When working with a financial planner, or any professional for that matter, it is important to know that they are looking out for your best interests, not their own. You want a professional that is committed to being a fiduciary.
What is fiduciary duty?
A fiduciary is required to act in their clients’ best interests, not their own.
Perhaps the clearest example of this is when a commission-based advisor is recommending a product to their client – should they recommend the product that is truly best for the client or the product that pays them the highest commission? This is part of the reason why I believe a financial advisor’s firm structure and fee structure are important. If the goal is to do what is best for the client, the structure of the firm and its fees should make that natural and easy.
Are all financial advisors fiduciaries?
It may seem surprising that all financial advisors aren’t required to act as fiduciaries. Which when you think about it is kind of crazy – you could be hiring someone to help you make important financial decisions that is not required to look out for your best interests first.
If you are in the process of hiring a financial advisor, I think it’s a great idea to ask them specifically if they are a fiduciary. Asking them to confirm so in writing is even better.
All advisors who work for fee-only registered investment advisors are required to act as fiduciaries. Advisors with the CFP® designation are also required to act as fiduciaries.
Be especially mindful of these things when an advisor is compensated via commissions, as they likely are being held to a lesser standard. I believe it is best for advisors to act as fiduciaries at all times – this is part of the reason Ulmer Financial is set-up as a fee-only registered investment advisor. I am always required to act as a fiduciary.
If you have any comments, questions, or ideas for future posts, please let me know
I hope you found this post helpful and educational. If you have any comments, questions, or ideas for future posts, please let me know. You can reach me directly via email at crawford@ulmerfinancial.com.
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