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Fiduciary Responsibility and the AIF® Designation

May 14, 2015

There is a very good reason that the individual, or group, you trust with your financial assets charges you for their services; the world of investing and financial guidance is full of complex legal terms that often form a minefield that paralyzes the average individual. Even a qualified business professional may find themselves easily confused by financial lingo. Among the terms you’re likely to hear during a meeting with your financial advisor are "fiduciary responsibility" and "AIF® designation." What do these terms mean, and how do they impact you?

Fiduciary Responsibility

This is the clearer of the two terms. Fiduciary is a word used to describe the relationship between people in which one person has a responsibility to care for the assets and rights of another. In the world of business, for example, a board of directors has a fiduciary responsibility. As a guiding body for the corporation, the board has a fiduciary responsibility to guide the assets and rights of stockholders in the company. This responsibility includes:


·            Avoiding conflicts of interest

·            Acting in the interest of the company as a whole, not individual members

·            Offering oversight with the goal of ensuring all transactions within the  

    business are legal

·            Making crucial decisions to protect the assets of the company


In the world of personal finance, your financial advisor has a fiduciary responsibility. The individual you entrust with your Roth IRA, IRA, 401(k), and other investment portfolios is responsible to you and must act at all times to protect your assets and rights. Likewise, a business offering a retirement plan to its employees has a fiduciary responsibility to meet under the terms of that plan. For example, the business is required to meet its fiduciary responsibility in the following manner:


·            Act solely in the interest of plan participants

·            Carry out their duties and interests prudently

·            Follow plan documents

·            Diversify plan investments

·            Pay reasonable plan expenses


What is an AIF® Designation?

An AIF® designation is a qualification for financial planners and advisors that stands for Accredited Investment Fiduciary®. In simpler terms, this designation is used to identify an individual who has completed appropriate training to work as a fiduciary (financial planner). Earning an AIF® designation is part of a greater effort to improve the decision making of investment fiduciaries and other financial services providers.

In short, the AIF® designation exists for the following reason:

"Investment fiduciaries are constantly exposed to legal and practical scrutiny -- it comes from multiple directions and for various reasons. The AIF® training and designation help mitigate this liability by instructing in practices that cover pertinent legislation and best practices. The Accredited Investment Fiduciary® (AIF®) designation represents a thorough knowledge of and ability to apply the fiduciary Practices."

Whether you are looking to work with a financial planner and want to better understand their responsibility to you, or you are considering a change in career within the financial industry, the information in this post is of utmost importance. By understanding the responsibilities and education of those handling assets and finances, everyone can be more confident in the financial planning process.