What I’d like to explain is the difference between advisors with a fiduciary vs suitability standard.  This has often been difficult to explain and I think this analogy makes the subject easier to understand.

Buying a car

Imagine if you will, you have a teenager who is about to start driving.  It is time to get some transportation for your teenager.  Got the picture?

The advisor with the suitability standard merely needs to get the teenager from point ‘a’ to point ‘b’.  The suitable car can be an old jalopy or it could be a brand new race car.  Often it is the car with the best incentive to the salesperson.

A fiduciary standard is where an advisor must put the client’s interests before their own interests.  With that in mind, the fiduciary advisor must look at what is best for the client.  The fiduciary standard is not simply getting from point ‘a’ to point ‘b’.  When looking at a car for a teenager imagine a car that won’t start unless the seat belt is fastened, has a GPS that reports where the car had been and how fast it has been going.  We might even consider a breathalyzer test before the car will start.

Fiduciary vs Suitability Summary

As you can see these are two very different standards.  Which standard would you like to have working for you?