New York Times reporter Alina Tugend ("Pick a Planner Who Can Spell ‘Fiduciary’," April 26, 2008) writes about the importance of doing proper homework when it comes to selecting an investment advisor, stockbroker or financial planner (consultant). Her rule? Ask someone you are thinking of hiring - Are you willing to wear the hat of fiduciary? Since not everyone is required by law to embrace the fiduciary mantle, and some do so only in exchange for additional compensation, the question is far from trivial. She quotes Sheryl Garrett, author of Personal Finance Workbook for Dummies (John Wiley & Sons, 2007) as urging individuals to document agreed-upon terms, including those that relate to the discharging of fiduciary duties such as care and loyalty. Fees and conflicts of interest are other considerations. For example, a compensation structure that includes commissions may encourage the sale of unsuitable securities to small investors.
As more employees migrate (by choice or force) to defined contribution plans, investment literacy is critical. Interested readers may want to check out the following resources:
- "Final Report on Financial Planner Standards of Conduct" by the FPA Fiduciary task Force, June 1, 2007
- Investor Protection Trust library
- "SEC to continue assault on fiduciary protection in 2008" by Diahann W. Lassus (Investment News, January 7, 2008)
- "Can you trust your financial advisor?" by Liz Pulliam Weston (MSN Money, date not given) - Cites 2005 complaint count against advisors with almost 4,000 taking the form of "breach of fiduciary duty"