As I watched with horror as a passenger was dragged off a plane, it got me thinking about “Best Interest” and how it might apply to your money. You see, the flight crew was most likely actually following procedure. When no one was tempted by a $800 voucher to get off the plane, they have a computer program randomly choose who is to get booted. And I am sure, somewhere is the super small fine print that we all check that we have “read it” when purchasing a ticket, it says that a paid seat does not guarantee you that you will actually get a seat. And the flight crew is taught to follow procedures, so when someone resisted the police were called in and the rest is history.
But was it in the “best interest” to the parties involved or just to the airline? Most likely just the airline, and therein lies the analogy. In the financial world, most firms will act in their firm’s best interests, not their clients. It doesn’t mean they are all bad, but buyer beware. You better read all the fine print because when push comes to shove, you will be facing a lawyer who is VERY familiar with the fine print.
The financial world is teetering on becoming “Fiduciaries” (currently, the legislation is on hold under the new administration)and if it does go through, it would mean that an advisor to your retirement accounts MUST act in your best interest, not the company’s. Many are shocked to learn that this isn’t the current rule. I liken it to buying a car. If I go to a Ford dealer, I am not surprised that they only recommend Fords. But if I hired a car consultant who recommended a Ford over a Chevy, I would assume it was because they thought it was the best car for me, not because they made a bigger commission selling one over the other. If they did, they would not have been acting as a fiduciary. The same is true for financial advisors. Walk into a branch of a big name brand, and you are pretty sure they are going to be selling those products. Go to an independent advisor, you assume they have your best interest at heart, but this is not always the case.
So, how do you know if someone is a fiduciary? For starters, ask them. Most fiduciaries are pretty proud of it. If the answer is very convoluted, then they probably are not. It is acceptable to ask how your advisor is getting paid and if there are conflicts of interest. In addition, you can go on sec.gov and check out any investment advisors background, firm history, and fee schedules. If it doesn’t look like it is matching up to what they are telling you, it may be a sign you are going to get dragged down the aisle! Just make sure someone is video taping it!