James Hallett

In the wake of recent financial scandals, there is a growing debate in Congress as to whether a fiduciary standard should be applied to all professionals who offer investment products and advice. Simply put, a fiduciary is someone who acts on behalf of or advises another individual, putting those individuals' financial best interests ahead of his or her own.

There are financial advisors who are obligated to put their clients' interests first, but there are many more that are under no such obligation. It's not always easy to tell the difference between an advisor who must act in your best interests and an advisor who "might" act in your best interest.

Making matters worse, some in (the other) Washington already are trying to split hairs over the definition of fiduciary. In other words, an advisor could act as a fiduciary when presenting advice but become a salesperson when implementing that advice by selling products that could benefit the advisor rather than the client (you).

If Congress is serious about fixing the current financial system and restoring investor confidence, then there is only one real option: Require anyone who gives out financial advice, whether a broker, insurance agent or financial planner, to abide by a bona fide fiduciary standard. Otherwise, consumers never will be sure whether their trusted financial advisors are ethical.

Consumers deserve the tools and support necessary to make sound financial decisions as they prepare for a sound financial future. They should clearly be able to identify competent and ethical financial advisors to help them make that future a reality.

Here are some factors to consider regarding the services you are seeking.

You first should identify your investment goals. Your goals should incorporate your age/time horizon, income, taxes, wealth and risk tolerance. Consider what level of investment services and advisory services you need. Do you want a pure investment management relationship or are you in need of more sophisticated financial planning and advisory services? Also, consider the level and form of communication you expect.

After identifying your goals and expectations, you should interview advisors to decide which one would be best suited to help you succeed. Asking detailed questions can help you determine your comfort level with the prospective advisor on both a personal and professional level.

1. How long have you been in business?

2. What is your educational background?

3. What are your financial planning credentials, designations and affiliations?

4. Will you provide me with references from other professionals?

5. How are you compensated (fee only, commissions only, fee and commission)?

6. Is your firm registered as an investment advisor in compliance with the Investment Advisors Act of 1940?

7. Will you acknowledge your fiduciary duty to me in writing?

I hope this helps as you reflect on any current relationships you might have and gives you confidence as you move forward.



James D. Hallett, Hallett & Associates, P.S. is registered as an investment advisor with the SEC. This column is for informational purposes only and should not be used as the primary basis for an investment decision. Consult an advisor for your personal situation.