Why the Suitability Standard Isn't Suited for You
Working with a fee-only investment adviser who adheres to the fiduciary standard can help ensure you get the best financial advice to suit your needs.

You need to be sure that any financial advice you get is given with your best interest in mind. The best way to do so is to hire a fee-only adviser who operates in a fiduciary capacity.
The Department of Labor has recently stepped in to mandate that all advisers to retirement assets hold themselves to the fiduciary standard. Simply put, the fiduciary standard states that advisers must hold the interest of their clients above their own. This is in contrast to the lesser and more commonly adhered to "suitability" standard, which states that an adviser must hold the interest of their clients at least as high as their own.
That's a subtle change in language, but an enormous difference in meaning.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
For context on how this situation unfolded, think back to the early days of the stock market. If companies wanted to raise money to hire more employees or build more factories, they hired an investment bank to issue stock in their company for consumption by the public market (which are called initial public offerings, or IPOs). In order to move those issues, the banks paid brokers a commission to sell securities from their inventory. The brokers were incentivized to generate profits for the bank by way of selling as much product for as high a commission to as many customers as possible. There's nothing wrong with that, and it's a commonly accepted practice across various industries for goods and services. "Caveat emptor" applies here.
However, as capital markets matured and Americans became more dependent on financial assets to support their livelihoods, many began seeking advice on the best investments for their portfolios. Common knowledge held that those who knew the most about investments were the ones selling them, so the advice of brokers was sought on how to best allocate savings.
When recommending investments, the broker has many options to consider, but let's simplify it to Investment A or B.
Investment A is pretty good for the client, but doesn't pay much of a commission to the broker.
Investment B is also pretty good for the client, and pays a nice commission to the broker.
Because both investments are pretty good and therefore suitable for the client, there's some likelihood that Investment B will be recommended because it pays more for the broker.
Are Investment A and Investment B equally good for the client? That's difficult to know in this example, but since suitability is the standard to which most advisers (those registered with a broker-dealer) are held, the broker-adviser has done a satisfactory job.
The new fiduciary rule aims to address this problem, but only does so for retirement accounts. Non-retirement accounts could still fall under that same suitability standard. And this could be the same adviser working with the same client; it just so happens they have one retirement account and one non-retirement account.
If you're confused by what you just read, you're not alone.
That's not to say that commissions shouldn't be part of the economic model by which brokers are compensated. There is absolutely a time and place for that, but doing so under the veil of advice lacks transparency and consistency.
Fortunately, this conflict has given rise to a better advisory model that puts the client at the center of the relationship by removing the commission equation altogether—that is the business of fee-only investment advisers. Their advice is the same on retirement accounts as it is on non-retirement accounts. It's 100% driven by what's deemed best for the client, and the client pays directly for that advice while the adviser implements and manages the portfolio of investments on their behalf.
Since its inception as Disch & Associates in 2008, Great Point Wealth Advisors has always advised clients in a fiduciary capacity. It's a founding principle and our way of reciprocating the trust given to us by our clients.
The DOL has made strides in this effort, but the real strides must come from you, the investors. You need to seek out fee-only investment advisers for help managing your portfolios and the myriad of other financial and estate related subject matter that requires careful consideration. It is critical to securing the future you deserve.
Peter V. Disch, Jr., CFP® is the founder and managing member of Great Point Wealth Advisors, an SEC Registered Investment Adviser in Boston.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Peter V. Disch, Jr., CFP® is the Founder and Managing Member of Great Point Wealth Advisors, an SEC Registered Investment Adviser in Boston. Recognizing the demand for unbiased and objective advice, he designed a firm that focuses solely on advising clients and managing their wealth in a fiduciary setting. Peter began his career after graduating from Boston College's Carroll School of Management and consults on asset allocation, tax management, estate planning and income generation.
-
RMD Deadline April 1: Five Tax Strategies to Manage Your 2025 Income
Taxable Income The April 1, 2025, deadline for required minimum distributions (RMDs) is fast approaching for retirees who turned 73 in 2024.
By Kelley R. Taylor Published
-
Rising AI Demand Stokes Undersea Investments
The Kiplinger Letter As demand soars for AI, there’s a need to transport huge amounts of data across oceans. Tech giants have big plans for new submarine cables, including the longest ever.
By John Miley Published
-
The Three Biggest Fears Keeping Retirees Up at Night
Here are the steps you can take to put those fears to rest and retire with confidence so you can relax and enjoy the life you've planned.
By Pam Krueger Published
-
What Can a Donor-Advised Fund Do for You? (A Lot)
DAFs and private foundations go about helping charities (and those who donate) in different ways. Each comes with its own benefits and restrictions to navigate.
By Julia Chu Published
-
Estate Planning When You Have International Assets
Estate planning gets tricky when you have assets and/or beneficiaries outside the U.S. To avoid costly inheritance mistakes, it pays to understand the basics.
By Kelsey M. Simasko, Esq. Published
-
Three Essential Estate Planning Steps to Protect Your Nest Egg
After dedicating years to building your wealth and securing your future, make sure your assets are protected and your loved ones are provided for in the future.
By Nicole Farbo, CFP® Published
-
Is Chasing the American Dream Ruining Your Financial Life?
Too many people focus on visible affluence as a marker of success. Here's how to avoid succumbing to the pressure and driving yourself into debt.
By Anthony Martin Published
-
Retiring With a Pension? Four Things to Know
The road to a secure retirement is slightly more intricate for people with pensions. Here are four key issues to consider to make the most out of yours.
By Joe F. Schmitz Jr., CFP®, ChFC® Published
-
How to Teach Your Kids About the Tax Facts of Life
Taxes are unavoidable, so it's important to teach children what to expect. Also, does your child need to file a tax return for 2024? Find out here.
By Neale Godfrey, Financial Literacy Expert Published
-
Revocable Living Trusts: The Good, the Bad and the Ugly
People are conditioned to believe they should avoid probate at all costs, but when compared with living trusts, probate could be a smart choice for some folks.
By Charles A. Borek, JD, MBA, CPA Published