Final answer:
A fiduciary is a professional who is obligated to prioritize their clients' interests and provide unbiased advice in financial planning. Financial planners should be regarded as fiduciaries, but some may operate under a suitability standard. One form of unethical conduct is misrepresenting qualifications or experience, which violates the ethical principle of honesty and integrity.
Step-by-step explanation:
A fiduciary is someone who has a legal and ethical duty to act in the best interests of another party. In the context of financial planning, a fiduciary is a professional who is obligated to prioritize their clients' interests above their own and provide unbiased advice.
Financial planners should be regarded as fiduciaries because they are entrusted with managing their clients' finances and making important decisions on their behalf. However, not all financial planners are fiduciaries. Some may operate under a suitability standard, which means they are only required to recommend suitable investments, not necessarily the best ones for their clients.
There are ethical dilemmas and conflicts of interest that financial planners may face when receiving compensation. One major challenge is the choice between receiving fees or commissions. If a financial planner operates on a fee-only basis, they are compensated solely by their clients and have no incentive to recommend certain investment products for the sake of earning a commission. On the other hand, if a financial planner earns commissions, there may be a temptation to recommend products that may not be in the client's best interest but offer higher commissions.
One of the top ten forms of unethical conduct of financial planners is misrepresenting qualifications or experience. This violates the ethical principle of honesty and integrity. Financial planners are expected to provide accurate and truthful information about their qualifications and experience to build trust with their clients. Misrepresentation undermines this trust and can lead to poor decision-making and potential harm to the client.