Market Advisory Group—Frequently Asked Questions
page-template,page-template-full_width,page-template-full_width-php,page,page-id-15924,ajax_fade,page_not_loaded,,qode-title-hidden,side_area_uncovered_from_content,qode-child-theme-ver-1.0.0,qode-theme-ver-13.4,qode-theme-bridge,wpb-js-composer js-comp-ver-5.4.5,vc_responsive


What is the Fiduciary Standard and why is it important?

The fiduciary standard mandates that an investment advisor act in the best interest of the client in making securities investment recommendations. Simply put, an investment advisor must provide advice and investment recommendations that he or she deems best for the client based on the information the client has provided. When making decisions that are best for the client, a fiduciary must adhere to the duties of loyalty and care. In accordance with the fiduciary standard, an investment advisor is required to provide disclosures to the client before entering into any contracts to provide investment advice. These disclosures discuss important topics such as the investment advisor’s qualifications, service offerings, compensation and the range of fees, methods of analysis, and any records of disciplinary actions or possible conflicts of interest.

Lack of transparency and conflicts of interest plague the world of investment advice. Choosing to work with an investment advisor who will act as your fiduciary helps to eliminate the common problems associated with salespeople who are product focused and commissioned-based.

Because a fiduciary is required, by law, to fully disclose how they are paid as well as any possible conflicts of interest, you as the consumer are in a better position to make a well-rounded and informed decision regarding your investments.

How a broker is different from a Fiduciary and what concerns should I have?

A broker (stockbroker), by definition, is any person executing transactions (buying and selling securities e. g. trading) for the accounts of others. Brokers carry many different titles in today’s investment world such as: wealth manager, wealth or financial advisor, investment or financial consultant and registered representative. Regardless of the title a broker holds, they are generally not considered to have a fiduciary duty to the client. brokers avoid the higher legal standards of a fiduciary because of the exemption found under section 202 (a) (11) (C) of the investment Advisors Act of 1940: any broker or dealer and whose performance of such services is solely incidental to the conduct of his business as a broker or dealer and who receives no special compensation therefore. Simply put, brokers are not viewed as fiduciaries because their advice is incidental to the sale of their products. They are not required to put the clients’ interests ahead of their own, rather they are merely expected to deal fairly with their customers and adhere to the lower standard legal care known as the Suitability Doctrine. This standard requires brokers to know their customer’s financial situation well enough to recommend investments that are considered suitable. Broker are NOT required to provide up-front disclosures like investment advisers.

When dealing with a broker, caution should be exercised. Since a broker is only required to establish suitability, he is not legally bound to place your interests ahead of his own. In fact, he can sell you an investment that earns him the highest possible commission so long as the investment is deemed suitable. He can also sell proprietary products if his firm offers them. Lastly, he could be party to conflicts of interests that could influence his investment recommendations but isn’t required to disclose those conflicts to his client.

Dual Registration

Dual Registration can confuse the legal situation quite easily. In today’s investing market, there is a large number of financial advisors that serve as both investment advisors and brokers. For example, you open several accounts with a financial advisor whom is employed by a major brokerage firm. That advisor may recommend a “fee-based” account where he would act as your investment advisor and simultaneously sell you other investments such as bonds or limited partnerships where he would receive a commission, thereby functioning as a broker. The biggest issue with the scenario of Dual Registration is the lower of the two legal standards typically applies; which leaves you, the client, in an ethical quandary.

How can I tell if my Financial Advisor is a Fiduciary or Stockbroker?

As a potential client, checking disclosures on the advisor’s website and marketing materials will provide quite a bit of insight into the advisors business practices. Here are a list of questions one could ask to determine if an Advisor is a Broker or Dually Registered.

“Are you legally obligated to put my best interests ahead of yours?”

“Will my account be an advisory account or a brokerage account?”

“Are you fee-only or fee based?”

