David Karp was quoted by Tony Robbins in his book, Money: Master the Game, about what makes a ‘suitable’ vs. ‘fiduciary’ financial advisor. Listen to David Karp explain the difference in standards in this video:
Most advisors operate under a standard known as “Suitability.”
Doesn’t sound wrong on first impression, does it?
After all, the basic definition of “suitable” is “right or appropriate for a particular person, purpose or situation”. That sounds like what you want from an advisor. You want them to put you in the situation that is right for you under your particular set of circumstances and needs. You want them to put your interests first.
Unfortunately, that’s not quite what suitability means in the financial advisory context. Here, it refers to an obligation on the part of an advisor to reasonably believe that their recommendations are generally suitable.
That provides a hole big enough to drive a Mack Truck through.
The advisor can have a countervailing or greater obligation to their employer – which gives rise to all sorts of potential conflicts of interest – and not be in violation of the Suitability Standard. It also makes it harder for clients to successfully challenge actions when they’ve been assessed excessive fees, or otherwise subjected to unnecessary or less-than-ideal transactions which create revenue for the advisor.
The Fiduciary Standard is distinguished from the concept of “suitability” insofar as it imposes upon the contracted advisor an obligation to place the client’s interest above all else. There are no split loyalties and no incentives to do anything but what is best for the client’s well-being.
“Best” is, by definition, better than “suitable.”
Don’t settle for anything less than the service of your best interests. Require a true fiduciary standard of care.
At PagnatoKarp, our focus is on YOU. We go beyond wealth management to simplify and elevate your lifestyle so you have more time to spend on what matters to you most.
We offer digitally integrated, in-house services for investment, planning, tax, legal, private banking, family governance, concierge, and travel. With True Fiduciary™ Standards and Family Office services, you receive transparent advice focused on safety of assets, simplicity, and cost. Please contact us at 703-468-2700 or firstname.lastname@example.org.