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Fiduciary Standard

Portfolio Solutions® is guided under the fiduciary standard. This is the highest standard of care in our industry for acting in the best interest of clients, and an important distinction from firms operating under what is known as the suitability standard. The fiduciary standard requires that we put our clients’ interest first as a Registered Investment Advisor (RIA) regulated by the U.S. Securities and Exchange Commission (SEC). In contrast, the suitability standard requires that a firm make recommendations that are suitable based on the client's current, personal situation. However, this standard does not require such advice to be in their clients’ best interest while operating as a broker-dealer supervised by the Financial Industry Regulatory Authority (FINRA).

Because Portfolio Solutions® operates under the higher fiduciary standard, you can have confidence knowing that the team at Portfolio Solutions® is working in your best interest. Since the Investment Advisers Act of 1940, the SEC has required firms like Portfolio Solutions® to adhere to a fiduciary standard when advising on both retirement and non-retirement investment accounts. This means we have a fundamental obligation to account for the needs of each client with a duty of undivided loyalty and utmost good faith.

Suitability Standard

Others in the investment industry, such as popular broker-dealers seen advertising frequently on TV and various insurance representatives are not held to the fiduciary standard. Rather, these firms are only required to follow the suitability standard which simply requires that a broker reasonably believe that an investment product was suitable for a client's financial needs (not necessarily in their best interests). In addition, conflicts of interest are not required to be disclosed. As an example, a broker could recommend a mutual fund with a higher expense ratio because it pays them a commission under this standard.

Registered investment advisors like Portfolio Solutions® are responsible for far more. We must determine whether fees are reasonable, the portfolio is adequately diversified, verify and disclose any conflicts of interest, take all reasonable steps necessary to fulfill our obligations, and use reasonable care to avoid misleading clients. Investment advisors must also provide full and fair disclosure of all material facts to our clients and prospective clients.

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