Definition: A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets for the benefit of the other person, rather than for his or her own benefit.
Clients want a relationship with a financial professional where they know they are both working toward the same goal. Fiduciaries make investment decisions with your best interest in mind and their objective is to help you achieve your financial goals.
As a client, if you want any of these specific traits from your financial professional you are seeking a fiduciary.
• A professional that puts your interest first
• A professional that understands your specific financial situation
• A professional that offers straight forward advice that reflects your goals
• A professional that recommends solutions that best fit your needs
Fiduciaries are committed to providing the best personal service, attention, and honest advice to every one of their clients.
There are many differences between a fiduciary and other advisors. Here are six examples:
1. Investment recommendations are not influenced by commissions on financial products.
2. Account activity is independent of transaction fees.
3. Recommendations are uncompromised by ownership interest in financial products.
4. Fiduciaries are free to take advantage of no-load financial products which have no sales commissions.
5. Compensation is linked to performance.
6. Regulators hold fiduciaries to the higher standard of “what is in your best interest” instead of what is merely “suitable” for you.
Structurally, philosophically, and legally fiduciaries are different from other advisors. This difference is even recognized in the Federal Law. Fiduciaries, by law, perform to the higher standard of acting in the clients best interest and are required to document a signed written code of ethics and fully disclosed compensation plan. Fiduciaries are paid by their clients for their professionalism in financial planning and management. They do not receive any compensation from financial products, such as; commissions, transaction fees, bonuses, free travel or other non-cash gifts. This trademarked term, known as “fee-only” pertains to the provision of financial advisory services and created standards around who was entitled to use this trademark. As the concept was successful and the practice advice grew, the competitive response of other non-fiduciary advisors was the so-called term “fee-based”. This effectively confused the investor and made them believe “fee-only” and “fee-based” were the same service or concept. However, a “fee-only” advisor accepts a fee as their only compensation and a “fee-based” advisor imposes a fee in addition to other charges that may be difficult to discover.
We see these “fee-based” advisors as “faux advisors”. Much to our dismay, these “faux advisors” have been successful at confusing the public mind. Is your advisor a true fiduciary? If not and you want to find out how a fee-only advisor will make a difference, please reach out to us at www.financialfiduciariesllc.com or call us a 1-800-950-8110.