Best Fiduciary Financial Advisor: The Role of Ethics in Investment

You deserve a financial expert that will listen to your concerns and cater to your needs. You don’t need pre-set investment plans or cookie-cutter strategies. They won’t work for you. The financial advisor you choose will need to have the right qualifications to care for your wealth. Pillar Wealth Management professionals have multiple decades of experience in effectively guiding affluent families with $5 million to $500 million. Book your appointment with us today for personalized expert advice.

If you’re looking to learn more about fiduciary financial advisors, we will discuss the following questions in this guide:

• What is a fiduciary financial advisor?
• What does a fiduciary financial advisor do?
• Should I hire a High net worth fiduciary financial advisor or go it alone?
• What are the qualifications of a fiduciary financial advisor?

What is a Fiduciary Financial Advisor?

In your quest to find suitable financial advisors to help you achieve your financial goals, you may have heard the suggestion from multiple people to find the best fiduciary financial advisory. Upon hearing that, it’s natural to wonder “what is a fiduciary financial advisor?”. Fortunately, we can help you with that. Read our ultimate guide to learn all there is to know about selecting financial advisors.

A fiduciary financial advisor refers to a person or organization that has been charged with managing, preserving, and growing the wealth of an investor on their behalf. A fiduciary has the added responsibility of prioritizing the interests of their client above their employer’s or their own. The responsibility isn’t a formality, but rather a legal obligation enforced by the SEC on registered fiduciary advisors.

A fiduciary advisor can provide financial advice or financial management services on a variety of topics regarding your wealth, including advice on optimally balancing your investments. Since these individuals go through robust training programs and earn their license after acquiring relevant experience, you can rest easy knowing that your money and assets are in capable hands.

What Does It Mean to Have a Fiduciary Duty?

We should first make it clear that even though advisors should usually have a fiduciary duty towards their clients, many advisors don’t due to various reasons. An advisor with a fiduciary duty is obliged by the state and common law to follow a duty of loyalty, a duty of obedience, and a duty of care when providing financial services. An investor will look to a fiduciary advisor to exercise discretion and expertise.

This is not something that should be taken lightly. Should you find that your advisor has breached their fiduciary duty, they can face harsh legal consequences for their actions. Negligence that negatively affects a client can result in heavy penaltiesfor fiduciary advisors. Of course, there will have to be proof of ill intent for this to happen since losses can happen due to countless factors.

When you opt for the best fiduciary financial advisor, you can also rest easy knowing that your advisor will not use any compensation methods that put them at odds against your interests. For example, almost no fiduciary advisor will charge a commission. This is because commissions create a potential conflict of interest where your advisor could potentially suggest a security that earns them higher commissions even if it isn’t in your best interests.

With non-fiduciary advisors, there’s always the risk that you could end up with someone that puts your assets under more risk than they should. Read this special guide for families with $10 million+ to learn how you can identify the best fiduciary financial advisor.

1. Why the Best Fiduciary Financial Advisor is Different

As knowledgeable investors, it’s our duty to understand the difference between fiduciary advisors and non-fiduciary advisors.

Let’s take the example of a fiduciary investment manager or advisor. The Securities and Exchange Commission or the state securities regulators will compel them to clearly communicate all information to you and use their expertise to provide the best possible financial advice. They have to make sure that they make the best recommendations possible for your goals.

With all of these terms being thrown about, it can get confusing to understand the differences between each. Simply put, a fiduciary can be any kind of financial advisor that provides expertise in financial planning, financial advice, investment management, and so on. On the other hand, not all financial advisors can be considered fiduciaries. Depending on their credentials, a financial advisor can be a fiduciary or a non-fiduciary.

Wealth management is a service that can also be categorized as something provided by financial advisors called wealth managers. These experts evaluate your goals and priorities to create a carefully crafted financial plan to achieve them. They use their experience and market data to help you create a strong investment portfolio and guide you through tough financial times with their knowledge. Wealth managers can also plan your inheritance, taxes, insurance policies, and retirement. Wealth managers are typically fiduciaries with certified credentials in their area of expertise. To learn what it’s like to work with a fiduciary wealth manager, book an appointment with us.

