Does your advisor use the “f” word? You’ve probably heard the “f” word many times, but the “f” word I’m talking about probably isn’t the one you were expecting. I’m referring to the word “fiduciary”, and it’s key to your relationship with your financial advisor. Here’s what a fiduciary is and why you should consider dumping your advisor if he or she isn’t using the “f” word.

What is a Fiduciary?

What is a fiduciary, you may ask? A fiduciary in the financial industry is an advisor who has a duty to put your best interests in front of their own. A fiduciary is committed to taking reasonable care of your assets and being loyal to their clients. You might think that all financial advisors are fiduciaries, right? Unfortunately, this isn’t the case and it usually comes down to conflicts of interest. Take, for example, an advisor who works for a big firm and gets paid on commission. He or she is constantly getting pushed to sell more and, in some cases, to sell certain products. They make more money the more they sell, so they have every motivation to sell you products that aren’t in your best interest if it means a bigger commission.

Why It’s Easier for an Independent Advisor to be a Fiduciary

An independent advisor is one who doesn’t work for a large company and who can make more independent decisions. Many independent advisors are also fee-only, meaning they get paid as a regular fee instead of on commission. This removes the conflict of interest problem and allows them to prioritize you. A fee-only advisor is also more likely to offer you more comprehensive services than one who is commission-based. For example, it’s not uncommon for a fee-only advisor to help you with matters that aren’t necessarily financial, such as discovering your personality type and learning how to better deal with family discord. Because they don’t have to worry about making that next sale, they can take more time to dig deeper into any issues you’re having and provide a higher level of customer service.

Knowing if Your Advisor is a Fiduciary

If your advisor is using the “f” word and referring to him or herself as a fiduciary, they had better be putting their money where their mouth is. If you’re still wondering what is a fiduciary and why does it really matter, leave a comment or question below and I’d be happy to continue the conversation!

  • Did my advisor take the time to really get to know me in the beginning of our relationship or was she or he only interested in the zeroes in my bank account?
  • Do I hear from my advisor frequently or does he or she just check when trying to sell something?
  • Is my advisor easy to get a hold of or does it take them days or weeks to return a phone call or email?
  • Do I feel I’m often being sold products that don’t really make sense or that don’t fit with my values or investing goals?
  • Does my advisor know the names of my family members and our hopes and dreams for the future?
  • Does my advisor communicate openly and honestly with me about how he or she gets paid?
  • Is my advisor dual registered as a broker-dealer?

When you work with a fee-only independent advisor, your relationship takes on a counseling aspect instead of a selling one. This creates a secure, trusting bond and gives you peace of mind that your finances are in the hands of someone who cares about you, not just your money. Have questions about fiduciaries? Please leave them below!