Choosing a financial advisor is a big decision. You want someone who knows what they are talking about, who has wisdom about investing money, and who can help you meet your goals. This is especially true as we move into a post-Coronavirus economy.
But how can you trust that your advisor truly has your best interests at heart? The simple answer is to look for a fiduciary financial advisor. They are legally required to make investments in the stock market that maximizes your results, not their own.
Is your advisor a fiduciary? You probably have no idea – and you can't assume they are. Here's what you need to know about fiduciary financial advisors and how to find one yourself.
What is a Fiduciary Advisor?
Anyone who hires a financial advisor hopes – and expects – that the advisor will give advice that is in the investor's best interest. However, many advisors have no legal requirement to do so. As a result, if you find that you have taken financial steps based on biased information that hurt your interests, you have very little recourse.
There is one exception, though. If you have a fiduciary advisor, they are legally required to put your interests before their own. A fiduciary is a person or firm that has the power to act on behalf of another in activities that require trust and good faith. The fiduciary duty is the highest standard of care.
You can count on a fiduciary advisor to suggest products and make financial decisions on your behalf based on your best interest, even if the advisor doesn't make much – or any – money from it.
At Triada, our fiduciary duty includes:
- Acting with loyalty and good faith
- Providing full disclosure of all material facts that a reasonable investor would consider to be important
- Not misleading clients
- Avoiding conflicts of interest, including profiting from specific investments or frequent trades
- Not using the client's assets for the advisor's own benefit or the benefit of other clients
How to Find a Fiduciary Advisor
You don't want to trust your investment management to a non-fiduciary advisor. How do you find out if your advisor falls under these responsibilities?
Simply, you have to ask some pointed questions.
The first question is, "How are you paid for your services?" A proper fiduciary is paid only a flat fee or a percentage of assets under management. If they are also paid a commission based on the financial products they sell, you should steer clear.
The second question is, "What services do you provide?" This helps you avoid people who use the title "advisor" but load you up with mutual funds and other low-effort investments. Then, you end up paying an advisor fee and a mutual find fee. Ask who is actually managing your investments.
Third, ask about their background and track record. You can get a copy of Form ADV, which discloses possible conflicts of interest. You can also get client references and call them. Also, be careful of advisors who have little to no experience outside of a brokerage or insurance sales. Those folks are more likely to be salespeople than fiduciaries.
Finally, ask outright if the advisor is legally bound to act in your best interests. Get the answer in writing. If they are fiduciary, you can seek damages in court if they break that trust.
Triada Can Connect You With a Fiduciary Advisor
Spending time searching for and interviewing advisors can be stressful, especially with many offices closed due to COVID-19. If you're looking for a wealth management solution that you can trust, let us connect us with an advisor that is legally required to act in your best interest.
A fiduciary financial advisor can be trusted to make investment decisions that are in your best interest. If you're looking for hands-off investment management, this is the type of advisor you need. You can't trust a salesperson – you need a fiduciary.
Don't take a shot with an advisor and hope for the best. Ask the right questions. Get references and check them. Find out about their background and get the fiduciary promise in writing. Or, work with Triada and let us connect you with a professional you can trust.