Up front disclosure and transparency are key elements of FPH’s core values. Every effort is made to apprise clients of how we are paid and of potential conflicts of interest associated with the guidance provided. To this end, it is important for clients to have a basic understanding of FPH’s business framework and the regulatory environment in which we operate.
In accordance with the current bifurcated regulatory structure, planning professionals who provide investment advisory services (fee-based asset management and financial planning services) through a Registered Investment Advisory Firm are regulated by the Securities Exchange Commission (SEC) and/or state-governed authority (e.g., the State of Hawaii Securities Division of the Department of Consumer Commerce and Affairs), while advisors who act as registered representatives of a brokerage firm are regulated by the Financial Industry Regulatory Association (FINRA). When acting in an investment advisory capacity, planning professionals are held to a fiduciary standard, which, among other things, requires the planner to place the interests of the client above his own and to provide clear disclosure. When providing guidance and recommendations pertaining to traditional brokerage accounts, the advisor is held instead to FINRA's suitability standard.
This important distinction technically means that, when acting in a brokerage capacity, advisors are required to make recommendations that they believe are suitable for the client, but which would not necessarily meet the SEC’s fiduciary standards for disclosure and for placing the client’s interests first. Since FPH offers financial planning and investment advisory services to its clients, we believe it is important for clients to understand that we may, at times, wear two different hats – one as an investment advisor representative that holds us to the SEC’s fiduciary standard and another as a registered representative of a brokerage firm, Financial Advisers of America, that holds our guidance to FINRA’s suitability standards.
It is our general philosophy to strive for transparency and to place the interests of our clients first regardless of whether we are wearing our advisory or brokerage caps.