The term “fiduciary” is significant to financial planning, as not all financial advisors must follow that advanced standard of care. Understanding the value of a fiduciary can help you better decide who you trust with your financial future.
A fiduciary is a professional required ethically and legally to act in your best interests. Lawyers, real estate agents, financial advisors, and other professionals managing some or all of your assets may also be fiduciaries, but let’s focus on financial planners.
Fiduciary financial planners (like me) have that same ethical and legal duty to:
Provide the highest standard of quality, care, and loyalty.
Place your needs above all others.
Thoroughly research all financial strategies to ensure they are appropriate for you.
Make recommendations and decisions that only benefit you.
Be transparent about fees, potential conflicts, or other factors influencing their advice.
If a fiduciary breaches their duty to you, there are major penalties, including fines and disciplinary action. You can search for an advisor on the BrokerCheck website to review training, experience, licenses, and any previous disciplinary action.
Non-fiduciaries and the suitability standard
Several types of financial advisors, including brokers and agents, are not bound by this fiduciary duty. For those advisors, the Financial Industry Regulatory Authority (FINRA) sets a lower “suitability” standard. The problem with this standard is that it could leave room for decisions that are not in your best interests. For example, they may recommend investments, insurance, and other financial products that may not be the best fit for them, but generate more commissions or fees for them – at your expense. That’s why it’s better to work with a fiduciary financial planner.
How do I know if my financial planner is a fiduciary?
Ask them. It’s a straightforward question, and a reputable planner will give you an honest answer. Financial planners who work as (or with) Registered Investment Advisors are required to act as fiduciaries. While asking questions, confirm how they make money from your financial planning and management activities. A fiduciary will transparently disclose all fees paid, as well as money received from third parties, like insurance companies.
Working with a fiduciary financial planner can make a big difference in your financial journey. By working with a fiduciary, you can feel confident that your financial advisor is committed to always acting in your best interest, providing the most appropriate guidance and advice, and maintaining full transparency. Whether you’re planning for retirement, going through a major life change, or simply looking to improve your financial health, choosing a fiduciary can help you achieve your goals with confidence and peace of mind.
Interested in learning more? Please reach out to us and set an introductory appointment.
