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1.
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I keep hearing about Ponzi schemes with people like Bernie Madoff and other investment firms, how can I be assured this won't happen with Akros? |
| Most investment frauds are committed when an investment advisor/s have custody of a client's assets. Akros does not take custody of your assets. | |
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a.
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Your assets will be held by an independent third party like Fidelity Investments or Charles Schwab or one of your choosing. This custodian will also send you a statement for you to verify you assets. The custodian will also send you confirmation of any trades that are made on your account. At no time do you lose any control of your assets. |
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b.
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Akros will never accept a check for any of your monies except for fees as agreed upon in advance. We will not accept checks or cash for any investments to your account. An independent custodian of your choice will handle all cash related transactions. |
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c.
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Akros will never have the rights to withdraw or access your funds from your investment accounts, except for possibly fees which will be agreed upon in advance and presented to the Custodian of your account. The only authority we will have is to make investment trades in your account. |
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2.
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What is a "Fiduciary"? And why is this important? |
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a.
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A fiduciary has a legal obligation to put your interests ahead of everyone including their own. A Registered Investment Advisor is a Fiduciary. They must follow the Investment Advisors Act of 1940, which are legal investment advising standards. |
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b.
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A fiduciary owes his clients "an affirmative duty of 'utmost good faith, and full and fair' disclosure of all material facts per the SEC Release No. IA-1092 |
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c.
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A non-fiduciary stockbroker (broker) only has to follow a "suitability" standard, which doesn't require the stockbroker to place the interest of the client above his own. They only have to provide "suitable advice" which means a broker must recommend appropriate investments to their customers - not necessarily the best investments. |
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d.
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Most investors assume that when they go to a "financial advisor" that person has a legal responsibility to look out for their client first. This just isn't true. |
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e.
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Being a fiduciary does not preclude commission compensation. Being a fiduciary is about disclosing all material facts—including compensation. A fiduciary legally must put the client's best interests first. A fiduciary legally has to act in a prudent manner; disclose conflicts and all important facts; avoid or manage in the investor's interest all material conflicts and disclose fees and control expenses; follow and document a due diligence process in making decisions; and diversify investments. A financial advisor or other financial professional who is not a fiduciary legally does not. |
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3.
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It seems like the term "Financial Advisor" is used by so many people in the investment field. What is the difference between different types of advisors? |
| There are two basic types of Investment or Financial Advisors | |
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i.
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Registered Investment Advisor" (RIA) |
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a.
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subject to the Investment Advisors Act of 1940 |
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b.
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is a Fiduciary |
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c.
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must follow the highest known standard in law which is the "trust" standard. The RIA is required by law to place the interest of its clients before its own and fulfill critical fiduciary duties of trust and confidence. The RIA must provide its "best advice" to the client. |
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d.
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is State and or Federally Registered |
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e.
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is Independent must disclose all material conflicts of interest in writing. A fiduciary has "the duty of an investment adviser to refrain from fraudulent conduct includes an obligation to disclose material facts to his clients whenever the failure to do so would defraud or operate as a fraud or deceit upon any client or prospective client" per the SEC Release No. IA-1092. |
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f.
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An RIA does not have to place trades or supply you with products from one or two suppliers. We must choose the products and services best suited for your desired needs and goals. |
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g.
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is legally allowed to take fees for their services. Non-RIAs cannot take fees for their services. |
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ii.
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"Broker", Registered Rep, and Non-RIA Advisors |
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a.
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are NOT a Fiduciary |
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b.
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are NOT required to put the interest of their clients before their own. A broker only needs to make sure the investment is "suitable". This means they must recommend appropriate investments to their customers - not necessarily the best investments. |
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c.
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are NOT independent. They must provide products and services from the brokerage firm they are affiliated and registered with. They cannot use the best products and services available in the market for their clients. |
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d.
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do NOT have to disclose conflicts of interest such as having a legal obligation to their firm to act in best interest of their employer and not their clients. Nor do they have to disclose hidden fees and commissions they are receiving for selling a "suitable" product and not the best product for you. |
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e.
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CANNOT take fees and must rely on commissions on each product they buy and sell their clients to make money. |
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4.
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Who could be a fiduciary for my investments? |
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a.
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Some firms and individuals hold themselves out as fiduciaries based solely on the Code of Ethics of the associations or credential organizations they belong to such as CFP, CFA, and CPA. However, LEGALLY they are not necessarily a fiduciary under the law. Per SEC Release No. IA-1092, there is a set criteria or "tests" which define an investment fiduciary. The following table should help you to ask your financial advisor about whether they are investment fiduciaries and are registered as a Registered Investment Advisor under the Investment Advisers Act of 1940: |
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Title
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Financial Fiduciary
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| Financial Advisor | Maybe |
| Investment Advisor | Maybe |
| Insurance Agent | No |
| Certified Financial Planner (CFP) | Maybe |
| Registered Investment Advisor (RIA) | YES |
| Registered Representative | No |
| Broker | No |
| Broker in a Bank Lobby | No |
| Certified Public Accountant (CPA) |
Maybe |
| Attorney | Maybe |
| Investment Counsel | Maybe |
| Bank Officer | Maybe |
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b.
