What is a Fiduciary?
A fiduciary is a term for a financial advisor who legally must act in the best interest of the individual/party they serve. When exploring the financial advising space, there are specific certifications that indicate if an advisor is in fact a fiduciary financial advisor.
4 ways to tell if your advisor is a fiduciary:
1- Ask them: A fiduciary will be happy to affirm their commitment to act in your best interests.
2- Review their fee structure: Most fiduciaries have a fee-only structure, meaning they do not recommend products for commission-based payments.
3- Review the advisor's certifications:The CFP (Certified Financial Planner) and AIF (Accredited Investment Fiduciary) certifications often indicate a fiduciary standard.
4- Check their registration: Advisors registered with the SEC (Securities and Exchange Commission) or advisors who are RIAs (Registered Investment Advisors) are both held to a fiduciary standard.
Are All Financial Advisors Fiduciaries?
The answer here is no. Financial advisors who are not fiduciaries are not held to the same ethical standards as CFPs or SEC registered investment advisors.
Fiduciary Duty vs. Suitability Standard
In meeting with a financial advisor, you may hear them say they are held to a "suitability standard" instead of a fiduciary duty. A suitability standard means that the advisor must make transactions that are suitable for their client. Having to act in a suitable way instead of in one's best interest is somewhat of a step down in comparison to a fiduciary.
Fee-only vs. Fee-based
Fee-only and fee-based sound similar, but they actually produce a different outcome. Fee-only means a financial advisor charges a fee to manage your investments and guide you through your financial journey. A fee-based financial advisor also has the ability to earn a commission on their trading, selling, and transactions. Although fee-based financial advisors can be CFPs, we at TruMix, believe that commission fees can be confusing to understand and may even be misleading.