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Top 4 Reasons Why You Should Choose a Fiduciary Financial Advisor

Top 4 Reasons Why You Should Choose a Fiduciary Financial Advisor

18 Aug 2021

The word “fiduciary” is commonly used by attorneys and those in the financial industry, yet everyday people outside of these professional realms may not have a complete understanding of what it means and why it is so important. It should be important to you that the financial advisor you select is a fiduciary.

A fee-only fiduciary financial advisor has a duty of care to you, the client.  This duty of care is an important designation as it means there is an added level of responsibility and professionalism that safeguards your interest.  After all, the last thing you need is a supposed expert financial advisor strictly acting in his or her own self-interest when providing financial guidance.

 

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Let’s take a closer look at what fiduciary financial advisors are really all about and the best reasons for relying on such a professional for financial guidance.

Defining the Word “Fiduciary”

Can you imagine a financial advisor making investments on your behalf or providing investment advice strictly based on speculation?  Can you imagine a financial advisor making investment decisions with your money based on emotional responses to the market’s undulations and current events?  There is the potential for such a nightmare scenario if you rely on a financial advisor who is not a fiduciary.

In a legal context, a fiduciary is a professional who embraces the responsibility of acting on behalf of another individual with both integrity and forthrightness.  Aside from financial advisors, attorneys, some bankers, and most officers of public businesses all serve as fiduciaries.  This means the individual in question is to act in a manner that protects and advances the interests of a client as opposed to those of his or her own, an employer, or any other party.

Your fiduciary financial advisor will work with your best interests squarely in mind.  In fact, acting in another’s best interest as a fiduciary is regulated by governing bodies such as the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA).  If a fiduciary does not act in a manner that advances the interests of a client, he or she will have violated the laws and/or standards of conduct pertaining to the fiduciary role.

Zero Conflicts of Interest

The fiduciary’s goal is to reduce conflicts of interest, put a client’s interest ahead of his or her own, obtain the optimal prices and seek the best possible terms.  Your fiduciary financial advisor will act in good faith on your behalf, providing all facts that are relevant to you, the client.  The best fiduciary financial advisors go out of their way to bypass potential conflicts of interest.

Furthermore, even if potential conflicts of interest arise, they will be disclosed to current clients.

Being a fiduciary also means the financial advisor will do his or her best to ensure advice provided pertaining to investing and finances is comprehensive and accurate.  Above all, the fiduciary financial advisor will refrain from using the client’s assets to advance his or her own financial well-being.

This could mean a fiduciary financial advisor would not purchase securities for his or her own personal account prior to buying them for the client at a potentially higher price following a potential price hike resulting from a delay or heightened demand.

Transparency

You deserve the complete truth from your financial advisor, even if it is unsettling.  Those who are bound by a fiduciary duty are that much more likely to prove completely transparent.  Fiduciaries discuss decisions with you, the client, detailing all information and facts that are even the slightest bit relevant in the context of financial decision-making.

Such transparency facilitates your comprehensive understanding of every factor that goes into making decisions pertaining to your assets, wealth, and financial success across posterity.  This is not to say every single non-fiduciary financial analyst will strictly act in his or her self-interest as opposed to the interest of a client.

However, non-fiduciaries will not be as transparent as those who qualify as fiduciaries.  Keep in mind, if you rely on an individual who does not have a fiduciary duty to lend assistance to you, you won’t have nearly as many legal options should you find this professional is not serving your interest.

Peace of Mind

Can you imagine putting your financial fate in the hands of a supposed trustworthy professional financial advisor only for that individual to mismanage your money, acting in his or her own self-interest instead of advancing your interest?  Lean on a fiduciary financial advisor and you will rest easy, knowing this professional is working on your behalf as opposed to his or her own or that of the overarching employer.

Fiduciary financial advisors have fewer conflicts of interest than those who do not qualify as fiduciaries.  A fiduciary is legally obligated to disclose conflicts of interest as well as potential conflicts of interest, making it perfectly clear to the client that there might be issues down the line that precludes him or her from acting in the best interests of the client.

Keep in mind, financial advisors and other professionals who work on commission may have an incentive to push their own products and services in spite of the fact that there might be superior or comparable offerings available at a lower cost.  This is precisely why you need a fiduciary on your side to obtain the optimal terms and prices for the client.

A Track Record of Success in Helping Others

Those who have served as fiduciary financial advisors have proven they are willing to help others achieve financial success.  More importantly, those with experience as fiduciaries have proven they are willing to put in the effort necessary to assist others in their quest for a timely retirement and general financial success.  If you have any questions as to whether the fiduciary financial advisor you are considering has a track record of success, do some research and ask questions.

You can even request a copy of the professional’s Form ADV essential paperwork required by the SEC.  This paperwork details the fiduciary financial advisor’s business, structure of pay, disciplinary history, potential conflicts of interest, and education.  You can also obtain this information through the IAPD tool provided by the SEC.

IAPD is an acronym for Investment Advisor Public Disclosure.  Request the financial advisor’s performance record along with client references so you can reach out for more information and you will have a better sense of whether the prospective financial advisor genuinely places clients’ interests above his or her own.

By working with a fiduciary like McGervey Wealth Management, you can be assured you’re getting investment advice from a firm that has the obligation to disclose conflicts of interest and put your interests ahead of its own.

We get to know you on a personal level and keep things simple, using common language everyone can understand. To learn more about McGervey Wealth, contact us today or get your wealth score to see how you stack up for retirement.

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More About the Author: E. Michael McGervey, CFP®, CRPC®

Mike is passionate and skilled at helping clients solve complex financial challenges. He’s known for his thoughtful communication, educational approach, and exceptional customized service. Mike has been a sought-after source for financial television, magazines, and newspapers looking for insightful analysis. His expertise has been featured by CNBC, FOX Business and...