The best thing about a fiduciary is that they disclose everything. When making a decision or recommending an action, the best fiduciary financial advisor will always provide a detailed explanation behind their suggestion should you ask for it. They will explain why they’re doing it and make sure that their decision is in congruence with your goals. The importance of this is further explained with other portfolio performance strategies in our guide.

2. Statutory Duty vs. Fiduciary Duty

There’s often confusion between the terms “fiduciary duty” and “statutory duty”. Let’s clear up some misconceptions.

A statutory duty is an obligation placed on directors of an organization or firm to follow the policies and constitution of said organization. The strategies and decisions they implement should always be aimed towards furthering the goals of the company as a whole. This is different from a fiduciary duty, which is the obligation of an advisor to their client.

3. What Standard of Care Do They Follow?

The best fiduciary financial advisor will follow a fiduciary standard of care. This means that they will make your interests their own and act on your behalf to make the best decisions possible and protect your assets as best as they can. While non-fiduciary financial advisors provide similar services, they likely won’t follow the same standard of care.

Typically, a suitability standard of care can be found with most non-fiduciary advisors. This does not hold them legally responsible for anything. They still want to give you the best investment advice, but there is no legal obligation to implement this or avoid conflicts of interest.

What Does a Fiduciary Financial Advisor Do?

The services you get from a fiduciary financial advisor will differ according tothe type of advisor you hire. Each expertwill have a certain set of knowledge, skills, and experience. Because of these differences, most advisors will offer exclusive services pertaining to a niche.

However, we believe the best fiduciary financial advisor for high net-worth and ultra-high net-worth is one that can offer a comprehensive solution. As we mentioned earlier, this is where a fiduciary wealth manager is important. Their top-class expertise and unmatchable personalization areextremely valuable to affluent investors, especially when you consider the convenience they offer. Ultra-high net-worth persons can read our hardcover book, The Art Of Protecting Ultra-High Net Worth Portfolios And Estates, Strategies For Families worth $25 Million to $500 Million,to see how they can find the best wealth managers.

The following is the list of services you can expect from a fiduciary financial advisor:

– Retirement planning

– Asset management

– Investment management

– Estate planning

– Insurance planning

– Tax management

Should I Hire a High Net Worth Fiduciary Financial Advisor or Go It Alone?

The temptation to use your own knowledge to manage your investments and finances is huge. After all, you can trust yourself to act in your best interests, and you can save money on paying fees. Plus, it could be likely that you’ve been growing and managing your wealth by yourself all your life.

However, there are quite a few cons to managing it alone. Firstly, it’s very unlikely you’ll have the same expertise, experience, and knowledge as the experts working at a wealth management firm. Not to mention the fact that these firms often work with the top professionals to provide ancillary services, too.

Other than that, the other factor you should consider is time. Think about it. Do you really want to spend hours every day planning your finances, monitoring your investments, or worrying about the next economic crash? Wouldn’t you rather be pursuing your dreams and living the lifestyle you deserve?

Even though you were able to manage your wealth before, it’s likely that your priorities are very different today. You may have a family to look after, pursuits you care about, or just a wish to live peacefully. By hiring the best fiduciary advisor, you can feel the burden lift from your shoulders.

Free from financial stress, you can start living the way you want. If you’re ready to start working with a fiduciary wealth manager, go to our website and book a chat with us.

Qualifications of a Fiduciary Financial Advisor

In order to recognize the best fiduciary financial advisor, you need to know the characteristics that set them apart. We’ve mentioned one already in this article— fiduciary duty. Though non-fiduciary advisors are also an acceptable option for some investors and circumstances, the optimal choice for affluent investors will almost always be a fiduciary advisor.

Other than that, here are some more distinct qualifications of a fiduciary financial advisor.

1. Experience

In this industry, experience is vital. Seasoned advisors have already learned from previous mistakes. They know what works and what doesn’t. This means that your investments are in steady hands when you decide to go for an experienced wealth advisor.

