The Suitability Standard for Financial Advisors
Suitability means only make recommendations that are consistent with the best interest of the underlying customer. It means making sure transaction costs are not excessing or that a recommendation is not unsuitable for a client. The suitability standard is often associated with broker-dealers.
Some of the nation’s largest investment firms have been held to this lower standard for decades. The standard, which requires only that investment advice be suitable to the client, has shown to produce conflicts of interest, primarily when considering fees. The DOL has explained that this alone is costing investors billions of dollars in hidden fees.