What is a Fiduciary Advisor and Why It Matters, #277

With the term “financial advisor” being used so broadly these days, it’s harder than ever for retirees and investors to make sense of who’s actually guaranteed to act in their best interest. So let’s talk about the key responsibilities of fiduciaries, explore the differences between fee-only advisors and those who earn commissions, and go through why full disclosure and ongoing advice matter so much in your financial planning relationship.

I share practical tips on how to vet potential advisors, whether you’re unhappy with your current one or searching for the right fit for the first time, and discuss online resources designed to help you find an aligned, trustworthy professional. If you want to make sure your advisor is truly putting your interests first, this episode is for you. 

You will want to hear this episode if you are interested in...

• [00:00] What is a Fiduciary Advisor?
• [04:59] Fiduciary duty in financial advice.
• [10:14] Advisor compensation and fiduciary conflicts.
• [13:16] Financial advisor versus Fiduciary.
• [14:41] Choosing your Fiduciary Advisor.
• [16:22] How to find a potential Fiduciary Advisor.

What Is a Fiduciary and Why Should You Care?

A fiduciary is someone who is legally and ethically bound to act in your best interest. Professions such as attorneys, executors, and corporate officers have fiduciary obligations, but in wealth management and investing, this distinction is particularly critical.

Registered investment advisory firms (RIA) and their representatives are fiduciary advisors, meaning their primary responsibility is you, the client, unlike brokers or insurance agents, whose loyalty is often to their employer. Because anyone can call themselves a “financial advisor,” the consumer’s challenge is identifying who’s truly working for you.

How Fiduciary Financial Advisors Serve You

1. Duty of Care

A fiduciary advisor must always put your interests first, providing recommendations and advice tailored for your benefit. This doesn’t automatically mean recommending the cheapest investment, it means recommending the most appropriate solution, factoring in cost, liquidity, and other key details. If an advisor recommends their own firm’s products, this must be clearly disclosed due to the potential conflict of interest.

2. Duty to Seek Best Execution

When managing your investments, a fiduciary is responsible for choosing brokers and executing trades with your best interest in mind. It’s not just about low commissions; it's about balancing price, research, reliability, and responsiveness.

3. Ongoing Advice and Monitoring

A true fiduciary doesn’t just sell you a product and disappear. They provide continuous advice, meet with you regularly, ideally at least annually or semi-annually, and adjust your strategy as your life and goals change. If you haven’t heard from your advisor in years, they’re likely not fulfilling their obligations.

4. Duty of Loyalty

Advisors must actively avoid or disclose any conflicts of interest. Vague, general disclosures aren’t enough; specifics matter so you can make informed decisions. For example, any financial benefit your advisor receives from recommending a particular fund or insurance policy should be clear and transparent.

How Fiduciary Advisors Get Paid and Why It Matters

Fiduciary RIAs typically avoid commissions and instead rely on three main payment models:

• Hourly Fees: You pay for the advisor’s time, just as you would an attorney.
• Flat Fees: One-time fees for specific services, like a comprehensive financial plan.
• Assets Under Management (AUM): The most common method; you pay a percentage of the assets the advisor manages for you (often around 1% annually).

The aim is to remove any incentive for the advisor to recommend products based on compensation rather than your best interest.

Financial Advisor vs. Fiduciary: Spotting the Difference

Many professionals use the title “financial advisor,” whether they are fiduciaries or not. The real question to ask: Are you a fee-only advisor? Fee-only advisors are paid solely by the fees their clients pay, not commissions or kickbacks from financial products.

To do your own research, use the online tools I recommend to verify credentials, licenses, and complaint histories. Also think about asking your advisor to sign a fiduciary oath, confirming their commitment to act solely in your interest.

A fiduciary promises ongoing advice, transparency, and loyalty, values that matter when your future is at stake. Remember: Ask questions, verify credentials, and always ensure your advisor is truly working in your best interest.

Resources Mentioned

• Retirement Readiness Review
• Subscribe to the Retire with Ryan YouTube Channel
• Download my entire book for FREE 
• BrokerCheck 
• IAPD 
• findmyfiduciary.com
• Fiduciary Oath 
• CFP.net 

Connect With Morrissey Wealth Management 

www.MorrisseyWealthManagement.com/contact

 

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