Fee-only advisors are fiduciaries and they cannot accept commissions; their only source of revenue is the fee they charge for advice and investment management. Since brokers are commission oriented, they cannot legally hold themselves out as fee-only. Anything other than fee-only would be associated with a Broker or a Dual Registrant and caution should be exercised.

“Which licenses do you hold?”

A series 7 or 6 license means the advisor is registered as a broker. Series 65 or 66 means the advisor is registered as an investment advisor which means he is bound by the aforementioned fiduciary duty. Having both the series 7 or 6 and 65/66 would equate to Dual Registration which presents the conflicts of interest mentioned above.

Another way to tell is to look at the disclosures on the advisors website or business card. Verbiage for brokers is similar to the following: “Securities offered through _____ which is a registered broker dealer…”

Tactical Asset Management versus Buy and Hold Strategy

The debate on this topic is not new, but is perhaps more relevant now due to the volatility of the past decade. Before making a fundamental change to your investment approach, here’s what you need to know about tactical asset management versus buy and hold.

Buy and Hold Strategy

There are many investors reconsidering whether buy and hold is the most prudent investment strategy. An investor who employs a buy and hold strategy purchases stocks and holds them regardless of market volatility with the belief that in the long run the market will provide a fair rate of return. This particular strategy can do well in a bull market when stocks are consistently rising. However, the reality of the stock market is when stocks continue to rise, they tend to become very expensive and overvalued which hinders the internal value of the stock thereby limiting its upside potential.

Many investment advisors practice buy and hold. Generally speaking, buy and hold is a hands off approach that allows the advisor to not have to think about the changes in the economic cycles. He can essentially “set it and forget it”. If you have ever been concerned about your money in a declining market only to be told “not to worry about it” or “over time it will come back up” you may be in a passive buy and hold strategy.

This is why mutual funds, pension funds, and individual investors have done poorly over the past decade; they haven’t fully adapted to the investment environment we are in. They’ve ended up holding overvalued assets without increasing the asset allocation of undervalued assets thereby creating a recipe for wealth deterioration.

Information is thrown at us much more quickly than in years past. Being able to adapt to these changing times is essential to your nest egg. Odds are you don’t drive a Model T – Your investment strategy shouldn’t be that old either.

Tactical Asset Allocation

Tactical Asset Allocation is an active approach to investing allowing us to change our investment holdings based on economic conditions. If we feel an investment is out of favor, we will simply sell it and deploy that capital elsewhere or in cash. By sitting in cash, it allows us to look for opportunities and invest at what we believe to be a low price. It involves continual risk management through portfolio rebalancing with a flexible target.

It only makes sense that when asset prices are currently lower than their fundamental value they provide rates of return that are higher in the long run. The inverse is true when asset prices are expensive and overvalued. We attempt to take advantage of market volatility by simply buying low and selling high.

As a tactical investor, you only want to own assets that are priced with a margin of safety. Owning assets priced below their intrinsic value yields high long term returns and preserves capital when risks are high.

Preservation is a consideration we take very seriously. We are not afraid to go to cash if we feel the market is overpriced or presents more risk than the potential reward.

What are ETF’s?

An ETF, or exchange traded fund, is a marketable security that is comprised of a basket of assets such as stocks or bonds. Unlike mutual funds, an ETF trades like a stock which allows then to have higher daily liquidity. This serves Market Advisory Group well, since we are tactical.

Mutual funds on the other hand limit liquidity and don’t allow the investor to sell until the close of business. This may be catastrophic to a portfolio in the event of a singular cataclysmic event such as the world trade center, or an impending terrorist attack.


We focus on building 100% complete financial strategies customized to fit your lifestyle, circumstances, and biggest goals. From the very first time we meet, our goal is to educate you, and learn as much as we can to help you. As your fiduciary, our primary duty is to operate in your best interest, not ours. This means no recommendations can be made until all the pertinent facts of your situation are understood by you and our advisors. No sales pressure. No confusing jargon. No bias toward one solution or another. We want what is best for you. It is our fiduciary duty.