With summer coming to a close and students headed back to school, we thought it would be a good time to for those of us that are no longer in school but are committed to a lifetime of learning to take a look at a few common terms used in the financial biz that are often confusing and sometimes downright bewildering.  A few of these terms have also been brought to the spotlight recently due to the new Financial Reform Bill. Put on your learning caps!

Fiduciary

A Financial Advisor held to a Fiduciary Standard occupies a position of special trust and confidence when working with a client. As a fiduciary, the Financial Advisor is required to act with undivided loyalty to the client. This includes disclosure of how the Financial Advisor is to be compensated and any corresponding conflicts of interest. A Fiduciary has a legal obligation to put an investor in the best products and/or investments they can.

Suitability

A Financial Advisor held to a Suitability Standard is required to recommend products that are suitable for the client’s objectives, means and age. There is no legal obligation, under the Suitability Standard, for a Financial Advisor to put an investor in the best products and/or investments.

Fee-Based

This compensation model allows a financial advisor to have a financial stake in the course of action that he or she recommends to a client. Some or all of the advisor’s income may be dependent upon their ability to steer their clients to a limited number of financial products.

Fee-Only

This compensation model indicates that an advisor never accepts commissions or compensation of any kind related to the products or investments that he or she recommends. The helps to ensure there are no conflicts of interest and the advisor can be considered objective and unbiased.

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