The Differences Between A Fiduciary And A Financial Advisor, Why Choosing A Fiduciary Means Your Interests Are Put First
If you’re looking for professional wealth management and investment advice, you’ve likely come across the terms “fiduciary” and “financial advisor.” Let’s explore why working with a fiduciary advisor is the better choice if you want a professional who is legally and ethically bound to act in your best interests. Take two hypothetical situations, one where you choose a financial advisor who is not a fiduciary, and one where you choose a fiduciary instead.
Someone you know and trust recommends a financial advisor so you start working with them too. They have a high volume of clients with a wide range of incomes. They seem knowledgeable and friendly. The products that they recommend you invest in sound good, and they show you how they’ve worked for many of their previous clients, so you trust their advice and go along with it. Years down the road you realize that your portfolio isn’t performing as well as you’d hoped. In retrospect you feel like the advisor didn’t take the time to understand your situation as well as you thought, and their advice wasn’t personalized to your unique financial needs.
Now let’s say instead you decide to work with a fiduciary financial advisor, like those at PFS Signature Wealth. Your fiduciary takes the time to deeply understand your financial goals, risk tolerance, and life situation. They then craft a personalized investment plan designed to grow your wealth over time.Their fees are transparent and they have a legal obligation to put your best interests first. Your portfolio steadily grows under your fiduciary’s diligent and careful guidance. You feel supported and confident in your ability to reach your financial goals.
Why did the financial advisor and the fiduciary financial advisor take such different approaches? They may both be financial advisors, but there are important differences to consider when deciding who you want to work with to manage your wealth and steward your legacy.
Financial advisor is a broad term that can include various professionals with different levels of education, certification, and ethical obligations. Fiduciaries by contrast are held to the highest standard of care and must adhere to stringent licensing and certification standards.
Financial advisors are held to the suitability standard. They are only obligated to provide products that are suitable for their clients needs. This means the products they recommend must be suitable for you, but not necessarily the best option available. Compare this to fiduciaries who held to the fiduciary standard. Fiduciaries are ethically and legally bound to put your best interests first. This high duty of care means that fiduciaries must always prioritize your interests over their own and provide advice that is the best, not just suitable, for your individual situation.
Financial advisors may have conflicts of interest, especially if they earn commissions from selling financial products. This can create a situation where the financial advisor’s financial interests are not aligned with those of the client. Fiduciaries on the other hand must avoid conflicts of interest and disclose any potential conflicts to their clients.
Fiduciaries are required to thoroughly understand their clients’ circumstances and goals, providing comprehensive financial planning and true portfolio management. With the client’s best interest being their only interest, fiduciaries are able to build long-term relationships with their clients based on trust and transparency that isn’t possible with a financial advisor whose interests are divided.
If you are looking for a financial advisor who will put your interests first every time, you need a fiduciary – someone legally and ethically bound to put your interests ahead of any other agenda. Someone who will be with you every step of the way with unwavering dedication to your long-term financial success.
Looking for a fiduciary and wondering if we’re a mutual fit? You can contact us here to schedule a conversation with our team.