By Matthew Gaude & Shawn McGuire
Does your financial advisor have a hidden agenda? You might assume that if you work with a financial advisor, they will have your best interests at heart. This, unfortunately, is not a safe assumption to make. In fact, conflicts of interest are quite common in the financial industry. What’s best for you might not be what’s best for your advisor. And, in many cases, this means you could be pushed into the investments that make your advisors the most money, even if they aren’t the best fit for you.
Fortunately, there is an easy way to tell where your advisor’s loyalty lies. All you need to do is find out if they are a fiduciary or a non-fiduciary.
What Is A Fiduciary?
In general terms, a fiduciary is a person or entity who has the power to act for another in situations that require complete trust. When it comes to financial advisors, fiduciary advisors are held to a much higher standard than non-fiduciary advisors. By law, a fiduciary advisor must be completely transparent and always act in their beneficiary’s best interest. This means they are obligated to avoid conflicts of interest and cannot use client’s assets for their own benefit. This generally isn’t a problem because they are paid on a fee basis (unlike non-fiduciaries). However, if a conflict of interest does occur, they are required to disclose it to their clients.
Additionally, they are required to provide ongoing services and investment monitoring. In other words, their job doesn’t end after the initial meeting or purchase. They must continually review your accounts to make sure you’re invested in the best options possible.
What Is A Non-Fiduciary?
Non-fiduciaries are not held to the same standard as fiduciaries. This doesn’t mean that they are all out to steal your money and can never be trusted—far from it. But you need to be careful. And you can never assume your money is being invested with your best interests in mind.
Why? Because non-fiduciaries are commision-based advisors (or partly commission-based). They receive bonuses for getting people into certain investments. They are only required to advise you on “suitable” investments and are not obligated to put their client’s best interests before their own. This means they may steer you away from an ideal investment in order to make a commission. Additionally, after they put you in an investment, they are not legally required to continue monitoring your accounts.
Do You Need A Fiduciary?
It may sound like investing with a fiduciary is a no-brainer. In many cases it is, but not always. It really depends on what kind of investor you are. If you’re someone who likes to do your own research and decide for yourself where you want to invest, then a fiduciary may not be necessary. However, if you are a “set it and forget it” type who prefers to take a hands-off approach, investing with a fiduciary would be a wise idea.
How To Find A Fiduciary
So you’ve decided that a fiduciary is right for you. Now you just need to find one. How can you tell who is a fiduciary and who isn’t? Well, it’s really quite simple. Just ask each potential advisor how they are paid. If they are compensated in any way from commissions, they are not a fiduciary. If they say they are fee-only advisors, ask if they are a fiduciary and get their response in writing. Or to make things easy, we are fiduciary advisors here at Live Oak Wealth Management and would be more than happy to answer any questions you may have. You can simply call my office at 770-552-5968 or email firstname.lastname@example.org.
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insights and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
Securities offered through American Portfolios Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through *American Portfolio Advisors, Inc., a SEC Registered Investment Advisor. Live Oak Wealth Management, LLC is independently owned and not affiliated with APFS or APA.
Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc. (APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk, and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.