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  • Poterack Capital Advisory

The Fiduciary Difference



A broker or agent represents a company.  You are familiar with real estate agents, insurance agents, talent agents, etc.  You are familiar with stockbrokers, mortgage brokers, etc.  These professionals are compensated by their clients based on transactions, regardless of whether the transactions are in the best interest of their client.

 

A Fiduciary represents a client, not a company, and must act in the client’s best interest without regard for transactions.  When you pay an Attorney, you expect advice which is in your best interests.  When you pay a Physician, you expect advice which is in your best interests.  When you pay an Investment Advisor, you should also expect advice which is in your best interests.

 

The challenge for people seeking a Financial Professional is in not knowing the difference.  Titles or designations on a business card do not clearly indicate if the individual is a Fiduciary or not.  My company PCA, myself, and Alec Quaid operate as a Fiduciary and because of my experience I’m able to discern if someone else in my industry is also operating as a Fiduciary or not.  Put another way, I understand the language and the regulatory system.

 

The government will never be able to regulate behavior with certainty.  Just because a broker or agent is not a Fiduciary, does not mean they are not acting in their client’s best interest.  It just means they are not legally required to do so.  Conversely, a Fiduciary is still human and may not act in the best interest of their client.  A Fiduciary can certainly make mistakes as well.

 

In the financial industry there are different standards.  As a comprehensive Wealth Manager, I work with people regarding investments. insurance, taxes, wills & trusts and other areas.  Good decision-making almost always overlaps with several professional disciplines. 

 

In the insurance industry, a “suitability” standard is acceptable versus a Fiduciary standard.  At PCA, in addition to being Investment Advisors, we are an independent insurance agency offering life insurance, annuities and Long-term Care insurance.  I am a Fiduciary because of my Securities licensure and how I’ve chosen to work with investment clients.  Therefore, when I help clients with insurance products, those transactions must be suitable to the insurance industry and in the best interest of the client (Fiduciary standard).  An insurance agent could sell the exact same insurance product even if it was not in the best interest of a client, if the sale was deemed “suitable” according to the insurance industry. 

 

Clear as mud???  Yes, the regulatory environment in my industry is complicated and therefore costly to remain in compliance.  There are noble intentions in these regulations, and I am all for getting the “bad guys & bad gals” out of my industry.  There are also unintended consequences which hurt good people in my industry and clients they serve.

 

I felt it was important to provide you information and emphasize the importance of choosing your professionals wisely.  Don’t hesitate to comment with questions or contact our office!

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