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The Term Fiduciary Taking on Critical Importance in Financial Planning

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An alphabet soup of confusing job titles and designations in the financial services industry has investors wondering exactly who does what. Different ethical and legal responsibilities are assigned to each. Choose wrong and it could cost—a lot.


A young mother described her horrifying circumstance to hushed crowd at a financial industry conference. She and her husband were proud parents of a precocious 2-year-old and she was nine months pregnant with their second child when her husband, a Navy pilot, was shot down and killed over Afghanistan.

She received a sizable check just weeks later, and blinded by grief, she immediately gave it to a financial professional. The conference host gently asked if it was a broker or advisor. The mother responded that she thought it was a financial advisor, but she wasn’t sure. [1]

Her answer isn’t unique. A plethora of terms and alphabet soup of designations and licenses has the investing public confused about who does what and the standards, both legally and ethically, to which they are held. Unfortunately, that confusion is actively encouraged by certain sectors of the financial services industry, according to regulators, something the Obama administration sought to address with the recent passing of the Department of Labor’s “Conflict of Interest” rule.

The rule requires financial advisors to act in the best interest of their client and to disclose any and all potential conflicts of interest, most specifically in how the advisor is compensated.

Traditionally, a recommended investment need only be suitable for a client’s particular situation; no longer, and a “fiduciary standard” is set to be implemented in 2017, a term that’s generated industry attention and debate for some time, but is now gaining greater awareness from the general public. The fiduciary rule states that the advisor must put the interests of their clients ahead of their own, and the financial product or service must be “the best” for their particular investment portfolio and financial plan.

The rule is not without controversy, and critics point to its vagueness in how the best investment for a client is determined and defined, something legal challenges will most likely determine.

While opponents argue over the burdensome nature of the rule, there are certain advisors that are already acting in a fiduciary capacity, and see the recent rule as a boon for their business, as well as a needed—and overdue—requirement for the industry as a whole.

“I am an independent financial advisor,” says Rocky Ghoneim, an Investment Advisor Representative (IAR) with Houston, Texas-based American Wealth Advisory, which offers a complimentary retirement kit. “That means I am not subject to the constraints of a large Wall Street firm. Too often, they have proprietary products that generate higher fees, and they will therefore recommend those to clients. We do not, and can recommend the product we feel is absolutely the best for the client, which means we have always acted as fiduciaries.”

Independent advisors such as Ghoneim point to what’s known as “open architecture,” industry jargon for a large supermarket-type of arrangement containing hundreds if not thousands of different investment products and services from which the advisor can choose. Financial firms and insurance companies enter into arrangements with these financial supermarkets, but the independent advisor is better equipped to tailor portfolios based on the client’s specific financial needs.

Surprisingly, prior to the DOL’s action, only about 1 percent of financial advisors were legally required to act in a fiduciary capacity. [2]

“Think of it this way,” Ghoneim concludes. “I develop retirement income plans for my clients. Too often, the financial industry seems to have a cookie-cutter approach; it’s a 60/40 or 70/30 stock to bond ratio for a client’s investment portfolio. That’s not a plan. Many companies are beholden to their shareholders. Well, my shareholders are my clients, and if I don’t act in their best interests as a fiduciary, I get fired.”

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Media Contacts:

person_outline  Full Name:Rocky Ghoneim, Investment Advisor Representative
phone  Phone Number:713-255-1184
business_center  Company:American Wealth Advisory
language  Website:
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