What is a Fiduciary Financial Advisor?
What is the Fiduciary Standard? Why is it important? What is the fiduciary difference? What are the benefits of working with a fiduciary? How do we align our interest with yours?
Investment Salespeople vs Fiduciary Advisors
Financial service providers can be seen as belonging to one of two different business models: Investment Salespeople and Fiduciary Advisors.
Investment Sales
Stockbrokers, bankers, and annuity salespeople represent an investment firm, not the client (thus their title “registered representative”). Likewise, most financial planners, financial consultants, and financial advisors are salespeople who are registered representatives of an investment firm. A salesperson is paid by that investment firm, not the client. A salesperson is qualified and paid to sell products but is not qualified or paid to give advice. A salesperson is not a fiduciary and is not required to put the client’s interests first. After all, if your job is to represent an investment firm and sell as much as you can of their investments, how can you put the interests of your client first? Short answer: you can’t.
Fiduciary Advice
A fee-only advisor represents the client, not an investment firm. An advisor is paid by the client, not an investment firm. An advisor is qualified and paid to give advice, not to sell a product. An advisor is a fiduciary and as such is legally required to put their clients’ interests first.
How to Tell One From the Other
Some titles do not tell us anything about whether a person is an investment salesperson or a fiduciary advisor. These titles include CFP® practitioner, Financial Advisor, Registered Investment Advisor (RIA), Financial Consultant, Financial Planner, and Wealth Manager. A particularly confusing title is Hybrid Advisor. This advisor wears two hats: a sales hat and a fiduciary hat and can choose when to wear each hat. Some other titles and phrases do give us an indication:
Investment Salespeople vs Fiduciary Advisors
If you see the words:
You are dealing with a:
Fee-Only
Fiduciary Advisor
NAPFA
Fiduciary Advisor
Registered Representative
Investment salesperson
Securities offered through:
Investment salesperson
Fee based
Investment salesperson
Stockbroker
Investment salesperson
Insurance agent
Annuity and Insurance salesperson
Private Banker
Investment salesperson
Financial Plan is a fee-only, NAPFA member, RIA. We are a fiduciary, and as such we are both personally motivated and legally required to put our client’s interests ahead of our own profit motive