2. High Net-Worth and Ultra-High Net-Worth Clientele

Having experience may not be enough. The best fiduciary financial advisor for wealthy clients will have the right experience. They will have worked with affluent clientele and helped them achieve their financial goals via a sustainable strategy. This way, you can be confident in their ability to do the same for you.

3. The Right Tools

Being a financial advisor isn’t about using your ‘gut’ feeling to make investment decisions. It’s actually the opposite. Your advisor should have a wide range of components and tools available to monitor and adjust your investments to keep them on track to meet your goals.

For example, Pillar Wealth Management deploys a combination of the 1000 Scenario Portfolio Stress Test and the Efficient Frontier to continuously track and adjust your portfolio. These components allow us to compare your portfolio performance against future projections and see if it can meet your goals. Removing emotions from investments is just one of five shifts we suggest in our guide to help you make the most of your portfolio.

4. Ability to Reduce Costs and Taxes

Finally, the best fiduciary financial advisor will be able to effectively eliminate any avoidable costs or taxes from your portfolio. This is often a very neglected part of financial management, but it’s vital in making sure you can protect your wealth.

Fiduciary duty vs. suitability standard

A fiduciary financial advisor has five fiduciary duties: duty of care, confidentiality, loyalty, obedience, and accounting. The most important is the duty of loyalty, which means the advisor is obligated to act at all times in the best interests of the client, excluding the interests of any other party and those of the advisor.

The duty of care requires the advisor to act with diligence and in good faith as a competent financial professional.

Advisors or brokers that are not fiduciaries are held to the suitability standard, which means they must recommend products that are suitable for the client. A suitable product meets the client’s requirements, but it earns income for the advisor, and there may be other cheaper or better products.      

Types Of Fiduciary Relationships

• When working with a financial advisor, you want to be sure that they will always provide advice and make recommendations that are in your best interests. This means that whether or not they are a fiduciary is important. Their recommendations have a direct effect on your financial life and your ability to reach your investment goals. Your advisor’s certifications may reflect whether they are bound by a fiduciary duty, but they can provide something in writing, too.

• Guardians are legally required to always act in the best interests of their wards. Hence, they have a fiduciary duty. This is critical because a ward, who is a minor, cannot make decisions on their own.

• A corporation’s board members are required to act as fiduciaries. The board manages the company on behalf of its shareholders, who are the true owners of the company. Therefore, the shareholders expect their investment to be managed to the best of the abilities of the board.

• Lawyers, who seek justice for their clients, must do their utmost to defend their clients in difficult and often critical circumstances. So, they have a fiduciary duty toward their clients, which includes maintaining complete confidentiality.

How To Find A Fiduciary Financial Advisor

An internet search will display websites that have a search option for finding a fiduciary financial advisor, such as Zoe Financial. Some are investment firms that will help you find one of their advisors in your area.

Certified financial planners are fiduciaries, and the Certified Financial Planners Board has an advisor search tool. Registered investment advisors (RIAs) are also fiduciaries.

Some professional organizations can help you find a financial advisor—NAPFA (The National Association of Personal Financial Advisors), Garrett Planning Network, XY Planning Network, and ACP (Alliance of Comprehensive Planners).

Contact some advisors with whom you can discuss your financial situation and how they can help you meet your financial goals. Ask them if they are a fiduciary and if they act as a fiduciary in all circumstances. Find out how they’re paid—their fee structure could be fee-based, commission-based, fee-only, or a combination of these.

If an advisor claims to be a fiduciary, you should ask for a written statement—included in any agreement you have established between you—which should include a clear description of fees and how conflicts of interest are mitigated by the advisor.

Conclusion

To conclude, here are a few points to take away from this article on the best fiduciary financial advisor for wealthy clients:

• Fiduciary advisors must always put their clients’ interests above everything else.
• You can live with less stress by handing over financial management to a wealth manager rather than go at it alone.
• The optimal fiduciary advisor must have the right experience, the right tools, and the right skills to achieve your goals.

If you’re someone with $5 million to $500 million and are on the search for a fiduciary wealth manager, we may have a possible solution. Pillar Wealth Management has served numerous happy clients and turned their lives around. We could do the same for you. Book an appointment with us today.

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