Key Points

• Not all financial advisor firms are bound by legal standards to make recommendations in the client’s best interest.

• A fiduciary is legally responsible for making decisions and recommendations in your best interest when they manage your money or property.

• “Financial Advisor” is a generic term, while an “investment adviser” is regulated by state and federal government agencies.

When looking for a financial advisor, trust is essential. There are many different firms out there, which can make it difficult to know who truly has your best interests at heart. One of the most important aspects of a financial advisor is whether or not they are acting as a fiduciary for their clients.  Working with a fiduciary, there is an expectation of duty of care, loyalty, good faith, confidentiality, disclosure and prudence.

A fiduciary is legally responsible for making decisions and recommendations in your best interest when they manage your money or property. Whether or not a financial advisor is acting as a fiduciary is a way to differentiate the level of service they provide.

What Makes a Financial Advisor a Fiduciary?

The federal Investment Advisers Act of 1940 defines the role and responsibilities of investment advisers. The terms “financial advisor” vs “investment adviser” are not interchangeable. The term “financial advisor” is generic and requires no certification to be used. The term “investment advisor,” on the other hand, is a legal term that’s registered with either the SEC or a state securities regulator.  Although a firm may be registered with the SEC or state, it does not mean that they have approved of a registrants practices or statements.

Because Capstone is registered with the SEC, we are true investment advisors, and we are bound to a fiduciary standard, which is higher than the suitability standard. When you work with a fiduciary like Capstone, you work with someone who is:

Transparent – Not only do we minimize potential conflicts of interest, but we’re also legally required to disclose them.

Objective – Because we don’t accept commissions on the products we sell, we’re free to recommend those that truly benefit you.

Why Choosing a Fiduciary is Important

Trust is vital when someone is managing your money, especially for high-net-worth portfolios. Generally, someone is deemed high net worth when they have liquid assets of at least $1 million to invest.

If your financial advisor receives commissions on products (quite often, they specifically receive commissions on insurance and annuity products), they’ll be more likely to recommend them to you. Those products may not be truly the most beneficial for your situation and your goals, however. As such, to ensure our objectivity, we do not receive:

• Product commissions

• Fund loads

• Fund 12B-1 fees

• Fund management fees

• Third-party referral fees

• Third-party soft dollars

How Do Fiduciaries Get Paid?

Capstone is a fee-only financial advisor. This means our clients pay us directly, and we’re compensated on a fixed percentage of your portfolio or retainer. You pay less for a more comprehensive service, and enjoy a clear payment structure where you know exactly what you’re paying. There aren’t any hidden or surprise fees.

The more successful you are, the more successful we are. We’re a team.

Understanding the benefits a Registered Investment Advisor brings to your financial planning is crucial when choosing someone to partner with. And it is a partnership. Financial planning is not a stagnant endeavor, and as the world and your life changes, you’ll want someone looking out for your best interests and guiding you toward a path that meets your goals. It’s about doing what’s right for you, your family and your business.

Disclosures:

This article is not a substitute for personalized advice from Capstone and nothing contained in this presentation is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed by other businesses and activities of Capstone. Descriptions of Capstone’s process and strategies are based on general practice, and we may make exceptions in specific cases. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.