In the news recently, the word “fiduciary” has been thrown around a lot in regards to financial advisors and their duties. The concept can seem confusing to people, as many assume that all advisors, whether they’re stockbrokers or financial planners, are required to act in their client’s best interest. But that’s not the reality. It’s important to understand the distinction between different types of advisors’ roles and what it means for you and your money.
What Defines a Fiduciary?
A fiduciary is supposed to put your needs first and to provide advice and recommendations that will benefit you. Think of a fiduciary like a trustee—someone who is given and accepts the responsibility of managing assets for a someone else. This duty is meant to protect you from conflicts of interest.
For example, following a fiduciary duty prevents an advisor from making an investment with your money based on the commission they can receive. For those who are not held to a fiduciary standard, a recommendation made by advisors only has to be “suitable.” The problem with this is that some advisors could then sell high-fee products, even if a lower-priced option was just as suitable or available, in order to receive a higher commission.
The fiduciary standard includes providing guidance that is unbiased and is considered beneficial to you, and charging fees that are clear and upfront. An objective of the fiduciary standard is to help investors know that their hard-earned money is in good hands.
What Type of Advisor Isn’t a Fiduciary?
While some advisors may use the term lightly, not all advisors are fiduciaries. Brokers and insurance agents working for large brokerage companies or insurance companies may not be required to serve in a fiduciary manner if they do not work with retirement plans.
Additionally, Wall Street brokerage firms can sell proprietary products, so their advice may potentially be biased. For example, annuities and other high-fee investments that provide brokers a higher commission can still be sold into your retirement account. Additionally, while brokers must inform clients that they’re choosing to be paid commissions, if the investor neglects to read the disclosures, they may not know where their broker's interests lie.
What Advisors Are Fiduciaries?
When you’re searching for an advisor who serves in a fiduciary capacity, look for advisors who work with an independent broker-dealer or Registered Investment Advisory firm.
At ClearVista Financial, we are an independent financial services firm committed to helping you reach your goals. Our approach to investing is founded upon the highest fiduciary standards. Our independence serves as a basis to create a specific investment strategy tailored to meet your financial goals. Our advice is driven by one concern alone – the best interest of our clients.
While some advisors focus on selling products and following cookie-cutter approaches, we aim to bring together the many elements of our clients’ financial lives in a cohesive strategy that we proactively monitor and adjust on an ongoing basis.
The Benefits of Working with a Fiduciary
There are several benefits to working with an advisor who serves in a fiduciary capacity. For one, they are open and transparent. Aside from the obvious goal of maximizing value for your money, working with a fiduciary will give you confidence that your advisor is working in your best interests rather than their own.
By working with an advisor who holds to fiduciary standards, you can feel more empowered to make the best decisions for you and your finances. Clients have the power to ask questions and to demand the highest value for the service that advisors are providing. As a firm in the financial world, we understand people’s reservations or even negative connotations towards the underlying motivations of some advisors. We want to assure you that you can trust in the fact that our relationship with you is built on integrity.
Take the Next Step
It’s important to thoroughly research an advisor before choosing to work with him or her. An advisor should be open to sharing with you their business philosophy, how they choose investments, what their process looks like, any potential conflicts of interest they face, and how they’re paid.
I take pride in my transparency and objectivity. If you’re unsure about your current retirement strategies, haven’t recently reviewed your investments, or are just interested in learning more about what it means to work with a fiduciary and what a comprehensive wealth planning process entails, I am happy to offer you a complimentary consultation. To get started, email me at email@example.com or call 800-491-4508.
Mark Trice is an independent financial advisor with nearly a decade of experience in the industry. As the founder of ClearVista Financial, his mission is to help people find financial balance in their lives and to spend life well. Along with providing financial planning and retirement planning to pre-retirees and 401(k) plan participants, he is also an educator. He currently holds the designation of a Certified Financial Educator® through the Heartland Institute of Financial Education. The advisors at ClearVista Financial are Investment Advisor Representatives with Cambridge Investment Research Advisors, Inc. Mark has offices in Austin, Brownwood, Temple, and Waco, Texas. Along with serving clients in Texas, he also works with individuals in California and Virginia. To learn more, visit www.clearvistafinancial.com or connect with Mark on LinkedIn.