Why is it important to have a fiduciary as a financial advisor? In this blog post, we’ll explore the importance of choosing a fiduciary to guide your financial journey and ensure your best interests always take center stage.
By Mike Rogers, AIF®, Founder and President of 360 Financial
Mike Rogers is a fiduciary financial advisor with over 30 years of experience in the financial services industry as an investment advisor and financial planner. He founded 360 Financial in 1995 and holds series 7 and 63 security registrations with LPL Financial.
Key Reasons to Choose a Fiduciary Financial Advisor & Tips to Find the Right One
Having a fiduciary as a financial advisor is often considered important because fiduciary financial advisors are ethically and legally bound to act in your best interests.
This ensures the advice they give is based on their clients’ financial goals and not the advisor’s personal gain.
Working with a fiduciary means you don’t have to worry about conflicts of interest. There will be a relationship of trust and transparency which is essential for long-term financial planning and wealth management.
A fiduciary financial advisor’s guidance is especially valuable in complex financial landscapes because a fiduciary’s duty compels them to provide advice with a depth of consideration and care. Your fiduciary financial advisor will factor in many aspects of your financial life and always put your best interest first.
Fiduciaries are often more thoroughly regulated, enhancing client protection and recourse in cases of unsatisfactory conduct or advice. The fiduciary standard can significantly influence the quality of financial planning, directly impacting wealth accumulation and preservation strategies vital for high-net-worth individuals.
To find a reputable fiduciary financial advisor, consider these five practical tips:
1 – Ask for Credentials
Look for advisors with reputable certifications such as Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA), as these designations require adhering to fiduciary standards.
2 – Request a Fiduciary Statement
Directly ask if the advisor is willing to sign a fiduciary oath, committing in writing to place your interests above their own.
3 – Understand the Fee Structure
Opt for advisors with fee-based structures rather than commission-based, as this aligns their interests with yours, promoting transparency.
4 – Check Regulatory Compliance
Verify the advisor’s compliance history via FINRA’s BrokerCheck or the SEC’s Investment Adviser Public Disclosure. You can check (IAPD) for past disciplinary actions and to confirm fiduciary status.
5 – Seek Referrals and Read Reviews
Ask for client referrals and read online reviews to learn from others’ experiences and ensure the advisor has a strong reputation for upholding fiduciary responsibilities.
Common Questions about Why It Is Important to Have a Fiduciary as a Financial Advisor
Why should my financial advisor be a fiduciary?
Your financial advisor should be a fiduciary because they’re legally bound to place your interests above their own, ensuring recommendations are based on your financial goals and needs.
What is a fiduciary, and why is it important to know if a financial advisor is or is not a fiduciary?
A fiduciary financial advisor is a professional entrusted to manage assets or wealth while putting the client’s best interests first. While you don’t have to work with a fiduciary, it’s important to know that there are benefits to ensuring your advisor is a fiduciary. Working with a fiduciary will ensure your investments are handled with utmost integrity and you advisor is fully dedicated to your financial wellbeing.
Do financial advisors have a fiduciary duty to clients?
Not all financial advisors have a fiduciary duty, but those who are registered fiduciaries are legally obligated to act in the best interests of their clients.
Can you lose money with a fiduciary?
First it’s important to note that you don’t lose money until you sell. The market may be down, but unless you sell, you haven’t lost any money. However, if you were to sell at the wrong time, you could lose money. Thus, it’s possible to lose money with a fiduciary if you insist on selling when the market is down.
Your advisor is there to guide you through the ups and and downs of the market and to help prevent you from making catastrophic errors that put your wealth at risk. However, if you were to liquidate some of your investments when the market was down, you would lose money whether you were working with a fiduciary or any other advisor.
Investments inherently carry risks because the market doesn’t have an exclusively upward trajectory. Depending on your risk tolerance, your portfolio may be more or less volatile than the market as a whole.
Keep in mind that a fiduciary’s duty is to make prudent decisions in alignment with your financial objectives and risk tolerance. If you’re younger and are working to grow your wealth, then your portfolio will fluctuate more than someone who is in their 70s and is aiming to preserve wealth rather than build wealth.
Why is having a fiduciary financial advisor important?
Having a fiduciary financial advisor is important to some investors because fiduciaries are required by law to act in your best interests. They can’t just choose investments that are “suitable.” Instead, they must ensure that all investments and advice are in your best interest. When you know that your advisor isn’t selling you packaged products with hefty hidden fees, you can relax. You can trust your advisor because you know they’re always acting in your best interest.
How do fiduciary advisors protect my interests?
Fiduciary financial advisors protect your interests by acting with loyalty and care, avoiding conflicts of interest, and providing transparent, objective advice that aligns with your financial goals. They must choose what is best for you not what is merely suitable for you.
Are there risks to not having a fiduciary advisor?
Yes, the risks of not having a fiduciary advisor include receiving advice that might be influenced by factors other than your best interests, such as commissions on products sold to you.
How does working with a fiduciary advisor benefit my financial future?
Working with a fiduciary advisor benefits your financial future because you’ll know that every piece of advice or financial planning strategy you receive is tailored to your goals. This gives you peace of mind because you know that your wealth is being managed with your best interests in mind. You don’t have to worry about your portfolio growth being slowed down by hidden fees.
Connect with a Fiduciary Financial Advisor
If you need a wealth management and financial planning team to help you achieve your big-picture goals, we recommend scheduling a call with a financial advisor at 360 Financial. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch.
About the Author
Mike Rogers
Mike Rogers is the founder and president of Minnesota-based financial advisory firm 360 Financial. As the founder, Mike’s priority is that 360 Financial always serves the clients with empathy, integrity, and honesty. This customized, client-centric approach allows the firm to help clients decipher between the things they can control and what truly matters. In other words, Mike understands that money is not the end-all-be-all; instead, it’s the “how” that fuels the “why” to the question:“What’s important to you?”
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How To Tell If a Financial Advisor Is a Fiduciary
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
