Thomas Batterman Explains Fiduciary Responsibilities and Obligations

To clarify any uncertainty of what a fiduciary is and why it is important, we teamed up with financial expert and trust professional, Thomas Batterman. With experience in estate planning, taxation, retirement planning, corporate organizations and real estate, Thomas Batterman from Wausau, WI will tell us everything we need to know about hiring a fiduciary.

Fiduciary Explained

A fiduciary is a person who holds a legal or ethical relationship with one or more parties. The main responsibility of a fiduciary is to safeguard and represent the interests of another person. Thomas Batterman describes the relationship between fiduciary and client as one built on trust, ethics, understanding, and the alignment of goals.

In the financial advisory arena, the primary benefit of using a true fiduciary is that the relationship is based on putting your interests ahead of the potential profit of the “advisor”. Thomas Batterman elaborates by adding that investment professionals who are not bound to a fiduciary standard have been known to recommend investment products to their clients because they offer the highest commissions, and not because the products are well suited to the clients’ needs. Your relationship with your financial advisor can become tenuous if this standard is not in place.

Fiduciary Standard

The fiduciary standard is much stricter than the standard that applies to brokers, insurance agents, and other financial professionals. The fiduciary rule is embedded in the Investment Advisors Act of 1940 and is applicable to all who are registered as “investment advisors”. However somewhere along the way individuals selling investment products could offer “advice”. The advice to be offered was supposed to be only “incidental” to the sales process, but in practice it was not done or perceived by the public in that way. Making matters worse, the SEC permitted these salespeople to call themselves “financial advisors”, thus creating further confusion for the public as to who was doing what, when it came to the issue of offering financial guidance. To try to remedy this issue, a “fiduciary rule” was formally proposed by the Department of Labor in April 2016. The need for this standard is obvious; a 2015 report from the White House Council of Economic Advisers estimates that conflicts of interests by brokers cost retirement investors up to $17 billion per year. Unfortunately, the DOL’s fiduciary rule has been victimized by the political process and at this point, despite the demonstrable need for something to be done so consumers can clearly understand with whom they are dealing, no progress has been made on finalizing this rule. Thomas Batterman believes that this unacceptable practice of salespeople being allowed to call themselves “financial advisors” and allowing their sales pitch for products to masquerade as “advice” needs to evolve in order to set future retirement investors up for success.

Fiduciary Obligations

Thomas Batterman explains that a fiduciary’s main obligation is to act impartially and solely in the interest of the client they are serving. This means that they do not accept fees from any of the financial products that they suggest and will only give advice that is rooted in truly empirical evidence. Should a conflict of interest arise, a fiduciary must openly disclose it.

Thomas Batterman’s Final Thoughts

Thomas Batterman would like readers to remember that everyone can benefit from a fiduciary, even if you are not wealthy. The fiduciary standard protects millions of investors from paying unnecessarily high commissions on investment products, and from buying investment products that are not in their best interest. Do your research, because even though this is great for a client, it can be difficult to find someone who adheres to this high standard. Estimates are that only 5–10% of the people holding themselves out as “financial advisors” are only in the business of providing financial advice for a fee and acting as a fiduciary in their relationship with their client.