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What is a fiduciary financial advisor?
A fiduciary financial advisor is an individual with a legal obligation to provide advice regarding a client’s financial well-being and to help manage a client’s investments, ensuring that they are making beneficial decisions when it comes to their money. Overall, a fiduciary is legally required to act in the best interest of their clients and align their approach with their clients’ personal goals and desires for themselves.
Who needs a financial advisor?
A financial advisor is recommended for anyone who may be undergoing major life changes, events, setbacks, or unprecedented circumstances. What these people have in common is the necessity of sturdy financial health and planning, especially considering their decisions with money could alter the course of their lives drastically. Thus, those who are getting married, going through divorce, expecting a baby, facing job loss, relocating, or grieving due to the loss of a loved one, to name a few, would benefit from working with a financial advisor who can guide them in the proper direction towards positive financial well-being, making the other areas in their lives more convenient and sustainable.
When should I get a financial advisor?
You should get a financial advisor when you believe that life events have affected your financial security and overall well-being and could use an extra set of eyes and hands to mitigate some of the stress or tension. For most people, these events tend to be fairly major, positive or negative, and create drastic change in one’s daily living. Examples include marriage, divorce, children, job loss, loss of a loved one, relocation, graduation, etc. There is no specified time when any one individual should seek the financial advice of a professional as it largely depends on what is going on in the individual’s life, home, or career. It is up to the individual to decide when the best time would be.
Is it better to have a fiduciary financial advisor?
The short answer is yes. Having a fiduciary financial advisor, as long as one can afford it, proves to be beneficial to anyone seeking financial security and organization. The saying “two eyes are better than one” exemplifies any circumstance in which a financial advisor may be needed. This is because, in a person’s day-to-day life experience, they are bound to undergo some stress at a certain point, so the extra help, especially with someone legally trustworthy, is convenient for both parties. The key factor in terms of whether or not a financial advisor is better to have is synonymous with affordability.
How to choose a fiduciary?
The best way of choosing a fiduciary is learning about their experience, style, and approach when it comes to finances and accountability. You want to choose someone who is reliable, trustworthy, and strikes a balance between hard-set goals and personal desires. Their style should primarily align with the goals and desires you have for yourself; this way, the fiduciary will focus their planning towards the achievement of your desired outcomes, however major or minor they may be. They should have experience working with clients in helping them achieve these goals while maintaining positive well-being and a stable livelihood.
Most of us work solely to earn money to support ourselves and our families. Beyond the weekly grind of a job and paying monthly bills the “American Dream”, for most of us, is to be able to not only save some of that hard-earned money for future needs but to be able to invest in our “future selves” for a comfortable retirement. This requires wherewithal, discipline, and a consistent focus on our own finances, which can be a daunting task as the years go by and financial responsibilities grow.
Managing your own money can be an intricate process, especially without much experience or comprehension. This is where a financial advisor can play a significant role in managing finances, anticipating and adjusting to financial changes, and planning for the future.
The Fiduciary Advantage
Ultimately, choosing a financial advisor requires a substantial amount of trust, as placing just an ounce of one’s finances in another’s hands can be the equivalent of signing over a bit of control over a portion of one’s livelihood. Thus, hiring a fiduciary financial advisor is typically the best route to take.
Fiduciaries have a legal obligation to their clients, and it is their responsibility to prioritize a client’s financial well-being above all else, ensuring that they are acting in the clients’ best interest, always.
Contrarily, a non-fiduciary advisor may not always have their client’s best interests in mind. These advisors tend to think more about their own motives rather than the needs of their clients, especially if there is an economic incentive to act otherwise. Frequently, there exist conflicts of interest between both parties, resulting in subpar investments and poor or mediocre financial management.
A respectable fiduciary advisor will take seriously their legal obligation to have a client’s best interests in mind, which goes hand-in-hand with the rapport they must build, the trust they must establish, and the level of transparency and accountability they must have. In fact, it is their fiduciary duty to assist each client with their unique needs and goals.
Benefits of a Fiduciary Advisor
Fiduciary advisors provide unbiased advice, focusing on their clients without predisposed recommendations or ideas and instead simply aligning with a client’s financial objectives. An advisor can assist with accomplishing these objectives, prioritizing a client’s goals, and providing conflict-free recommendations without clouded judgment.
Additionally, fiduciaries will help to plan for a client’s future, focusing on building comprehensive frameworks that provide guidance for each next step after every goal is achieved. These visions of the long-term will naturally evolve depending on the client’s personal or financial needs, allowing space for adjustments along the way as there will always be financial setbacks and challenges.
Speaking of which, fiduciaries also plan for these challenges as proactively preparing for the unexpected is a key part of any strong financial plan. Fiduciaries synthesize all aspects of one’s financial life into a cohesive strategy, understanding that every client’s situation is unique and should be handled with the utmost care.
Finding the Right Fiduciary Advisor
It is important that a client considers their potential advisor’s credentials, qualifications, experience, and background in financial advisory and mentorship. These criteria should reflect, at the bare minimum, an education in finance (or a related field), a couple of years working with other clients, and the appropriate certifications (i.e., licenses as a financial planner, accountant, or analyst, respectively).
Learning and considering an advisor’s style and approach is a practical way of determining if they would be the right fit. This may require a client to:
- Understand an advisor’s investment philosophies in order to see if they align with their own ideas.
- Take note of an advisor’s communication style, observing if they are clear in the way they speak about and listen to a client’s needs.
- Find common ground regarding financial motives so that trust can be built and rapport can be maintained appropriately.
Ideally, the financial advisor one chooses will not demonstrate any red flags, but just as financial challenges are inevitable, so are the imperfections that come with any working relationship.
Interviewing Potential Advisors
To narrow down the search for the most ideal candidate, the following is a list of questions that can must be asked in considering a fiduciary financial advisor:
- What is your background in finance, and how do you strategically approach helping your clients achieve strong financial health and well-being?
- What experience do you have in assisting others with their financial decisions?
- What is your main philosophy when it comes to financial health and investment?
- What are your current fees? Do you foresee them changing as the world of finance and economics continues to evolve?
The Safeguard (TRUST)
As author Michael J. Herbert puts it, “A relationship without trust is like a car without gas; you can stay in it all you want, but it won’t go anywhere.” This epitomizes the working relationship between client and advisor. Communication must be ongoing and consistent working towards financial goals and maneuvering around setbacks as they come.
If working with a financial advisor seems like an interest of yours, you can conveniently find fiduciaries near you, or you can contact us HERE.
Lastly, it can never hurt to seek references by asking friends, family members, or those in your local community. One can also ask a potential advisor for client references in order to speak to someone with direct experience with the advisor. Ultimately, knowing what you need primarily is the first step towards finding the ideal financial advisor who will not only meet your criteria but prioritize your well-being.