Is Your Financial Advisor “Suitable” or Acting in Your Best Interest?

Estate planning attorneys often gather clients’ assets to review in consideration of their estate planning goals. While the attorneys do not offer investment advice, we review the investments to ensure our clients have financial advisors in place that appear to be acting in the clients’ best interests.

Often, we find that the investments are not earning what they should. When we come across this scenario, we ask our clients to approach their financial advisors and ask them to put in writing whether they are acting as a fiduciary in providing investment advice.

Financial advisors are only required by law to offer investments that meet the “suitability” standard.  “Suitability” means that the investment satisfies the client’s investment needs and objectives.  However, the “suitability” standard does not require financial advisors to act in their clients’ best interest.  In other words, they can recommend and sell you investments that are “suitable,” and earn a larger fee or commission than they would have earned had they sold you an investment that was better for you.

To remedy this issue, the Department of Labor proposed the fiduciary rule several years ago. This would require financial advisors to act in their clients’ best interests, a higher standard than the current ‘suitability’. Unfortunately, this standard was not enacted into law. We caution our clients to consider these issues when working with a financial advisor. It may be better to consider flat fee-based planning rather than commission for this reason. If you want a second set of eyes on your financial advisor, consider working with an experienced estate planning attorney like Stouffer Legal in the Greater Baltimore area. Call today to schedule an appointment 443-470-3599.