In an environment of investor anxiety, many investors seek out guidelines to help them determine which advisors to trust.
At the same time, reliable investment advisors recognize that their trust must be earned, and want to be able to demonstrate their integrity. A good measure of an advisor’s commitment is whether he or she is considered a “fiduciary”.
What is a fiduciary?
A “fiduciary” is someone who manages the assets of another person and stands in a special relationship of trust, confidence, and/ or legal responsibility. He or she is required by law to always act in the best interests of their clients. Fiduciary standards for investment advisers have been developed over years of prudent practice.
They are based on seven precepts, namely that advisors should:
- Know standards, laws and trust provisions
- Diversify assets to the specific risk/ return profile of the client
- Prepare an investment policy statement
- Use “prudent experts” and document due diligence
- Control and account for management fees and expenses
- Monitor the activities of “prudent experts”
- Avoid conflicts of interest and prohibited transactions
Traditional brokers are not subject to the fiduciary standard, but rather something called a “suitability standard.” Brokers are not required to act in the best interests of their clients, and, in many cases, they might be prohibited from complying with the fiduciary standards by their brokerage firms. The broker’s primary duty is to his or her employer, and it’s virtually impossible to serve two masters.
What is a Certified Financial Fiduciary (CFF)?
CFF is a professional designation for financial professionals, namely, those who have successfully completed a rigorous certification and training process established by NACFF and The American Financial Education Alliance (AFEA), and who agree to uphold the highest moral, ethical and fiduciary standards of service when providing advice to potential or existing clients.
The National Association of Certified Financial Fiduciaries (NACFF) was created to provide all the information, tools, and resources needed for financial professionals to ensure they are compliant with fiduciary standards. They have taken it a step further by providing a comprehensive fiduciary training program and certification process that will further establish qualified financial professionals as a Certified Financial Fiduciary® (CFF).
To become a Certified Financial Fiduciary®, the following requirements need to be met:
- Exemplified the highest standards of morals, ethics, and fiduciary standards of service
- Successfully completed a rigorous training and certification process
- Passed a full background check and is in good standing with all state and federal license requirements
- Business office was reviewed for best practices and compliance
- Agreed to the NACFF terms of awarding and maintaining certification
- Agreed to abide by and uphold the CFF Code of Conduct and fiduciary pledge of “Good Faith, Care, and Loyalty to our Client’s Best Interest.”
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