In this article, we will attempt to explain what a fiduciary is, and why we follow a fiduciary standard of care.
Fiduciary Advisors Use a Prudent Expert Standard of Care
Only an individual advisor may act as a fiduciary. For example, as a fiduciary, I, Jacki Liautaud, voluntarily put the greater level of fiduciary responsibility on myself, for example being held accountable for what a prudent investment advisor active in the field would recommend. The fiduciary duty is a legal relationship. A fiduciary is expected to be extremely loyal to the person they owe the duty (the “principal”): they must not put their personal interests before the duty, and must not profit from their position as a fiduciary, unless the principal consents. The fiduciary relationship is highlighted by good faith, loyalty and trust. For example, the fiduciary advisor is expected to select best of class investment alternatives, may only receive fees from her clients, thus eliminating conflicts of interest, and seeks a best execution price for its clients. Best execution means no double dipping and never acting as a principal in a trade.
Tree Fort Financial Conflicts of Interests Policy
A conflict of interests encourages a fiduciary to use poor professional judgment. Any interest that is strong enough to encourage poor professional judgment will be difficult to remove, because the interest is important to the advisor. The reward for removing the conflict, however, is a clearer path to uncompromised professional judgment. If the conflict is not addressed, the client will suffer. Every conflict must be addressed and should never be allowed to remain unless there is no alternative. Managing conflict of interest essentially comes down to this: when possible, remove the source of the conflict. When the source cannot be removed, try your hardest to act without influence or ask another who does not have the conflict to make the decision. If you cannot do either, maintain the conflict for a brief period of time until the source can be removed or another can make the decision.