What it Means to Have a Fiduciary Financial Advisor

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These days, many financial advisors are promoting themselves as fiduciaries. But what exactly does that mean? And how can it benefit you?

What is a fiduciary?

A fiduciary is someone who has a legal obligation to act in the best interests of another person. This means that they must put your needs before their own. In the financial world, fiduciaries include estate executors, lawyers, real estate agents, and some financial advisors.

How Does a Fiduciary Duty Benefit You?

When your financial advisor is a fiduciary, you can be assured that they are recommending investments that are in your best interest, not theirs. This means they can’t steer you towards a particular investment just because it pays them a higher commission.

Here are some of the key things a fiduciary advisor must do according to the Investment Advisers Act of 1940:

  • Provide investment advice that is in the client’s best interest
  • Eliminate or disclose conflicts of interest
  • Seek the best price and speed of trade execution
  • Provide ongoing monitoring and advice on the client’s investments

How to Find a Fiduciary Advisor

Not all financial advisors are fiduciaries. Some are brokers who are held to a different standard, called the suitability standard. This means that they are only required to recommend investments that are suitable for your needs, not necessarily in your best interest.

If you’re looking for a fiduciary advisor, here are a few tips:

  • Ask if the advisor is a registered investment advisor (RIA). RIAs are fiduciaries.
  • Ask the advisor how they are compensated. Fiduciary advisors typically charge a fee based on a percentage of assets under management, rather than commissions.
  • Get everything in writing. Be sure to ask the advisor for a copy of their ADV disclosure document, which details their background, fees, and services.

By working with a fiduciary advisor, you can have peace of mind knowing that they are on your side and working to help you achieve your financial goals. Here at Lord & Lindley we have deep expertise in litigation related to the obligations of fiduciaries and are available to help by contacting us at 704-457-1010 to find out how we may be able to help you.  For more information regarding our firm, attorneys, and practice areas, please visit our website at www.lindleylawoffice.com.

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