Is Your Financial Advisor a Fiduciary?
Updated on Nov 10 2018
A financial advisor who is a fiduciary offers many benefits to the client as a fiduciary is someone who is legally-and ethically-obligated to always put you first. This is easier said than done in the complicated financial marketplace.
How to Find Out if Your Advisor is a Fiduciary
The investment world is plagued with conflicts of interest, obscure disclosure and an overall lack of transparency. Finding an investment or financial advisor who will act as your fiduciary can help eliminate many problems associated with commission-oriented or product-focused salespeople.
Here are some tell-tale questions to ask your advisor to find out if he or she is a fiduciary:
1. Do you receive any type of compensation besides what I’m paying you?
Keep in mind that some advisors receive commissions or other product-based compensation when their clients invest is particular products, such as mutual funds, annuities and variable annuities. This is a clear conflict of interest and can indicate that the advisor is not a fiduciary.
Make sure your advisor is providing unbiased advice and not simply selling you investment products.
2. What licenses, credentials or other certifications do you have?
Fiduciaries have to go through specific training to receive their credentials, so ask directly about their financial background and credentials. You can also research online to learn more about their credentials and whether they are a fiduciary.
Learn more about financial advisor credentials and training.
3. Are you dual-registered?
Some financial advisors are registered as both investment advisors and broker-dealers. Often, a broker-dealer is acting in the role of salesperson, which is indicative that he or she is not a fiduciary.
If your advisor is also a broker-dealer, it’s important to make sure you understand what service they are providing you, so be sure to ask specific questions and get a detailed explanation about your investments and any associated costs.
4. What are your areas of expertise?
The Certified Financial Planner Board of Standards issues Rules of Conduct for fiduciaries. According to these rules, CFPs should define what services they will provide and only offer advice in areas in which they are competent.
5. Have you ever been cited by a professional or regulatory organization for disciplinary reasons?
Fiduciaries should not be To be extra sure, you can look up the advisor’s records on FINRA’s BrokerCheck to find out if they have any complaints. Keep a close eye out for complaints related to providing financial and advisory services.
6. Are you a fiduciary?
Trying to make sense of all the different financial service professionals and their areas of expertise can be confusing. If you are going to trust a potential financial advisor with your money, it’s important to have open-communication and trust. Be direct and ask up-front whether he or she is a fiduciary.
Pay attention to how the advisor responds. If your advisor has told you that he or she is acting as a fiduciary, ask to see proof of their credentials.
To learn the differences between some of the financial services, such as financial advisor, financial planner, accountant, investment advisor and stockbroker, read our “Defining Financial Services Professionals” article.
- How to Find the Best Financial Advisor
- Top Questions to Ask a Financial Advisor Before Hiring
- 5 Mistakes to Avoid When Working With an Advisor
1“In Whose Best Interest?” A Financial Engine’s Survey on the Confict of Interest Rule, April 2017.
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