Covington Investment Advisors, Inc. Blog

News, Tips, Commentary, etc.

A Compliance Note on Conflicts of Interest

Last year, the Securities and Exchange Commission (“SEC”) identified a trend in their examinations that investment advisory firms were not adequately disclosing that a conflict of interest existed. In general, the investment advisors may have had compensation related incentives to place clients in the higher-cost mutual fund share classes when lower-cost share classes of the same fund were available. Investment advisors have a fiduciary duty to place your interests ahead of theirs and disclose conflicts of interest. In an effort to correct the situation, the SEC launched the “Mutual Fund Share Class Initiative” which allowed investment advisory firms to voluntarily report a violation of the Investment Advisors Act of 1940 resulting in 79 firms returning $125 million to harmed investors.

The SEC is dedicated to protecting main street investors, but investors must also take steps to protect themselves. I think it’s safe to assume that we are very resourceful when researching medical conditions or making a purchase by consulting with family, friends, and the internet. We would encourage you to check the background of your investment advisor, registered representative, or insurance broker with as much scrutiny. Professionals providing financial products or services should be registered. One way you can review the professional’s background is the investment advisor repository database website at www.iard.com or FINRA broker check at www.brokercheck.finra.org. For insurance brokers, you can check their license with the state insurance commission. A complete listing of each state insurance commission is available at www.naic.org. The professional you are working with may be registered with one or more of the examples listed. We would also encourage you to read the investment professional’s disclosure documents, such as Form ADV or the terms and conditions of the contract, before signing a contract in order to make an informed decision.

Additionally, you may wish to obtain a second opinion from another professional. It’s your retirement, college savings, wedding fund, or rainy-day fund that could be jeopardized unnecessarily. Be sure to ask questions about fees involved with the investment or any compensation the individual may receive from your investment. If you are considering a rollover from an employer sponsored retirement plan, we would recommend asking about the pros and cons of keeping it at your previous employer versus rolling it over into an IRA.

Covington Investment Advisors, Inc. is a Federally Registered Investment Advisor with the SEC, and as such, we have a fiduciary responsibility to act in your best interest at all times. We do not use sales tactics, we do not receive any commissions, or have any referral arrangements in place. If we recommend mutual funds for your portfolio, we recommend low-cost mutual funds, and if you are interested in rolling over your employer sponsored retirement plan, we have a process to review whether it’s in your best interest. If a conflict of interest arises, we will promptly disclose it to you. Form ADV describes our business practices in more detail and is available on our website or by calling us.

For prospective clients, we do not charge any fees to meet with you for an initial consultation. Our advisors, Patrick and Cindy, take the time to understand your situation and whether we would be a good fit for your financial planning needs. We do charge an investment advisory fee based on your portfolio value which is detailed in the agreement you sign with us.

Please feel free to contact us if you have any questions.

Disclosure: Covington Investment Advisors, Inc. is a Federally Registered Investment Advisor.  The information contained herein is general in nature and is provided solely for educational and information purposes and does not constitute legal, financial or tax advice.  Opinions and forward-looking statements expressed are subject to change without notice.  Past performance is no guarantee of future results.  Covington Investment Advisors, Inc. uses reasonable efforts to obtain information from sources which it believes to be reliable and does not endorse, approve, certify or control the third-party content referenced.

 

Trick or Treat? Don’t be tricked by these new emer...
Covington's Market & Strategy Update

Most Recent Blog Posts

Connect With Us

 

Covington Investment Advisors, Inc.
301 E. Main Street
Ligonier, PA 15658
Phone: 724-238-0151
Fax: 724-238-0148
Email: covington@covingtoninvestment.com