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Srbo Radisavljevic
Managing Principal/Investment Advisor

Edge Portfolio Management

City:Northbrook

State: IL



BIOGRAPHY:
At Edge, a low client to advisor ratio allows for personal and customized service for each individual.  Our goal is to work as a team for each client to provide not only portfolio management but wealth coordination and financial planning.  We make every effort to have frequent communication with our clients and to provide timely response to calls and emails.  I also enjoy spending time with my wife and three kids, following Chicago sports, enjoying ethnic cooking, and serving as a school board member for Norridge School District 80.

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What is a Fiduciary Relationship? Millionaires Think They Know (Do They?)

Three-fourths of Millionaires say they understand the concept of a fiduciary relationship, while 85 percent feel their financial advisor is a fiduciary.

| BY Donald Liebenson


Millionaires put a high premium on financial knowledge, whether they obtain it through their own research or from a financial advisor. In turn, they are more likely than their less-wealthy counterparts to consider themselves at least fairly knowledgeable about financial products and investments than non-Millionaires (60 percent vs. 52 percent), according to a 2014 wealth level study conducted by Spectrem’s Millionaire Corner. They are significantly more likely to consider themselves “very knowledgeable” (19 percent vs. 9 percent).

Does this knowledge extend to their grasp of the concept of a fiduciary relationship, which can be crucial in their dealings with a financial advisor?

If you ask them, then, yes, three-fourths of Millionaires say they understand the concept of a fiduciary relationship, while 85 percent feel their financial advisor is a fiduciary. Age and wealth are factors in who among these Millionaires claims the best grasp of the subject, with the youngest Millionaire respondents under the age of 35 most likely to say they do not understand the concept of a fiduciary relationship (52 percent).

Among Millionaires with a net worth between $1 million and $4.9 million, those with $1 million-$1.9 million are also most likely to say they do not understand the concept (30 percent vs. 25 percent of Millionaire respondents overall).

What is a fiduciary? Basically, a fiduciary relationship states that a financial advisor acts always in the best interest of the client, in accordance with the Investment Advisors Act of 1940. “Anybody holding themselves out for investment advice has to meet the 1940s Act,” states Knut Rostad, founder and president of the Institute for the Fiduciary Standard. “Period; end of sentence.”

This is where things get a little tricky. Created in the wake of the 2008 economic collapse, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 instructed the Securities Exchange Commission to consider mandating that brokers operate under the same fiduciary standard as investment advisors. Unlike investment advisors who are regulated as advisors, broker-dealers are regulated as salespeople under the Securities Exchange Act of 1934.

One-third of Millionaire investors use a broker, according to Millionaire Corner wealth level advisor usage studies. Over the decades, the distinctions between brokers and advisors have blurred, which can cause confusion among retail investors. Brokers currently are required only to steer clients toward trades or investments deemed suitable, while investment advisors are obliged to put clients’ interests first.

A new Spectrem’s Millionaire Corner study of Millionaire households and their relationship with their financial advisors finds a basic understanding of the fiduciary relationship. Roughly two-thirds (65 percent) said it was a professional looking out for their client’s best interest.

But they are more inclined to think that a fiduciary relationship is one involving the care of assets (77 percent) or is a legal or ethical relationship (76 percent). Just over half (55 percent) believe it is a relationship based on confidence, good faith and trust. One fourth consider a fiduciary relationship to be one of “extreme loyalty.”



About the Author


Donald Liebenson

dliebenson@millionairecorner.com

Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.  

A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.