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Plan For Life

Your Financial Advisor Should Put You First

The importance of CEFEX Certification and what it means for you.

November 17, 2017 • 4 minute read
BrightPlan Blog

Did you know not all financial professionals are required to work in your best interest?

It sounds crazy, because you’d think working in your best interest should be the default setting. The financial industry doesn’t necessarily agree with that -- but we do.

We recently launched our digital financial planning and investment platform, BrightPlan. BrightPlan is the first digital advisor certified by CEFEX for fiduciary excellence, which makes us very proud and excited.

But words like “CEFEX-certified” and “fiduciary” could leave you yawning. If you’re wondering what these terms mean and why you should care, let’s get past the industry jargon and focus on what’s in it for you.

Working with an RIA Means You Work with a Fiduciary

BrightPlan is a Registered Investment Adviser, or RIA. An RIA is a person or firm registered with the Securities and Exchange Commission that gets paid for providing investment advice or recommendations. While giving investment advice, RIAs like BrightPlan are required legally and ethically to act as a fiduciary to clients.

So what is a fiduciary?

A fiduciary is held to a legal and ethical requirement to act in a client’s best interest. A fiduciary owes clients a duty of undivided loyalty and good faith. In other words, you can trust a fiduciary to have your back.

Not All Financial Professionals Have to Act in Your Best Interest

We’re talking a lot about the fiduciary standard because, again, it’s not the default for financial professionals (even though we believe it should be).

When you employ a doctor, attorney, or trustee, they are legally required to act in your best interest. But somehow, this same standard does not apply across the financial industry. While RIAs must operate under the fiduciary standard, other financial firms adhere to different standards.

Here’s why you should care whether you’re getting fiduciary advice: the White House Council of Economic Advisors estimates that conflicted advice from investment professionals is draining $17 billion per year in excess fees from middle class Americans’ retirement accounts.¹

Unfortunately, it’s not always clear when you are -- or aren’t -- working with a fiduciary in the financial world.

What makes things even more confusing is that financial firms give out titles that imply that their employees are always looking out for the client. They may use titles like estate planner, wealth manager, consultant -- and even financial advisor.

But titles are just that: titles. In fact, the SEC makes a note that titles are only marketing terms and have little meaning and no regulation.² In reality, these employees may be salespeople pushing products that generate the highest commissions or fees.

That’s why it’s critical to seek out help from a true fiduciary who doesn’t only say they work in your best interest, but who is independently verified by a third-party source.

Don’t Take Our Word for It: We’ve Got Objective Third-Party Validation

Remember that CEFEX certification we mentioned before? It means that BrightPlan was independently verified to adhere to the best fiduciary and professional practices in the industry.We take our role as a fiduciary seriously and want to provide our clients who invest with this additional level of comfort.

CEFEX stands for the Centre for Fiduciary Excellence. It’s an independent organization that assesses and certifies Registered Investment Advisers for fiduciary excellence. CEFEX certification can help clients who invest determine the trustworthiness of their advisor.

CEFEX conducts a rigorous process to assess whether a firm:

  • Knows and adheres to legal requirements and industry standards
  • Diversifies investments according to the risk/reward profile of clients
  • Clearly sets expectations with clients
  • Communicates roles and responsibilities
  • Uses and monitors prudent experts
  • Properly controls and accounts for investment expenses
  • Avoids prohibited transactions
  • Properly manages conflicts of interest

After conducting its assessment, CEFEX awarded BrightPlan the Investment Advisor Certification. And as part of our ongoing commitment to excellence BrightPlan volunteers for annual audits to be sure we’re keeping pace with the industry’s best practices for serving clients.

Financial services companies lost a lot of public trust in the wake of the Great Recession, with good reason. Along with being independent, keeping costs low, and partnering with Plancorp, CEFEX certification is one more way we hope to show clients that we’re sitting on the same side of the table with them, ready to help them reach their goals.

Sources:

  1. White House Council of Economic Advisors: The Effects of Conflicted Advice on Retirement Savings. 2015.
  2. SEC and NASAA Investor Bulletin: Making Sense of Financial Professional Titles. 2013.

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