There's been a great deal of discussion over the past several months about financial advisors acting as fiduciaries, which is, simply, the practice of placing the interests of the client ahead of their own. What has been left out of this discussion is that many advisors who promote themselves as a fiduciary are, in fact, only working as a part-time fiduciary, at best.
It's complicated, to say the least. Here's why.
Many fee-based financial advisors maintain licenses to sell both commission-based securities and insurance products. They may be affiliated with a registered investment advisory firm, but they may also be affiliated with a broker/dealer. And therein lies the paradox.
In their capacity as investment advisor representatives, they have a legal obligation to put their clients' interests ahead of their own personal or professional interests. Yet when they operate as representatives of a securities firm, they need only adhere to a vague "suitability" standard, meaning they can sell a financial product that may not be best for their clients, so long as it doesn't actually do them harm.