Fees and Financial Advisors

I have to admit that sometimes I’m embarrassed by my profession.

Despite the prevalence of financial advisors (it seems like there’s one on every corner), it’s pretty difficult to find, one who genuinely has your best interests in mind.

The majority of financial advisors either don’t have a legal obligation to act in your best interest OR have connections to financial companies that incentivize them to recommend high-cost products. Or both.

So how can you distinguish the trustworthy from the untrustworthy? Here are some key variables to consider.

Fiduciary vs. Non-Fiduciary

You may have heard the term fiduciary in the news recently, and it’s an important term to understand if you’re looking for a financial planner.

A fiduciary is someone who is required by law to act in your best interest. In the world of financial planning, a fiduciary is required to recommend the strategies and products that will best help you reach your personal goals, even if they aren’t in the financial planner’s best interest.

It might seem surprising that, many professionals who hold themselves out as financial planners are not fiduciaries. Many are simply representatives of financial companies tasked with selling that company’s products.

Others are fiduciaries sometimes and not other times. Our laws actually allow financial advisors to be fiduciaries when they’re giving advice, but then to “switch hats” and drop the fiduciary role when they recommend products. So you might get good advice about your overall investment strategy, but then be sold investments that are much more expensive than available alternatives.

It’s too bad that “doing what’s in your client’s best interest” is a differentiator, but it’s simply the current state of affairs. You deserve a financial planner who is a fiduciary 100% of the time.