When it comes to financial and retirement planning, there is a wide range of titles, such as financial advisor, financial planner, and wealth manager. Choosing a trustworthy advisor who can provide sound advice and help you confidently pursue your goals can be a daunting task. To make an educated decision, you may be wondering, “What are the right steps to take?”
When considering a financial advisor, it can be difficult to know whether or not they will act in your best interests. Job titles do not always provide insight into the standards to which an advisor is held. To verify your advisor is looking out for your best interests, it’s important to ask if they are held to a fiduciary standard and whether they are willing to be transparent in the ways they invest their own money. A clear yes-or-no answer can provide clarity and help you make the best decision for your financial future.
What Do These Different Titles Mean?
If you’ve ever researched financial advisors, you may have noticed there are many different types of advisors from which to choose. Some of the most common types of financial advisors are brokers, fee-only fiduciaries, and independent financial advisors. It’s important to know the standards each type of advisor is held to as you’re deciding who to hire.
Here’s the breakdown:
- Brokers manage your portfolio but also sell financial products such as mutual funds or insurance policies, for which they earn a commission. They are not held to a fiduciary standard, so they may not always act in your best interest.
- Fee-only fiduciaries may charge a flat fee, or a percentage of your portfolio, but they are always held to a fiduciary standard, in which they are required to act in your best interest.
- Independent financial advisors have started their own financial firm. Most independent advisors act as fee-only fiduciaries, but some may act as fee-based advisors and sell additional financial products on a commission basis.
What Exactly Is a Fiduciary?
In general terms, a fiduciary is a person or entity who has the power to act for another in situations that require complete trust. When it comes to the financial industry, financial advisors who work for a Registered Investment Advisor firm must always act as a fiduciary for their clients. CERTIFIED FINANCIAL PLANNER™ professionals are also held to this duty when providing financial advice to their clients. By law, a fiduciary advisor must be completely transparent and always act in their clients’ best interest. They are also obligated to avoid and disclose any potential conflicts of interest.
Additionally, the ongoing services and investment monitoring they provide also falls under the fiduciary duty. In other words, their job doesn’t end after the initial meeting or purchase. They must regularly review your accounts to help align your investments with your best interest.
There are financial professionals whose services do not fall under the fiduciary standard. This doesn’t mean that they are out to steal your money and can never be trusted—far from it. These financial professionals who register with FINRA are held to a standard known as Regulation Best Interest (Reg BI). This is a step in the right direction, but doesn’t take things as far as the fiduciary standard for Financial Advisors who work for a Registered Investment Advisor firm that registers directly with the Securities and Exchange Commission.
What Does it Mean to Work With a Fiduciary?
There are several benefits to working with an advisor who serves in a fiduciary capacity. For one, they are open and transparent. Aside from the obvious goal of maximizing value for your money, working with a fiduciary can give you confidence that your advisor is working in your best interests rather than their own. They’ll give you their true, professional opinion (even if it’s not the answer you want to hear). This is extremely valuable when you’re facing a big life decision, whether it’s purchasing a second home, transitioning into consulting work, or retiring earlier than anticipated. Reviewing your entire financial picture, an advisor can show you the impact a decision may have on your future and how you can pursue certain goals.
By working with an advisor who holds to the fiduciary standard, you can be confident in your financial future. Clients have the power to ask questions and to demand the highest value for the service that advisors are providing. As a Registered Investment Advisor firm, we understand people’s reservations or even negative connotations toward the underlying motivations of some advisors. We want to assure you that you can trust in the fact that our relationship with you is built on integrity and putting your interests above our own.
A Holistic Approach
Independent, fiduciary advisors do so much more than just pick your stocks. Working with an experienced financial specialist can be a realistic sounding board to help provide you with a litmus test when you have questions or face a big financial decision. They actively coordinate the accumulation, distribution, and transfer of your wealth, as well as the estate, tax, and financial planning areas of your retirement plan. An advisor who looks at the big picture of your financial life can help you optimize income and mitigate taxes in retirement.
For example, this type of advisor helps you create a retirement income plan that strategizes when you take your withdrawals and what accounts you take them from first; not to mention, they also design a Social Security strategy that optimizes your benefits, manages Medicare confiscation, and addresses long-term care so you can feel confident that you’re on the right track as you pursue your long-term goals. The objective advice of an independent fiduciary advisor can make an incredible impact on your financial situation in retirement.
Is it That Important to Find a Fiduciary?
Yes—if you wish to feel confident and are looking to make sound financial decisions that empower you to work toward your goals with clarity and confidence.
At Center for Wealth Management, we strive to provide tailored strategies designed to help you accomplish your financial aims. As an independent firm, we customize solutions to fit your individual needs, and make investment choices based on your risk tolerance, goals, and other life aspects—not our own interests or commissions.
Let us partner with you on your journey toward financial freedom. Simply give us a call at (248) 220-4321 or email email@example.com. You can also schedule a meeting by visiting www.calendly.com/cwmrob/initial.
Robert Moore is senior partner, financial planner, investment advisor, and co-owner of Center for Wealth Management, an independent, fee-based wealth management company based in Troy, MI. With more than 15 years of experience, Rob provides customized advice and solutions that are in the clients’ best interest. He strives to always go above and beyond his clients’ expectations, helping them retire with more security than they had before, and invest their time and energy in what’s most important to them. Rob specializes in working with DTE Energy employees, helping them maximize their benefits so they can reduce taxes, prepare for retirement, and protect their families through a comprehensive planning process. Rob graduated from Michigan State University and holds the CERTIFIED FINANCIAL PLANNER™ and Chartered Financial Consultant® (ChFC®) certifications.
Rob is known as a diehard family man who enjoys spending time with his beautiful wife, Jill, his daughter, Brookelyn, and his son, Brayden. When he’s not working, you can find him playing basketball once a week, squeezing in a round of golf, and watching college football and basketball with friends and family. He is passionate about enriching the lives of others through his church involvement and service at a community addiction program. Learn more about Rob by connecting with him on LinkedIn.