Here’s an uncomfortable truth: A fee-only financial advisor can be a crook. No compensation model or legal standard can guarantee that the person sitting across from you is honest.
I was reminded of this just as I read about the awful case involving Siddharth Jawahar. The former investment adviser behind Swiftarc Capital pleaded guilty to wire fraud after stealing millions of dollars from clients. (Travis Kelce and several NBA players were named among the victims). Jawahar wasn’t paid commissions for selling products, but he could earn extra money when the investments he managed made money. For me, that’s a huge red flag, and if I saw that on an advisor’s SEC filings during my vetting process, they’d be rejected then and there. Those are called ‘performance fees,’ and that tells me this advisor is incentivized to take on more risk.
Jawahar was recently sentenced to 11 years in federal prison and ordered to pay $31.35 million in restitution. He raised more than $35 million from investors through Swiftarc, but only about $10 million was actually invested. The rest? Private jets, luxury apartments, and a very expensive lifestyle.
It never ceases to amaze me that these con artists operate this way in full light of day — soliciting investors, filing regulatory paperwork and running what looks like a legitimate advisory business — for years before anyone catches on. Research tracking Ponzi schemes prosecuted by the SEC found they run for roughly four years on average before collapsing. Even after regulators step in, victims often recover only a fraction of what they lost.
So does this undermine what I’ve been telling investors for years about seeking fee-only fiduciary advice? No. But it raises an important question: What protection does being fee-only and fiduciary actually give you?
I’ve been doing this for three decades. I’ve seen brokers who should have been held accountable for recommendations that hurt investors. And I’ve spent years working closely with fee-only fiduciary advisors. From personal experience, I will tell you there is a difference between those two groups, and prospective clients need to understand that the difference is already baked into the cake before you ever become a client.
Imagine this happened to you
Say you have $500,000 saved for retirement and a broker recommends putting $250,000 into an annuity. Later, you figure out the huge costs embedded right in the product, commissions (you pay) connected to the sale, and surrender charges that make it expensive or even impossible to access your own money for years. Now you’re asking: Why was this annuity recommended to me?
Someone will inevitably say, “But brokers have Regulation Best Interest now.”
Yes, but…
Reg BI requires brokers to consider risks, rewards and costs, and to have a reasonable basis for believing a recommendation is in the customer’s best interest. But Reg BI did not fundamentally change the burden an investor faces when seeking damages.
In the real world, if you bring a claim against your broker in FINRA arbitration, say for recommending that annuity without knowing all the facts, you’re the claimant. In most cases, it’s on you to prove by a preponderance of the evidence that you were financially harmed and that the brokerage advisor was responsible. Good luck with that—brokerage agreements commonly contain predispute arbitration provisions, meaning you’re usually not getting your proverbial day in court.
Reg BI changed the standard governing a broker’s recommendation. It did not flip the burden and require the brokerage firm to prove that its recommendation was appropriate simply because you challenged it.
That’s part of what’s baked into the cake. You’re choosing not only a financial advisor but the compensation structure, conflicts, legal obligations and dispute framework that come with that relationship. Please let that sink in.
Now change the relationship
With a fee-only fiduciary advisor, there’s no commission waiting on the other side of that annuity sale. The advisor also has a legal duty to act in your best interest. After 30 years watching advisors work under these different structures, I’ve seen that accountability matters. Advisors tend to be more careful about what they recommend, what they charge and the conflicts they avoid.
Does that guarantee a good advisor? Not even close.
And yet, a fiduciary can still be a dangerous crook
That’s the lesson from Jawahar. Fee-only isn’t a character reference, and fiduciary isn’t a background check. Someone determined to steal your money isn’t going to be stopped by a fiduciary oath.
And this is exactly why vetting matters so much.
At Wealthramp, we don’t take someone’s word for it because they say they’re a fiduciary or have CFP® after their name. We dig into how they’re paid, whether they sell products, their regulatory and complaint history, what their Form ADV tells us, and who actually holds the client’s money. Then I want to understand how they think. What would you do with a difficult client situation? What wouldn’t you do? Where does your expertise end? When would you bring in someone else?
You learn a lot about an advisor by asking questions that don’t have a checkbox answer.
The real protection is layers
While most of us will hopefully never encounter a Ponzi scheme, there are other things to watch out for. The perfectly legal investment that may be completely wrong for you. The annuity that locks up half your retirement savings when you need liquidity, the expensive investment you don’t understand, or the recommendation influenced by a commission, or the advice that comes without any context because context isn’t necessary in order to make a ‘sale.’
I don’t believe one label can protect you. You want layers: remove unnecessary financial conflicts, work with an advisor who accepts fiduciary accountability, independently vet the person behind the credentials, and keep your assets with a reputable independent custodian.
None of that guarantees you’ll never encounter a crook. But in my experience, I think the fiduciary legal standard difference matters.
P.S. For a primer on fiduciary advisors, check out the latest video in my “Decoding Financial Advisors” series on YouTube.