How to Find a Fiduciary Advisor

Fiduciary advisors are bound by law to work in your best interest—here's how to find one.

When you hire a financial advisor, you do so with the impression that they will be working in your best interest. It’s normal to feel apprehensive—after all, you’re putting your money into the hands of a stranger, albeit a professional. However, some financial advisors do not have your best interests in mind. Some are incentivized to sell you products that may not be the best decision for you and your investments. Unlike other financial planners, fiduciary advisors are bound by law to work in your best interest.

What is a financial advisor?

The title “financial advisor” can mean many different things. A financial advisor could do financial planning, 401(k) investments, financial advice, sell insurance, etc. Unfortunately, some advisors are invested in their own commissions, so you may not be given the best advice for your particular situation. If an advisor seems shady when you ask how they get paid, it’s not unlikely that they have a pay structure that incentivizes them to favor certain products over another.

Ferguson Johnson Wealth Management tells us that financial advisors tend to fall in one of three categories:

1. “Investment Adviser Representatives – Employees of a Registered Investment Adviser, regulated by individual states or the SEC. These advisors must always act as fiduciaries in the best interests of their clients. This is what Ferguson-Johnson Wealth Management and our advisors are.
2. Registered Representatives – Employees of a Broker-Dealer regulated by FINRA. These advisors are held to a suitability standard when making recommendations to clients (more on this later).
3. Dual Registered – Employees of Hybrid firms that can ‘switch hats’ to be an Investment Adviser Representative or a Registered Representative as wanted/needed.”

Those planners who are investment advisor representatives are always true fiduciaries and must act in the best interest of their client.

What is a fiduciary financial advisor?

Fiduciary financial advisors “have a relationship of trust with their clients and abide by fiduciary duty, meaning they have an ethical obligation to act solely in your best interest.” A fiduciary helps eliminate the risk of trusting your money with the wrong advisor. They can provide you with valuable insights from an unbiased perspective.

Fiduciary advisors seek the best prices and terms for their clients, provide relevant facts and education, are trustworthy, and avoid conflicts of interest. If fiduciaries breach their duty by account churning or making unauthorized trades, then legally you are not entitled to the damages they caused.

How do I know if my advisor is a fiduciary?

If you want to know if your financial advisor is a fiduciary, consider asking them these questions:

1. Do you receive any type of compensation besides what I’m paying you?
2. What licenses, credentials, or other certifications do you have?
3. Are you dual-registered?
4. What are your areas of expertise?
5. Have you ever been cited by a professional or regulatory organization for disciplinary reasons?

Be mindful of how the advisor responds, and if they tell you that they are acting as a fiduciary, request proof of their credentials.

How to find a fiduciary financial advisor

A good jumping-off point when looking for a fiduciary is by using the SEC advisor search tool. This tool will be able to provide you with information regarding if a firm acts as a Registered Investment Advisor.

Another way of finding a fiduciary is by reading through the disclosures on their website. If they state that they are a registered investment advisor, then you can be confident that they are a fiduciary.

Finally, you can have an advisor sign what is called a “Fiduciary Oath.” Fiduciaries should have no problem signing an oath that states they will work in your best interest.

When you’re trying to find a financial advisor, a fiduciary will always work in your best interest. You must take the time to find a fiduciary and ask the right questions to ensure that your money will be invested well and that you will be given sound, unbiased advice. Find an advisor today.

Related Articles:

• Is a Certified Financial Planner a Fiduciary?
• Financial Advisors and the Fiduciary Responsibility
• What is a Fiduciary Financial Advisor?
• Is Your Financial Advisor a Fiduciary?