How to Tell if Your Financial Advisor is a Fiduciary
What is a fiduciary financial advisor and how can you know that you are entering a fiduciary relationship?
The short answer is that a fiduciary is someone who is required to put their clients’ best interests at the forefront of their decision making. There are many fiduciary relationships that you enter into when you work with professionals, but finding a fiduciary financial advisor can be tricky.
Part of being a fiduciary at all times ties back to how a financial advisor is compensated. If you are paying your financial advisor a commission, you technically are not in a fiduciary relationship for that transaction. They can absolutely be objective; however, is it possible that a better insurance product, mutual fund, or annuity exists – yes. The advisor’s role in that situation is not to see if anything better exists, but to make sure the one offered makes sense for the client’s situation.
How can you tell you are working with a fiduciary financial advisor at all times? For starters, if you pay them a fee for their time or advice directly or out of your accounts, you mostly likely have a fiduciary relationship. If you ever feel that your financial advisor is not acting as a fiduciary and putting your interest above their own, you should definitely have a conversation about that, regardless of whether they held themselves out as a fiduciary.
The last part to consider when discussing being a fiduciary financial advisor, is does being a fiduciary give clients the ability to never have a conflict of interest? No! A financial advisor that you pay a flat fee to do a financial plan does not have a duty to help you build and increase your wealth. A financial advisor that you pay a percentage of your investable assets is not necessarily inclined to suggest you move money out of the portfolio and into real estate or to buy more insurance. And a financial advisor that you pay a commission to is not incentivized to give you continuing service.
Every compensation model and every fiduciary relationship has positives and negatives and synergies and conflicts. The important thing is working with a financial advisor that you can trust and one that educates and empowers you as the client to help achieve your goals.
At the end of the day, make sure your fiduciary financial advisor is the best financial advisor for you and your family. At the Cremé Wealth Team we believe in full transparency and empowering people to make the right decision. Please reach out and continue to explore our website to learn about how we strive to always be sitting on the same side of the table as our clients in making decisions.