Summary: This article introduces the concept of a fiduciary financial advisor, emphasizing the legal obligation such advisors have to prioritize their clients’ interests above their own. It distinguishes between fiduciary and non-fiduciary advisors, outlining the conditions under which an advisor is considered a fiduciary.
Main Points:
- A fiduciary financial advisor legally must prioritize the client’s interests, contrasting with non-fiduciary advisors who might prioritize commissions or product sales.
- Not all financial advisors are fiduciaries; the distinction is crucial for ensuring advice that aligns with the client’s best interests.
- The fiduciary status can be determined if the advisor is registered with the SEC, a state securities regulator, or holds a CERTIFIED FINANCIAL PLANNER™ credential.
In the broadest definition, a fiduciary is a person or corporation that acts on your behalf and must put your interests first. A fiduciary financial advisor is a professional who manages and provides advice related to your financial assets. These fiduciary advisors are obligated by law to make your needs and goals their top priority.
The fiduciary role is a simple concept at its core. However, it’s vital to understand that not all financial advisors are fiduciaries. That means some financial advisors aren’t obligated to act in your best interests.
Non-fiduciary advisors can be more focused on earning commission or selling specific products as opposed to providing advice in your best interest. We share important questions to ask — questions that help determine if a potential advisor is in fact a fiduciary — later on in this article.
The fiduciary financial advisors at Dechtman Wealth Management always act in your best interest to help you reach your financial goals. We take this responsibility seriously and commit to maintaining our fiduciary oath.
The Fiduciary Oath
Every fiduciary financial advisor at Dechtman Wealth Management adheres to the five principles of the fiduciary oath:
We will always put our clients’ best interests first.
We will act with prudence; that is, with the skill, care, diligence, and good judgment of a professional.
We will not mislead clients and will provide conspicuous, full, and fair disclosure of all important facts.
We will avoid conflicts of interest.
We will fully disclose and fairly manage, in our clients’ favor, any unavoidable conflicts.
Our fiduciary financial advisors take your financial security and stability seriously. They build an understanding of your unique financial needs and goals to support individualized financial planning. That leads to more personalized attention and a strategy that is built on but also goes beyond general best practices.
Fiduciary vs. Financial Advisor
It is important to remember that not every financial advisor is also a fiduciary advisor. The term “financial advisor” describes the services that professionals offer. However, this title is not regulated and those using it are not held to any specialized standards.
There are three conditions in which an investment advisor or financial advisor becomes a fiduciary:
- The advisor is registered with the U.S. Securities and Exchange Commission (SEC).
- The advisor is registered with a state securities regulator as a registered investment advisor.
- The advisor earns the CERTIFIED FINANCIAL PLANNER™ professional credential.
Unless one of these conditions applies, a financial advisor is not held to the standards of being a fiduciary. This is the most direct way to distinguish between a financial advisor vs a fiduciary.
It is true that stockbrokers, insurance agents, broker-dealers, and other standard financial advisors follow suitability obligations. This means these agents have to supply suitable recommendations to their clients.
However, those obligations do not meet the same standard as the fiduciary oath. Non-fiduciary advisors aren’t required to put clients’ best interests above their own.
When you want financial advice that puts your money and your long-term financial security first, you need a fiduciary investment advisor.
Choosing a Fiduciary Advisor
To find the right fiduciary financial advisor for your needs, there are a few questions you can ask prospective agents:
- Who is directly managing my investments?
- What is your track record?
- What is your background?
- Who pays you?
- Are you paid primarily based on fees or commission?
- Are you legally bound to act in my best interests?
The answers to the first three questions won’t directly inform you if a potential advisor is a fiduciary. However, they are all questions that a dependable advisor can answer clearly and confidently. Learning about a possible advisor’s experience and investment management process helps you make a more informed decision.
The answers to the last three questions will shed light on your potential advisor’s status as a fiduciary or non-fiduciary. Fiduciaries can earn commission in certain contexts, but their primary income normally stems from fees paid by clients.
The last question is the most direct way to tell if a prospective advisor is a fiduciary. Any answer that isn’t quickly clear and doesn’t include a “yes” is a sign that a professional is not a fiduciary.
Trusting someone, even an experienced professional, to manage your finances is a major decision. It’s ultimately your financial well-being that’s on the line.
The good news is that a clear standard exists to determine if an advisor is required by law to act in your best interests. To ensure an advisor is focused on your needs as opposed to any other priorities, clarify their status as a fiduciary.
The long-term health and strength of your investments directly correlate with your financial advisor’s knowledge and skill. Take the time to find a fiduciary advisor who puts your financial needs first.
Work With Dechtman Wealth Management
With more than 40 years of financial know-how and industry knowledge, Dechtman Wealth Management is dedicated to giving you the best, most efficient investment experience in Denver, Colorado. We uphold our fiduciary oath by always putting your best interests first, while also taking our commitment to clients a step further.
You should have a clear, complete understanding of how you are investing, where your money is going, and what fees you are paying. Our fiduciary financial advisors use common language instead of industry jargon to ensure you truly understand your investments.
Make an appointment with a fiduciary advisor at Dechtman Wealth Management to take control of your financial future and investments.
