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Personal Finance

Is your investment manager required to act in your best interest? Maybe not.

2015-05-20

As a fully-chartered North Carolina trust company, AAFMAA Wealth Management & Trust holds the highest level of fiduciary duty to our members. But what is fiduciary duty? It means to act in the best interest of the person whose assets the fiduciary is in charge, not their own. While that probably sounds like common sense, you might be surprised to know it is not a standard practice across the investment industry.

In recent news, the administration requested the redrafting of Department of Labor (DOL) rules to raise the fiduciary standard for brokers that are handling Individual Retirement Accounts (IRAs) following concerns about differing levels of responsibility within the investment management community. Currently brokers do not have a fiduciary level of duty to their clients and as a result, they are allowed to offer conflicting advice. For example, they can legally provide their clients with investment recommendations that may not be the best available option but that benefit the broker with higher fees or commissions. In other words, when a broker is considering a choice of investment funds for your IRA, they may use a fund that costs you more over one that costs less.

This motivates brokers to work in their own best interest and puts you at an obvious disadvantage. The DOL has recognized this systemic flaw and its potential impact on individual investors, and proposed rules to modernize the marketplace and make brokers overseeing IRAs more responsible to their clients.

AAFMAA Wealth Management & Trust is different than other investment management firms. We have a fiduciary duty to offer you completely unbiased advice that is in your best interest first — but this level of care and service is nothing new for AAFMAA. For 136 years, AAFMAA has been operated solely for the benefit of members like you. We don’t answer to stock holders, or pay any dividends. This allows us to sit on your side of the table and work together with you to manage your assets and provide you with the most innovative, personalized, and lifestyle-appropriate financial services possible. For more information about AAFMAA Wealth Management & Trust, visit wealth.aafmaa.com or call 1-800-522-5221.