4 Reasons Why You Should Choose an AIF Financial Advisor
An “Accredited Investment Fiduciary,” or AIF, is a financial designation offered and regulated by the Center for Fiduciary Studies and accredited by the ANSI National Accreditation Board. AIFs are investment advisers who work with a wide range of accounts, from individual investment and retirement accounts, small business retirement plans, and foundations and endowments.
Over the past several decades, there have been multiple highly publicized cases of asset managers who invested their clients’ funds in investments that were inappropriate for their clients’ needs. These investments, which the clients often were not able to fully recover, were often risky and generated commissions or kickback incentives to the investment manager.
As a result of this misconduct, there has been an increasing emphasis on employing financial professionals who are held to a fiduciary standard. AIFs, who follow fiduciary best practices, offer their clients more protection and peace of mind versus investment managers who do not hold this standard..
Below, we list four of many reasons prospective clients should consider working exclusively with an AIF investment professional.
1. Fiduciary Duties
The investment management industry has traditionally not been subject to a fiduciary standard of care, instead only needing to prove that the investment advice or recommendation was appropriate for the client’s needs. Many investment advisors have not shifted to a fiduciary standard of care yet, meaning they may experience a conflict of interest that they resolve to their client’s detriment. Do you know if your financial advisor is a fiduciary? Read on to learn more...
This “suitability” standard, which is what broker-dealers are usually held to, has led to situations such as brokers advising clients to purchase funds that generate a higher commission rather than another fund that might be better suited for the client. As long as the recommended fund is still “suitable” for the client’s needs and goals, advising clients this way, despite this clear conflict of interest, is legal.
As fiduciaries, AIFs place their client’s interest before their own in all transactions and advice they give. They provide the same high standard-of-care in the investment management industry as CPAs, lawyers, and physicians do in their own fields.
In practice, fulfilling this fiduciary responsibility may involve the AIF communicating to the client when he or she is not the best professional to meet their needs or recommending investments that would be the best option for the client, even if they generate no or lower management fees for the AIF.
2. Structured Investment Process
The AIF certification is one of only ten designations out of over 100 in the financial services industry that have been accredited by a third-party organization. In order to become certified, AIFs must take a course either in-person or online and pass a closed-book, timed exam. AIFs also must have a minimum number of years of relevant financial experience, with the length of experience ranging from two to eight years, depending on whether they already have another professional designation and/or a bachelor’s degree.
To maintain their certification, AIFs must take at least six hours of continuing education credits per year. They also have access to the Center for Fiduciary Studies’ Fi360 website, which has extensive training materials and information for AIFs.
One of the advantages of working with AIFs is their training in investment management and organizational practices have been designed by industry experts. AIFs follow a set procedure for many aspects of their business, including establishing their investment strategies, managing day-to-day portfolio decisions, reporting performance to clients, as well as internally and externally auditing their clients’ records.
This process also reduces the risk of “information overload” with individual investment advisers by establishing clear standards ahead of time regarding acceptable investment strategies, asset types, and levels of risk. With these limits in place, advisers will not be distracted by considering investment options that are outside the bounds of the pre-designed portfolio strategy.
3. Protections Offered
AIFs are able to adapt to changing legislation (and lawsuits against fiduciary negligence) as well as industry best practices through the guidelines provided by the Center for Fiduciary Studies.
The Center has developed a list of 22 Prudent Investment Practices for AIFs to guide every aspect of an AIF-centered investment firm. These practices define how to organize the business and employees, how to formalize business strategies and ensure that all aspects of reporting and marketing are ethical, how to implement investment strategies and manage clients’ assets, and how to monitor both the clients’ performance and overall strategies and policies.
By following these 22 practices, AIFs protect their clients’ best interests while ensuring that they are following fiduciary guidelines to the extent expected by the law. This also offers the advisor reduced risk of litigation if he or she can show proof of following the recommended best practices for AIFs.
The Center for Fiduciary Studies also provides public access for anyone to look up whether their current advisor is an AIF and to review any disciplinary actions. If a client believes his or her advisor has engaged in irresponsible portfolio management or investment advice, the client can report complaints to the Center for Fiduciary Studies. A committee will review the complaint and decide what, if any, sanctions to impose on the advisor.
4. Code of Ethics
Finally, AIF’s follow a code of ethics that guides all aspects of their practice as an investment advisor. Among other requirements, AIF’s must disclose all information relevant to the client in making informed investment decisions, charge clients reasonable fees relative to the services provided and industry standards, hold all client information confidential unless required to disclose it by law, and provide recommendations for other professionals when the AIF is not fully qualified to handle a client’s needs.
AIF’s also take a broader oath that they will promote their practice in a responsible and honest way, find and correct any mistakes they make, and show integrity in all actions with their friends, family, and the broader community. These expectations of high integrity in all aspects of an AIF’s life far exceed the requirements of other investment advisors.
Due to the high standard of care that AIF’s offer, clients can have full confidence that they are working with a professional who has extensive industry experience, fulfills a fiduciary responsibility, and is committed to managing portfolios, as well as client relationships, with the highest degree of integrity.
ARQ Wealth Advisors has a team of experts who are passionate about helping you achieve your goals. Our team includes Certified Financial Planner™ professionals (CFP®s), Chartered Financial Analysts® (CFA), Retirement Income Certified Professionals ® (RICP), and Accredited Investment Fiduciaries ® (AIF). We’re ready to help you get where you want to go. Contact us here.