It's a good idea to understand the ethical and legal standards to which a prospective financial advisor is held. Unfortunately, not all financial advisors are held to the same high standard.
WHAT IS A FIDUCIARY?
Essentially, a fiduciary is a person or organization that owes to another the duties of good faith and trust. The highest legal duty of one party to another, it also involves being bound ethically to act in the other's best interests.
A fiduciary is expected to manage the assets for the benefit of the other person rather than for his or her own profit, and cannot benefit personally from their management of assets. This is what is known as the "prudent person standard of care."
In contrast, brokers, who are often compensated by commission, generally only have to fulfill a "suitability standard of care." This means the broker has to reasonably believe that any recommendations made are suitable (but necessarily the best option) for his or her client. The requirement to disclose conflicts of interest is far less strict as well. In terms of loyalty, a broker's duty is to the broker-dealer he or she works for, not necessarily the client served.
OUR COMMITMENT TO YOU
As a Registered Investment Advisor (RIA) under the Investment Advisers Act of 1940, North Ridge has always been a fiduciary.
We believe in placing your best interests first and that objectivity and transparency are paramount to a lasting working relationship. As such, we are proud to commit to the following five fiduciary principles:
- We will always put your best interests first.
- We will act with prudence; that is, with the skill, care, diligence, and good judgement of a professional.
- We will not mislead you, and we will provide conspicuous, full and fair disclosure of all important facts.
- We will avoid conflicts of interest.
- We will fully disclose and fairly manage, in your favor, any unavoidable conflicts.