Fee Only Fiduciaries for Business Owners, Professionals & Self-Employed
Clearstone is a Fiduciary
“A fiduciary is an individual in whom another has placed utmost trust and confidence to manage and protect property or money. The relationship wherein one person has an obligation to act for another’s benefit.” — dictionary.law.com
For individuals, investment advice is primarily offered by two primary professionals; investment advisors and investment brokers (also known as “registered representatives”). Many believe these two are the same, but there is a key difference that may not be completely understood by the investing public: only one is legally obligated to act in the best interest of his or her client.
In other words, investment advisors and registered representatives are held to different legal and professional standards. And these differences can impact those seeking financial assistance.
Investment Advisors are Fiduciaries
“As an investment adviser, you are a “fiduciary” to your advisory clients. This means that you have a fundamental obligation to act in the best interests of your clients and to provide investment advice in your clients’ best interests. You owe your clients a duty of undivided loyalty and utmost good faith.” –Information for Registered Investment Advisors. U.S. Securities and Exchange Commission.
Unlike registered representatives (or investment brokers), investment advisors are regulated by the Securities Exchange Commission (SEC) or by state securities regulators. As fiduciaries, we are held to the highest legal standard to act, serve and advise accounting to our client’s best interests. Additionally, we are to serve clients with utmost professionalism and care, avoid conflicts of interest, be transparent in all we do and control all investment expenses.
Registered Representatives (Investment Brokers) are Broker-Deal Representatives
“Registered representatives are primarily securities salespeople and may also go by such generic titles as financial consultant, financial advisor, or investment consultant … When a registered representative suggests that you buy or sell a particular security, he or she must have reason to believe that the recommendation is suitable for you … “ . – Brokers. Financial Industry Regulatory Authority (FINRA). This means the registered representative can legally put his or her own interest (or the interest of their broker-dealer) above those of an investor, provided the investments are “suitable” for the situation. –
Registered Representatives must only reasonably believe their investment recommendations are suitable for their clients. The “loyalty” distinction is also important in that a registered representative’s duty is to the broker-dealer he or she works for, not necessarily the client served. I
The suitability standard can create conflicts regarding fees. As fiduciaries, an investment advisor is prohibited from recommending a mutual fund or other investments because of their higher commission. This differs from registered representatives. If the fund or investment is deemed “suitable,” it can be sold to the client and sales commission can be received.
As a “fee-only” firm, Clearstone is paid directly by our clients. Because we do not accept commissions or third-party fees, clients know that our recommendations are free from the conflict of interest of having to produce income from the sale of financial products.
Some registered representatives advertise as “Fee-based” advisors. They are generally compensated from both the fees charged for their advice and the commissions they on the sale of the financial products used to implement their advice.
Clearstone is a member firm of IPI Wealth Management, Inc. of Decatur, Illinois. Starting with six offices in 1987, IPI Wealth Management now has over 50 locations across the United States and manages over $1 billion in client assets. On multiple occasions, IPI has been named by Financial Times as a Top 300 Registered Investment Advisory (RIA) firm.
Our purpose goes beyond providing quality advice and complete wealth planning and management. It even goes beyond our “client-first,” fiduciary commitment. We exist to create lasting value for our clients and their families.
That’s what drives us.