Are you looking for a financial advisor who is legally obligated to prioritize your best interests? It doesn’t sound logical that all financial advisors wouldn’t prioritize your best interests first, but unless you are working with a Fiduciary, you can’t be completely sure. Fiduciary financial advisors offer this assurance, setting them apart from other types of advisors. This guide will help you understand what fiduciary financial advisors are, how they operate, and why working with one could benefit your financial future.
- Fiduciary financial advisors are legally obligated to act in their clients’ best interests, distinguishing them from non-fiduciary advisors who may have conflicts of interest.
- Working with a fiduciary advisor provides benefits such as transparency in fee structures, prioritization of client interests, and comprehensive financial planning tailored to individual needs.
- Selecting the right fiduciary financial advisor involves verifying credentials, confirming fiduciary status, and understanding their fee structures to ensure alignment with your financial goals.
Understanding Fiduciary Financial Advisors
Fiduciary financial advisors and personal financial advisors serve both high-net-worth and non-high-net-worth individuals, as well as institutional clients. They offer comprehensive services such as wealth advisory, financial planning, and investment management tailored to individual client needs.
The fiduciary duty these advisors uphold distinguishes them from non-fiduciary advisors, creating a relationship based on trust, transparency, and the commitment to act in the client’s best interest. A long term professional relationship with a Fiduciary Financial Advisor can keep you on track to meet your long-term financial goals in the most efficient way possible.
A fiduciary is an individual or organization responsible for managing money with a legal obligation to act in another person’s best financial interests. Fiduciary financial advisors must prioritize their clients’ needs above their own. Imagine a financial advisor who discloses potential conflicts of interest and operates with a duty of care, loyalty, and good faith. Registered investment advisors and CERTIFIED FINANCIAL PLANNERS™ are bound by these fiduciary responsibilities. This ensures that their investment recommendations align with your financial goals rather than their own compensation. By inquiring whether your potential advisor is a fiduciary, you can ensure they are legally required to prioritize your interests.
Fiduciary vs. Non-Fiduciary Advisors
Fiduciary advisors adhere to the highest level of trust and good faith in their client relationships. They must avoid or disclose conflicts of interest, maintaining transparency in their practices. In contrast, non-fiduciary advisors typically follow a suitability standard, recommending investments that are deemed suitable based on reasonable beliefs. This lower standard allows for potential biases since non-fiduciary advisors might receive commissions from the products they sell.
Non-fiduciary advisors are regulated by the Financial Industry Regulatory Authority (FINRA) and are not all financial advisors subject to the same rigorous compliance standards as fiduciary advisors. This can lead to recommendations that may not always align with your best interests. According to the 2024 FINRA Industry Snapshot, of the total 713,576 registered individuals in the securities industry as of 2023, 628,392 were registered as non-fiduciary broker-dealers, while only 85,184 were registered solely as fiduciary Investment Adviser Representatives. Recognizing these differences helps in making informed decisions about financial planning and investments.
IMPORTANT DISCLOSURES
The information included in this document is for general, informational purposes only. It does not contain any investment advice and does not address any individual facts and circumstances. As such, it cannot be relied on as providing any investment advice. If you would like investment advice regarding your specific facts and circumstances, please contact a qualified financial advisor.
Any investment involves some degree of risk, and different types of investments involve varying degrees of risk, including loss of principal. It should not be assumed that the future performance of any specific investment, strategy or allocation (including those recommended by HBKS® Wealth Advisors) will be profitable or equal the corresponding indicated or intended results or performance level(s). Past performance of any security, indices, strategy or allocation may not be indicative of future results.
The historical and current information as to rules, laws, guidelines or benefits contained in this document is a summary of information obtained from or prepared by other sources. It has not been independently verified, but was obtained from sources believed to be reliable. HBKS® Wealth Advisors does not guarantee the accuracy of this information and does not assume liability for any errors in information obtained from or prepared by these other sources.
HBKS® Wealth Advisors is not a legal or accounting firm, and does not render legal, accounting or tax advice. You should contact an attorney or CPA if you wish to receive legal, accounting or tax advice.
