When it comes to demonstrating and maintaining a fiduciary duty, financial professionals who have the accredited investment fiduciary, or AIF, credentials have a little more “oomph.”
This professional designation prepares investment professionals to act as fiduciaries — and work in the clients’ best interests — when doing their jobs.
Currently, not all investment advisors have a fiduciary education or duty, says Matthew Eickman, an AIF and national retirement practice leader at Qualified Plan Advisors. “On the one hand, that’s understandable,” he says. “Fiduciary responsibilities traditionally have not been a big part of the securities registration or insurance licensure processes.” But on the other hand, it’s simply not good enough.
With the Securities and Exchange Commission, Financial Industry Regulatory Authority and Department of Labor “exponentially increasing the focus on fiduciaries, it’s become critically important for advisors to have a higher standard than the bare minimum,” Eickman says. “Pursuing and retaining the AIF designation is a fundamental step toward elevating those standards and better positioning an advisor to better care for his or her clients’ interests.”
Here’s what advisors should understand about the accredited investment fiduciary certification and how to get it.
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What Is an Accredited Investment Fiduciary, or AIF, Certification?
“The AIF designation is conveyed to individuals who have met educational, competence, conduct and ethical standards to carry out a fiduciary standard of care and serve the best interests of their clients,” says John Faustino, head of Fi360 at Broadridge Fi360 Solutions, the organization that issues the AIF designation.
Fi360 is accredited by the American National Standards Institute to provide the AIF designation, which is recognized by FINRA as a financial industry certification.
The AIF designation is intended to demonstrate that the professionals responsible for managing others’ investments or giving advice on those investments understand and uphold their fiduciary duty. Getting your AIF designation shows you’re not just another advisor holding herself out as a fiduciary.
The most critical aspect of an AIF certification is the extra commitment it demonstrates, Eickman says. “Investors are better off working with a fiduciary. They are best off when that fiduciary takes his or her duties seriously.”
There are four primary reasons someone might want to become an AIF, Faustino says. Those reasons are to create better investor outcomes, mitigate fiduciary liability, differentiate yourself from other financial professionals and win new business, or join a community of like-minded investor centric financial professionals.
The AIF may complement or build upon an existing credential such as the certified financial planner designation.
What Is the Fiduciary Duty?
The fiduciary duty is the highest standard of care in the financial industry. It means you have the power and responsibility to act for someone else in situations requiring total trust, good faith and honesty.
Having a fiduciary duty to your clients means you must act in your client’s best interest at all times, even if doing so is against your own best interest. A fiduciary can only recommend an investment option or strategy if it is the best option available. This is distinct from advisors who work under the suitability standard, which requires that they only ensure an investment is “suitable” for the investor before recommending it.
To give an example of this distinction: A suitability advisor could recommend an investment that would earn the advisor the highest commission even if there is an alternative that could serve the same role in the client’s portfolio but at a lower cost. A fiduciary would only recommend the lowest-cost option because it is the best choice for the client.
Fiduciaries must also eliminate any conflicts of interest when possible and disclose those that cannot be eliminated. This means fiduciary advisors cannot earn commissions on the products they sell because this would give them an incentive to recommend the higher earning product rather than the one that is best for the client.
[Read: CFA vs. CFP: What They Are and How They Differ]
What Does an AIF Do?
The majority of AIF designees are financial professionals who work for registered investments advisory, or RIA, firms, broker-dealers or banks, Faustino says. “Their day-to-day responsibilities typically involve supporting wealth, retirement plan and foundation or endowment clients with planning and investment needs using fiduciary practices.”
Becoming an AIF designee doesn’t necessarily mean you’ll have any additional responsibilities from what you did before getting the designation. Rather, the designation shows that you accept the responsibility of conducting your day-to-day duties under a higher standard of care, Eickman says.
“Ignorance should never be an excuse for investment advisors, but it’s even less of an excuse for AIF designees,” he says. “They know better. They know more. They must serve their clients with that higher understanding in mind.”
[Read: What’s the Difference Between a ChFC and CFP?]
How to Become an Accredited Investment Fiduciary
To become an AIF, you must meet predetermined experience and education requirements, complete the AIF training, pass the exam, satisfy the AIF code of ethics and conduct standards, and pay the requisite dues.
You’ll also need to have a bachelor’s degree or higher unless you have five years of relevant, nonclerical experience in financial services and another professional credential or at least eight years of relevant, nonclerical experience in financial service without another credential. If you don’t have at least five years of relevant experience, you can still get the AIF designation as long as you have both your bachelor’s degree and another professional credential.
The training portion of the AIF designation is provided by Fi360 and can be taken in a self-paced online format, virtual classroom format or the capstone format. While the length of time required will vary with the format, Faustino says, candidates should plan to spend 20 to 25 hours completing an AIF training course and reading through the “Prudent Practices for Investment Advisors” handbook before taking the exam.
The exam is an 80 question multiple-choice test composed of 70 scored questions and 10 nonscored trial questions. Applicants have 120 minutes to complete the test and must get a score of 70% to pass.
Aspiring AIFs have one year after passing the AIF exam to satisfy the other requirements. If you don’t complete all requirements within one year of your test, you’ll need to retake the exam to get your certification.
The AIF designation costs $325 for the first year’s dues. You’ll need to pay these dues on an annual basis and complete six hours of continuing education, four of which must be provided by Fi360 or one of Fi360’s approved providers, to keep your certification active.
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What Is an Accredited Investment Fiduciary — and How to Become One originally appeared on usnews.com
