Our Duty

Our Business is Advice, Not Sales

There are many questions and much confusion regarding who or what an “investment advisor”, “financial planner”, “financial consultant”, “financial advisor” “Registered Representative” or “broker” actually is, and the credentials needed to qualify for such a title. There is a lot of legal leeway granted as to the title someone chooses, however, there are some important distinctions as to whether someone is a Registered Investment Advisor (“RIA” or “Advisor”) or a Registered Representative (“RR”, “broker” or one that is usually employed by a broker-dealer).

Please note that it is our position that it is always up to the individual Advisor or broker to act with integrity regardless of how they are compensated, who they are employed by, what they call themselves and what legal standard they are measured against. However, there are some important differences you need to be aware of when selecting with whom you are going to trust some of the most intimate details of your life.

Legal Standard:

Fiduciary vs. Suitability

The legal standard by which the individual is measured against is quite different. As an RIA, Principia Wealth Advisory is held to a fiduciary standard when rendering advice and making recommendations to clients. Law.com defines a fiduciary as “a person who has the power and obligation to act for another under circumstances which require total trust, good faith and honesty.” In short, it is our ethical AND legal responsibility to act in your best interest. The suitability standard requires RR’s and brokers only to recommend investments that are suitable for you. In other words, the broker can legally put his own interests above yours as long as he makes a “suitable” recommendation. We feel that this is an important distinction to understand as this can have profound effects on what investments are recommended for your account.

Compensation:

Advice vs. Transactions

RIAs are paid an advisory fee directly from the client, usually as a percentage of assets under their care or a fixed-fee retainer, for advice and service. Principia Wealth Advisory has no incentive to recommend one security over another and has no incentive to create transactions. Brokers are paid commissions, usually directly from the investment company that was recommended, and as such there is a subtle pressure to create transactions. Further, brokerage firms are often investment product manufacturers who see their brokers as the prime distribution channel to sell their products.

Reporting:

Transparency vs. Disclosure

At Principia Wealth Advisory, we want you to fully understand all of the fees you are paying for quality advice. These are your hard-earned resources and you ought to have the highest standard of transparency in your financial dealings. Brokers will usually follow all of the legal mandates of disclosure, however, that usually comes in the form of prospectus booklets and voluminous, lengthy legal documents. Our reporting, as well as that of your custodian, is designed to give you meaningful, relevant and straightforward information.

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