The sheer magnitude of information we have right at our fingertips these days can quickly and easily put us in information overload. In our search for answers, we can end up feeling uncertain about what is most important, much less what is even true. And when it comes to financial matters, this seems to be the case more often than not. Am I reading fact or just someone’s strong conviction being presented as fact? Is this advice predictable or just someone’s incidental experience being promised without reliable support? You need someone you can trust to identify the good from the bad, but who can you even trust when every expert seems to have your best interest in mind?
You want a professional who will give you honest and reliable advice, someone you can depend on to keep your best interests as their number-one priority. And that is where the term “fiduciary” comes in.
Many people believe that all advisors, whether they are stockbrokers, insurance agents or financial planners, are required to act in their clients’ best interest. Unfortunately, that is just not reality. Therefore, it is critical that you understand the different types of advisors, their distinct roles, and how to discern what the services they will provide will end up doing for you and your finances.
What Is A Fiduciary?
A fiduciary advisor is one who is bound to a standard that was established as part of the Investment Advisors Act of 1940, which clearly stipulates that an advisor must place his or her interests below that of the client and is ethically bound to act in the other’s best interest. (1)Fiduciary duty is considered the highest legal duty of one party to another.
In other words, a fiduciary advisor is someone who is given and accepts the responsibility of managing assets for you, with a primary responsibility to put your needs first by providing objective guidance. For example, fiduciary duty helps to prevent situations where an advisor may make an investment decision with your money solely for a commission payout.
On the other hand, those advisors who don’t adhere to a fiduciary standard are only required to offer “suitable” recommendations to their clients. This means that these advisors can sell high-fee products, even if a lower-priced option is just as suitable or available, in order to receive a higher commission or payout, without repercussion. However, if a fiduciary did this, they could be subject to regulation by the SEC or state securities regulators.
And as if the assurance that your advisor is always acting in your best interest isn’t enough, the fiduciary standard also requires that all fees are presented clearly and up front, assuring you that your hard-earned money is in the most effective hands.
Who Is A Fiduciary Advisor And Who Isn’t?
As unjust as it may seem, not all advisors are fiduciaries. Brokers, insurance agents, and real estate agents are not required to serve in a fiduciary manner. As they represent themselves or their company, they are only required to provide you with “suitable” products. I have several friends/colleagues that fall into this category and I know they run very ethical business practices even though they are not held to a fiduciary standard. Just because one might not be held to a fiduciary standard doesn’t necessarily mean they are bad to do business with. However, it’s important to understand what type of financial professional you are dealing with and how this may or may not benefit you.
Some large firms can sell proprietary products, so there is a good chance that their advice may still be biased. One example of this would be the selling of annuities and other high-fee investment products. With those options being high-fee, they may not be the best option for you. However, your broker may still choose them because the commission or payout might be higher. And while brokers are required to inform their clients that they are choosing to be paid a commission, if for one reason or another the client overlooks that part of an email conversation or disclosure statement, they could remain unaware of the unfavorable inclination of their broker’s interests and decisions.
At Fiduciary Wealth Management, one of our top priorities is working closely with you to not only create a personalized portfolio but to also implement and monitor your strategies on an ongoing basis. By taking a holistic approach, we focus on getting to know you and your needs before diving into the numbers. This allows us to craft strategies that align with your circumstances and can help you pursue your objectives. Our job is not about our pockets, but rather to help guide you toward your own vision of success and accomplish your long-term dreams. Our approach to investing is founded upon the highest fiduciary standards.
And because we are an independent financial advisory firm, we have the freedom to create a genuinely personalized investment strategy tailored to meet your financial goals in the most beneficial manner. It is our ongoing goal to maintain the highest ethical standards, always placing the interest of our clients first. We are dedicated to providing you with the best advice we can give, and we have the freedom to do so without any pressure to promote a certain product or service. We provide complete transparency and disclosure when it comes to our investment approach and compensation, confirming our dedicated loyalty to you.
Why Should I Work With A Fiduciary?
By working with an advisor who holds to fiduciary standards, you can feel empowered knowing that your best interests are always the top priority. As the client, you have the authority to ask questions and to expect the highest standard of service from your advisor. As a firm in the financial world, we understand the reservations or even negative connotations many people have toward the hidden motives of some advisors. We want to assure you that our relationship with you is built on honesty, integrity, and trust.
How Do I Find A Fiduciary?
It’s important to do your research and explore your options as you make a decision to work with an advisor. You want an advisor who is open to sharing their business philosophy with you, how they choose investments, what their process looks like, any potential conflicts of interest they face, and how they’re paid.
We at Fiduciary Wealth Management place great importance on maintaining our transparency and objectivity. We work to build a relationship that allows you to feel safe and secure with us. We want you to have confidence in our abilities and advice, and that confidence will bring peace of mind. By building a strong rapport with our clients, they realize we are a genuine, caring firm looking out for their best interest.
If you’re unsure about your current financial strategies, haven’t reevaluated your investments in several years, or are just interested in learning more about what it means to work with a fiduciary, we are happy to offer a complimentary review of your financial plan. Or if your strategies are currently undeveloped and you’d like to discuss getting your plan started, we would love to meet with you. Click here to schedule a phone call now!
About Rocklin Senavinin, CFP®
With nearly 20 years of experience in the financial planning industry, Roc has dedicated his career to helping individuals live comfortably in retirement and enjoy the assets they have spent their career building. He is co-founder of Fiduciary Wealth Management, a fee-only registered investment advisory firm in Little Rock, Arkansas. As a CERTIFIED FINANCIAL PLANNER™ professional, he has advanced training in the holistic process of creating a personal financial plan that addresses a person’s comprehensive needs for the short and long term. To learn more, connect with Roc onLinkedIn or visitwww.fidwm.com. If you have questions, feel free toschedule a phone call using this link.
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(1) https://www.investopedia.com/articles/professionaleducation/11/suitability-fiduciary-standards.asp