Fiduciaries have a relationship of trust with their clients by putting the client first and remaining loyal. Be careful! Not all advisors are fiduciaries.
There are great ways to tell whether your advisor is a fiduciary. One of the easiest ways is to ask your advisor if they are fiduciary. Your fiduciary should be able to explain how their business works and the rules that apply when giving advice. All CFP® Professionals and other fiduciary advisors are obliged to their clients when providing investment advice.
Here are some types of advisors you might have heard of that could be fiduciary.
- Investment Advisor – when working with retirement accounts, is held to a fiduciary standard by the Department of Labor (DOL)
- Broker-Dealers – are regulated by the SEC but are not required to be fiduciaries. They are held to the “suitability standard,” which means that the investments must be suitable for the client at the time of purchase.
There are other benefits to working with a fiduciary. They are open and transparent about their business and must disclose if they gain anything from the advice they give you. By working with fiduciaries, you can trust that your investments are in the right hands. Clients have all right to receive the highest value of service fiduciaries offer. These obligations include managing conflicts of interest and providing professional services with competence.
Often advisors have certifications, some of which require the practitioner to be a fiduciary. Here are a few designations that require their practitioners to be fiduciaries to their clients.
- CFP® Professional (Certified Financial Planner)
- ChFC (Chartered Financial Consultants)
- AIF (Accredited Investment Fiduciary)