What is the Real Difference Between Fiduciary Advisors and Other Financial Advisors?
Have you ever wanted to contact an investment or financial advisor but didn’t know where to start? What is the difference between a fiduciary advisor and an investment advisor?
Today, Margaret asks the important questions that everyone should know the answers to in her discussions with author, investment advisor, owner of website Wealthramp, and co-host of Moneytrack on PBS, Pam Krueger, and financial fiduciary and owner of Augustweath, Scott Whytock.
What is a Fiduciary Advisor?
A fiduciary advisor is a financial advisor who must, by law, act or offer advise that would benefit the client. You might have seen financial advisors who say they “work like a fiduciary advisor,” or you might have seen those who “act” like a fiduciary. This really is the difference between a fiduciary advisor and other types of financial advisors.
Unfortunately, there are no laws when it comes to claiming that a person “works like a fiduciary advisor.” Anyone who can obtain a CFP (certified financial planner) certificate can claim that they are “just like a fiduciary.”
Fiduciary advisors are given a limited power of attorney to invest your assets. Financial planners, for the most part, are literally exactly that, offering you financial advice, but not necessarily investing for you.
How to Weed Out the List of Financial Advisors
Kim notes that there is one question that will make things quick and easy when it comes to weeding through lists of financial advisors: How do you get paid?
Financial advisors who sell products, or who offer you investment “deals,” most likely make their money from these areas. A true fiduciary will only earn money when you earn money. Whether it’s a flat-fee or an hourly rate, a professional only earns money when you do.
Those who are filling a sales role are not going to be the type of people you want as your financial advisor since they are there to sell you something. This would include insurance companies, some brokerage firms, and life insurance companies.
Fiduciaries cannot sell something that doesn’t benefit you. This includes pushing something that gives the planner kickbacks, bonuses, or other incentives for selling certain products.
Too Many People are Afraid of Financial Planners
Many people mistakenly believe that you must have a million dollars or more to need a financial planner, while others fear that they are handing off their money to someone who will take off to the Bahamas with suitcases full of cash.
First, nearly everyone can use a little financial planning, unless you plan on winging it alone. Although a trip to the Bahamas does sound nice, you will receive statement both from your financial planner and the brokerage firm that your financial planner uses. This means that you will know every step of the way where your money is and how well it is being invested.
Most fiduciaries choose this career, they do so because they want to help others and have a more intimate relationship between people and their money.
Have you seen a financial planner? Will you feel more comfortable now about asking how a financial planner earns their income? Do you think most people would benefit from a financial planner’s advice? Let’s talk about financial planning!