A changing regulatory environment is likely to create a new crop of advisors acting as fiduciaries, but that doesn’t necessarily mean all of them will adhere to the highest standard of fiduciary advice.

The Institute for the Fiduciary Standard, a McLean, Va.-based financial think tank, has weighed in on the matter by releasing a self-assessment tool that will allow advisors to evaluate their firms’ adherence to a best-interest, client-first standard.

“Our best practices test whether advisors offer objective, transparent and competent advice at a fiduciary level,” says Knut Rostad, president of the IFS. “These best practices stress the ethical side of fiduciary advice, like the importance of avoiding conflicts, being transparent and improving communications.”

With the Department of Labor announcing rules mandating that advisors act as fiduciaries when working within retirement accounts, and a business climate pushing more advisors toward fee-based revenue models, advisors need clarification on what the best-interest standard means, says Rostad.

“The Department of Labor’s conflict of interest rule has set off a new era; its importance can’t be overstated,” Rostad says. “It is a giant first step and the start of a journey consistent with law, logic and history.”

Rostad likens the fiduciary rule to the first shots of the American Revolution in Lexington and Concord, Mass.

The tool is intended to assist RIAs in gauging their businesses against the institute’s best practices, and to help brokerage representatives faced with acting as part-time fiduciaries navigate their conflicting standards for advice and compensation.

The institute developed the tool internally with input from the National Association of Personal Financial Advisors, establishing several areas of self-assessment for advisors.

The tool asks advisors to affirm that they adhere to those standards set forth in legislation, like the 1940 Investment Advisers Act, as well as those standards established through common law while working with clients, and to avoid conflicts of interest whenever possible.

Advisors are also required to provide written disclosures and statements of compensation.

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