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“It is hard enough to save for retirement. Conflicted investment advice should not be one of the barriers millions of Americans face as they work to save for their retirement.” – David Certner, Legislative Policy Counsel AARP
Understanding the Importance of a Fiduciary Financial Advisor
A Fiduciary financial advisor is a professional who is trusted to manage and make decisions regarding the finances of their clients. The word “fiduciary” means that the advisor has a legal obligation to act in the best interests of their clients, which is a higher standard than the standard of care that other types of financial advisors may be held to. In this article, we will explore the importance of choosing a Fiduciary financial advisor, how to find one, and what questions to ask when considering this type of professional for your financial needs.
What is a Fiduciary Financial Advisor?
A Fiduciary financial advisor is a professional who is trained and licensed to provide financial advice and make investment decisions on behalf of their clients. They are responsible for managing their clients’ financial portfolios and making investment recommendations that are in the best interests of their clients. Fiduciary financial advisors are required by law to act in the best interests of their clients and put their client’s interests ahead of their own.
Why Choose a Fiduciary Financial Advisor?
There are several reasons why you may want to choose a Fiduciary financial advisor:
- They are held to a higher standard of care, meaning they must act in the best interests of their clients
- They are required to disclose any conflicts of interest and provide their clients with full disclosure of all fees and commissions
- They are not allowed to make investment recommendations that are not in the best interests of their clients. This is different from other financial advisors because they may be required to look out in the best interest of the firm. I had that experience in my previous place of work. I felt that a client of mine would be best served by a smaller bank, because they could be more flexible with terms of a loan. My manager said, we have to look out for our shareholder’s best interest. I felt my job was to represent the client NOT the shareholder. That is the precise moment I decided to leave that company.
- They are required to provide their clients with a written agreement that outlines the services they will provide and their fees
How to Find a Fiduciary Financial Advisor
When looking for a Fiduciary financial advisor, there are a few things you should consider:
- Look for a financial advisor who is a registered investment advisor (RIA), and who is either registered with one or more states or with the Securities and Exchange Commission (SEC)
- Check the advisor’s disciplinary history to ensure they have a clean record
- You can ask for references from past clients. We don’t do this, because we would rather give up a future client, than burden our current clients with helping us get more business. You can read their public reviews on Google or Facebook.
- Look for a financial advisor who is a member of a professional organization, such as the Financial Planning Association (FPA)
- Ask for a consultation to get to know the advisor and see if they are a good fit for you. When you meet, see if they ask good questions, get to know you and what is important to you. When they are able to see the world through your eyes, they should be able to represent and recommend things that are more in line with your needs.
Questions to Ask When Considering a Fiduciary Financial Advisor
When considering a Fiduciary financial advisor, there are several questions you should ask:
- What is your approach to financial planning and investment management?
- Are you a registered investment advisor and are you registered with the SEC?
- How are you compensated and what fees will I be charged?
- What is your investment philosophy and what is your process for making investment decisions?
- How do you manage conflicts of interest and disclose any potential conflicts to your clients?
- How often do you communicate with clients and in what manner?
- What if my goals change? What should I do and how is this handled?
- Are there times when you are NOT a fiduciary? This is important. Many advisors may wear two different “hats” one as a fiduciary and one that represents their firm (think publicly traded therefore their shareholders). You may not know when this advisor is representing you or their firm. They can change their hat without you knowing it.
What is the difference between a Fiduciary financial advisor and a financial advisor?
A Fiduciary financial advisor is a professional who is legally bound to act in the best interests of their clients, while a financial advisor may not have the same legal obligation. Fiduciary financial advisors are held to a higher standard of care and are required to put their client’s interests ahead of their own.
What are the benefits of using a Fiduciary financial advisor?
The benefits of using a Fiduciary financial advisor include receiving financial advice that is in your best interests, full disclosure of all fees and commissions, and a written agreement outlining the services the advisor will provide and their fees.
Let me know if we can help in any way. Email me at Jeremy@Riverbendwm.com or CLICK HERE to set up a phone appointment.
On the lighter side, we visited the University of South Carolina this past weekend. The Darla Moore School of Business tour was insightful. They talked about the multiple different educational track business students can take. We also toured the gymnasium and the dorms. Elliott was excited.
Chess this past week was daddy 1, Elliott 1, and 1 stalemate (Elliott got lucky 😊).
Hope all is well with you and your family,
Finger Financial Five – 5 points in 5 minutes or less – is to provide you with a weekly shot of useful financial information. My intention is to share principles, so that you will have more clarity and peace, that help you make better financial decisions.
Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA Riverbend Wealth Management.
This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.