IS YOUR FINANCIAL ADVISOR A FIDUCIARY? HOW TO FIND A FIDUCIARY FINANCIAL ADVISOR IN YOUR AREA

Understanding what a Fiduciary Financial Advisor is

Looking for a financial advisor or a financial planner? An important distinction to learn is whether or not the advisor is a fiduciary.

The most important thing to know when looking for a fiduciary financial advisor is what exactly that term means. The definition of a fiduciary is an individual who has a legal obligation to act in the best interest of another person.

As such, a fiduciary will disclose any conflicts of interest that arise and resolve them in the client’s favor as well as avoid using the client’s assets in any way for their own benefit. Fiduciaries are obligated to put their client’s best interests above their own.

It is increasingly hard to tell if someone is working as a broker or investment adviser because currently MOST (60% of “financial advisors”) are now registered as both (1). This dual registrant will work as a fiduciary when building a financial plan,  but then switch hats and work under the lesser brokerage firm standard of advice called Best Interest when selling financial products.  Is the advisor required to affirmatively tell the client when they have switched hats and are working under the lower regulatory standard?  The answer is clearly “no”.  Why would someone do business this way? By being dually registered and offering both fee-based programs and product sales, they are able to keep the combined revenue from both sources, while pretending to work in the best interests of their clients. 

When the person providing you advice is not a fiduciary they may make investment decisions that may be in their own best interests, such as earning them higher commissions or other bonuses.

Finding out whether your prospective financial advisor is a fiduciary or not is an important part of the selection process, but determining which advisors are fiduciaries and which are not, is not always clear. Here we offer a few ways to help find an advisor who is also a fiduciary.

How to Find a Fiduciary Financial Advisor

To find a fiduciary financial advisor, we recommend you ask friends and colleagues for recommendations, consult trusted advisors, or use online sources to find fiduciary financial advisors near you. We elaborate on each of these methods below.

Ask a Friend, Family Member, or Colleague if they Know a Trusted Fiduciary 

Above all else, we recommend your search for a financial advisor begins with those in your life whom you trust. You may or may not get recommendations for a fiduciary specifically, but you will get honest feedback from someone you trust. Be sure to ask any advisors referred to you if they are fiduciaries.

How to Check if Someone is a Fiduciary using Online Sources

Firms that are Registered Investment Advisors (RIAs) are regulated by an agency of the US government, the Securities and Exchange Commission (SEC). The SEC has strict rules and regulations governing advisory firms, and by law, RIAs are fiduciaries and are required to act only in the best interests of their clients. You can use a few online databases to find firms which are registered as RIAs.

  • NAPFA.org  (The National Association of Personal Financial Advisors)
    NAPFA.org provides a database of financial advisors who have a fee-only structure and who are also fiduciaries. Learn more about why a fee-only structure is important in our article, What is a Fee-Only Financial Planner/Fee-Only vs. Fee-Based Financial Planning. We hold NAPFA in high regard and admire the work it does to educate the public about financial planning and to highlight advisors who commit to their clients with a fee-only structure. Visit napfa.org to check their database.

  • SEC (U.S. Securities and Exchange Commission) Adviser Database
    You can also research potential advisory firms through the SEC’s adviser search tool. If the advisory firm is a federally Registered Investment Adviser, and thus a fiduciary, it will have what is called a Form ADV filing available to be viewed online. This document includes a plain-English brochure describing the firm’s services, compensation methods and other matters that you can use to determine fiduciary responsibility.

About Modera Financial Planners

We are proudly a fee-only, independently-owned financial planning firm that acts as a fiduciary for our clients. We have built our organization to put our customers’ interests first, as evidenced by our fee-only fee structure and fiduciary responsibility.

If you’re interested in our services, please contact us. If you would like to learn more about financial planning, wealth management, and finding a financial advisor, please visit other areas of our education section.

1. Wall Street Journal, June 15, 2019, “Confused About Financial Advisors?  You’re Not Alone”

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