As a Floridian, you save money for your retirement in the Sunshine State. However, there are times when the investments your advisor recommended you purchase help them more than they help you. The investment advisor has requirements on what they must disclose to you before a sale.
The Securities and Exchange Commission outlines what a conflict of interest means and how that affects you and your investments. A conflict of interest focuses on those recommendations that financially benefit the advisor. When the financial advisor acts as your fiduciary, they have a requirement to disclose any conflicts of interest to you.
The conflict of interest extends to specific client interests that may have nothing to do with your investments. The compensation they receive can be indirect or direct. Advisors must work to minimize or eliminate their conflicts and communicate those efforts to you.
The advisor should disclose the nature of the conflict of interest such as shared incentives with the clearing broker. When discussing the investments, your advisor should explain all the fees associated with a sale and how that affects any returns you receive. Different share classes may have similar funds represented that can affect your returns.
Some advisors have revenue-sharing payments as an incentive for selling a particular fund or shares. Any potential conflicts of interest regarding revenue-sharing payments can include agreements and incentives the advisor should share with you. When they send you their annual updates, look for highlighted areas showing changes in their disclosures.
This information is only intended to educate and should not be interpreted as legal advice.