A financial advisor is a key part of many people’s overall investment strategy. Your chosen advisor’s values and methods should align with your financial goals. Furthermore, they should be experienced with the financial arenas you wish to address (retirement, investment growth and so forth) and adhere to your same level of risk tolerance.
You should also consider whether or not your advisor is also a fiduciary. Fiduciaries offer additional benefits that can prove invaluable to your future investment growth. Here are a few reasons to work with an advisor who is a fiduciary.
What Does The Term “Fiduciary” Mean?
The word “fiduciary” means “involving trust.” Shouldn’t you be able to trust the person who manages your money? The term, however, encompasses more than that; a fiduciary is an individual who promises to work in your best interests when offering advice and selecting investments.
You may be surprised to find out that not all financial advisors are fiduciaries. In fact, most are not. Advisors must pass certain requirements in order to be considered fiduciaries, so it is always worth your time to check if your advisor has fulfilled these prerequisites.
Fiduciaries Advise What Is Best for Your Goals
A fiduciary is obligated by law to provide advice that best suits your goals. Non-fiduciary advisors may offer you funds or stocks that also benefit them. For example, Company A might offer advisors a commission whenever they get a person to buy a Company A fund.
Fiduciary advisors do not accept commissions in this way, so you can rest assured that your portfolio is balanced according to your needs and future goals, not what will earn your advisor the most money.
Similarly, fiduciaries are required to disclose any conflicts of interest in their advice or the products they recommend. For example, if the advisor owns Stock B, they are not permitted to encourage all of their clients to buy into Stock B so that the price rises.
Even if they do not receive a direct commission from the company offering Stock B, this is still not permissible behavior for fiduciary advisors, and they must notify their clients that they have a relationship with Stock B.
Fiduciaries Do Not Automatically Charge Fees
In a similar vein, fiduciaries will attempt to get you the lowest costs for things like trades and expenses for funds that you own wherever possible. It is common for non-fiduciary advisors to charge management fees or to place you into funds with higher than average fees.
While the fee may seem like a small number—often around 0.75% to 1.5%—it can really add up over the course of multiple years. A portfolio with $100,000 being charged 0.75% each year will lose $750 annually to fees. Over a 20 year horizon, that is $15,000 taken from your investments that could have been growing and capitalizing.
Fiduciaries are always required to be transparent about the fees that they charge, and they try to reduce fees as much as possible. Advisors acting as fiduciaries are compensated according to pre-set terms that you both agree upon before starting your work together.
The most common type of payment for a fiduciary financial advisor is a percentage of your portfolio, though some advisors only charge you when you speak to them or set a flat rate to manage your entire portfolio each year.
A Fiduciary Advisor Conducts Research And Monitor Their Choices
Fiduciaries work with a wide range of products since they are not beholden to relationships with certain companies. A fiduciary must understand your situation in order to uphold their duty to make the best recommendations, which means that you will receive comprehensive help based on your unique financial goals and risks.
You can count on a fiduciary to do their best to help your money grow. They will also monitor the performance of your investments over time because it is their responsibility to offer you the best possible options. If your portfolio is no longer performing at an optimal level, the fiduciary is obligated to help you amend your portfolio so that it may better serve you.
Trust The Professionals To Help You Achieve Your Financial Goals
Working with an advisor who is a fiduciary offers a wide range of helpful, money-growing benefits. Fiduciaries strive to cut costs and increase your savings to maintain your financial health. The experts at Inflection Advisors would be happy to assess your finances and work with you to develop a custom financial plan. Reach out to schedule an appointment.