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Akros does not take commissions for any trades or products. Our fees are clearly defined and there is nothing hidden. Our compensation is never based on how many trades or products you utilize to meet your investment goals. For example, let's assume you have a "financial advisor" who is a broker, a CFP and registered with a broker/dealer. The broker gives you advice that is deemed to be not in your best interest or that the broker fails to disclose conflicts of interest. This broker will have violated his ethics code of the CFP designation and may lose this accreditation, but he has not necessarily broken the law because he is NOT a fiduciary. If your "financial advisor" works for a Registered Investment Advisor (RIA) and the advice is deemed NOT to be in the client's best interest, this is a legal issue no matter what credentials or ethic standards are in place. |
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5.
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Does an Investor's Bill of Rights mean my investment/financial advisor is a fiduciary? |
| No. Many non-registered investment advisors (click here for chart in question 4) are using an Investor's Bill of Rights with their clients. Legally this is a simple agreement that is put in place between you and your representative. Any breach in this agreement is not a legal breach which is overseen by a government regulator. It may be a moral violation or an ethical violation. You may even be able to bring this person to court, but legally they had no fiduciary obligation and thus, not the same standard as a fiduciary. Even without an "Investor's Bill of Rights", a fiduciary – a Registered Investment Advisor – has the legal obligation to put your interests ahead of everyone including their own. The regulators will oversee areas such as investment advice, compliance, marketing, resolution of problems, disclosure issues, accuracy of data, and custody of assets. Some Registered Investment Advisors (like Akros) have an Investor's Bill of Rights which they sign with their clients, and these rights are held to a higher standard --- A fiduciary standard. |
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6.
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Does this mean I should NOT hire a Broker, a Registered Rep, or other investment advisors who are NOT fiduciaries? |
| No. You need to ask questions and make sure the person you are hiring is someone who fits your needs. There are many ethical brokers, registered reps or other investment advisors, you just need to ask questions and make an informed decision. |
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7.
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What services should a Comprehensive Financial Advisor perform for you? |
| Fiduciary is a great choice to be a Comprehensive Financial Advisor since they will be helping you in all aspects of your financial life. You should know they are acting in your best interst and bringing you the right advisors and solutions to help you reach you goals. | |
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i.
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Financial Section |
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a.
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Your financial advisor should take the lead in ensuring that all of your other advisors talk to each other, when necessary (ex: tax, investment, legal, insurance and planning people). They should sit-in on meetings to make certain they communicate effectively among each other to ensure that my plan unfolds efficiently and in the smartest way. |
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b.
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Your financial advisor should have a comprehensive written lifetime financial plan in place for you and ensure that it is fully reviewed at least annually. |
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c.
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All of your financial goals ultimately distill down to a dollar figure required to achieve the goal and your financial advisor should show your progress benchmarked against each of your goals. |
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d.
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Your financial advisor should shown you exactly how much money you will need to accomplish each of your goals and when you will have "enough" to achieve all of them. |
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e.
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Your financial advisor should actively orchestrate the allocation of your assets to advise you on how best to deploy them in support of your goals. |
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f.
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You should meet with my financial advisor at least three times per year to cover organized and important agenda items driven by him or her. |
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g.
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Your financial advisor should have a process to continually review all of your financial accounts, even those financial accounts NOT directly under his or her control. |
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h.
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When you have a financial objective target date approaching, your financial advisor should routinely contact you well in-advance with the funding plan. |
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i.
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Your financial advisor should monitor your "cash reserves," at every institution in which you have an account, to ensure you have enough for contingencies. |
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j.
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Your financial advisor should have a process to uncover risks, dangers and road-blocks to your financial plan at least annually and then develop specific strategies to address each. |
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ii.
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Tax Section |
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a.
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Your financial advisor should see that all of your personal tax returns are thoroughly reviewed before you file them. |
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b.
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Your financial advisor should maintain copies of all statements, personal documents and tax returns that it is sensible for you to keep for any future reference. |
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c.
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Your financial advisor should ensure that a tax projection is completed well-before the tax deadline annually, so there are never any tax "surprises". |
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d.
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Your financial advisor should be keenly aware of his or her process to identify well in-advance a financial detail, tax deadline or any important target date for a goal you have set. |
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iii.
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Legal Section |
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a.
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Your financial advisor should ensure that your estate plan (wills, trusts, etc.) have been fully reviewed within the past five years. |
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iv.
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Insurance Section |
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a.
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Your financial advisor should ensure that all of your property & casualty insurance, like homeowner's & auto insurance, is reviewed each year. |
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b.
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All of your life, health, disability and long-term care insurance is fully reviewed by your financial advisor each year for suitability. |
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c.
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When did your agent or broker last do a comprehensive review of your personal insurance? |
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d.
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How do you and your agent approach the annual policy renewal? Do you have a face-to-face dialogue to discuss your risk exposure, or does the agent merely mail you a summary or the renewal bill? |