Don’t be scared by the mysterious title of “fiduciary.” This is simply a person who makes recommendations and acts for you in the interest of your financial success. Simply stated, a fiduciary’s duties shift the focus from a business’ interests, like selling products and increasing sales, to your own wants and needs. Acting as a fiduciary administrator is considered the highest standard of care.
At TRS, we believe that the fiduciary principal is the only way to serve our clients.
How do you know if your financial advisor is acting as a fiduciary? In most cases, they aren’t. You may see your financial advisor simply as a broker; you view him/her as a sales person to invest in the stock market, not someone with whom you would share your intimate hopes and dreams. A relationship with a financial planner, however, is meant to guide you through the many options available to decide on the best strategy for your particular situation.
Understand that an investment advisor’s loyalty is to you and your future, while a broker’s loyalty is to commission on the impending sale.
To determine if your current broker or advisor is a fiduciary, it’s important to ask some poignant questions and pay close attention to their answers:
If they claim they act as a fiduciary, they should be able to back that up with something in writing, and you should ask to see it.
Ask if they are incented by any other commissions or compensation other than what you’re paying them when they make recommendations for investment products such as annuities and mutual funds. The answer should disclose whether they are providing unbiased advice or whether they are falling prey to greed and the act of filling their own wallet.
It’s important to do your due diligence and check out an advisor’s history on FINRA’s website for any red flags or complaints related to providing financial and advisory services. Sometimes advisors can be “dual-registered” as both an investment advisor and a broker-dealer. Ask questions to be sure you clearly understand which role they are representing when they provide advice to you.
You no doubt want genuine advice from brokers and financial advisors that mirrors the same recommendations they would give themselves. Ask the right questions to get the information you need in order to see if your financial advisor has your best interests in mind.