. Guess who has the most seats at the table?

Big Wall Street brokerages depend on the suitability standard. They have the distribution network already in place with their army of brokers. All they need to do is shout the command and soldiers peddle the equivalent of the burgers, chicken, and fish to the uninformed prey.

But don’t take my word for it. “Those dealing with a broker are under the misconception that they’re dealing with a financial professional legally obligated to put their best interests first; that’s not the reality,” says Barbara Roper, director of investor protection at the Consumer Federation of America.

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E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.
E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.