The dictionary meaning for the word FIDUCIARY is “a person to whom power is entrusted for the benefit of another”. After the stock market crash of 1929, Congress set out to create laws governing the delivering of financial advice, passing the Investment Advisors Act of 1940 which mandates that all Registered Investment Advisors (RIAs) have a FIDUCIARY duty to act in the best interests of their clients.
The easiest and best way for an RIA to adhere to their fiduciary duty to their clients is to not receive any compensation outside of the relationship with their client (Rebates, Servicing Fees, 12b1 Fees, Paid Vacations, etc…) and to not receive variable compensation based upon an individual client’s investment choice (Individual Stock, Bond, Mutual Fund, Exchange Traded Fund, Annuity, Managed Accounts, etc…). Both outside compensation and variable compensation can quickly create conflicts of interest between the client and the advisor.
At Tradewinds Capital Management we are paid for our services via a flat fee based upon the value of the assets that we manage for our client. This flat fee financial arrangement is the primary way we ensure we are abiding by our duty to act in the best interests of our client, for we have no financial incentive to recommend one particular investment over another. In this way we are free to make recommendations solely based upon their benefit to the client.