What standards are financial advisors held to?

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What standards are financial advisors held to?

July 31
02:11 2020

When you are looking for a financial advisor or contemplating if your current advisor is the best person for your situation, it can become difficult to know what to consider. Your financial advisor should be someone who you can trust. After all, your retirement is in their hands. There is no “Plan B” once you get to retirement and realize you should have done things differently. Today we will cover what a fiduciary is and why it matters to you.

What is a non-fiduciary advisor? 

Many financial professionals, such as registered representatives, stockbrokers, and insurance agents, are not held to a fiduciary standard. They only need to satisfy a “suitability” checklist to make a recommendation to a client. These financial professionals are able to charge commissions on investments and other financial products. Commissions are typically the largest conflict of interest in the financial industry. Many non-fiduciary advisors act in favor of their clients but may have incentives to offer you a “suitable” option rather than the best option for your specific situation.

What is a fiduciary advisor?

The term, “fiduciary”, in legal terms is a person who assumes responsibility on behalf of an individual or entity with utmost integrity. They are required by law to always act in their client’s best interest and cannot accept commissions. Most fiduciaries charge a percent of the money being managed (1-2% annually). When the client is the only entity paying the advisor, this allows them to make recommendations based solely on the merit of the options when considering the client’s scenario. Fiduciaries can even be held legally and financially responsible for any actions not made in their client’s best interest. 

Fiduciaries must:

  • Act in good faith and provide all relevant facts to clients
  • Put their client’s best interests above their own
  • Avoid conflicts of interest and disclose if any are present


How can I tell if an advisor is a fiduciary?

The easiest way to find out if an advisor is a fiduciary… is to ask! If your advisor says they are not a fiduciary, it’s okay to ask why. They should offer a clear explanation of how they work with clients and what rules apply to the advice they give. When the conversation about their fees / compensation gets complicated, it may be a warning sign.

Another way to determine if an advisor is a fiduciary is to look at the bottom of their website in the disclosure section. Below are some common disclosures and what they typically mean. 

  • Fiduciary: “Financial advisory services offered through XYZ Financial.”
  • Non-fiduciary: “Securities offered through XYZ Financial.”
  • Hybrid fiduciary: “Securities and advisory services offered through XYZ Financial.”


Does it really matter?

At the end of the day, there are quality advisors on both spectrums, fiduciary or not. Investors are getting smarter and it’s clear in industry trends. More and more advisors are moving away from commission models to become fiduciaries. We see value in the added legal and financial accountability that fiduciaries offer. Eliminating conflicts of interests can better ensure the right guidance is given to you and your family. You worked hard for your money and deserve an advisor who is committed to acting in your best interest every time. 

Rise Financial Partners is a fiduciary and our vision for clients is to hear “Well done, good and faithful servant! You have fought the good fight, you have finished the race, you have kept the faith.”

Find out more about our fiduciary oath here! Our disclosure section may be found here.

About Rise Financial Partners LLC:

Rise Financial Partners is an independent, fee-only registered investment adviser located in Philadelphia, PA. The firm offers financial planning and investment management services to business owners and philanthropic-focused individuals. Rise Financial Partners operates as a fiduciary serving clients throughout the United States.

Learn more at www.RiseWisely.com

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