A fiduciary investment advisor can help set you up for financial success. Many Americans are unaware of how important advisors with the “fiduciary” designation are when it comes to choosing a financial advisor for your family. Learn why fiduciary advisors are so important.
A fiduciary financial advisor is legally and ethically required to put your interests ahead of their own. In April 2016, the Department of Labor released the Fiduciary Rule in an effort to ensure that financial advisors provide clients the same expertise they would give themselves.
Learn more about what it means to be a fiduciary and why choosing an investment advisor held to the fiduciary standard is so important for financial success.
Fiduciary: The Most Important Word You Don’t Know
Choosing a financial advisor is an important undertaking. This person will have access to private details of your life, including your bank accounts, and can have a huge influence on what your retirement looks like. To choose a financial advisor that can set you up for financial success, you’ll want to choose one who truly understands what it means to be a fiduciary – and you’ll need to understand the term yourself.
A recent survey from Personal Capital found that nearly half of all Americans believe all financial advisors are legally required to act in the best interests of their clients. However, only financial advisors who are also fiduciaries are required to put your business ahead of their own. Another survey from Betterment for Business revealed a further misunderstanding of the word, finding that:
- 58 percent of respondents could not identify the definition of a fiduciary
- 20 percent believed that the terms “financial advisor” and “fiduciary” were synonymous
- 27 percent did not know the term at all
Fiduciary Advisors Ensure the Highest Standard of Care
The Cornell Law Dictionary defines fiduciary duty as “the highest standard of care.” If your financial advisor is also a fiduciary, he or she is obligated to act in your best interest at all times – even if it’s in contradiction to his or her interests. The Security and Exchange Commission directs that fiduciary duty also includes,
- Acting with undivided loyalty and utmost faith.
- Providing full and fair disclosure of all facts.
- Disclosing and avoiding (when possible) all potential conflicts of interest.
- Not misleading clients.
- Not using a client’s assets for his or her own benefit, or the benefit of other clients.
In addition to the peace of mind that comes from entering into a fiduciary relationship, there is some…
This article was sourced from SENIOR finance advisor.