Are your looking for fiduciary advisors? Financial advisors love talking about risk management, asset allocation, investment management, picking the best stocks, etc. But, do they actually practice all of those concepts? And more importantly, do they do so holistically? And what exactly do fiduciary advisors for high net worth individuals do?
With the prevalence of fee-based models, advisors tend to be motivated by commissions that they may earn on the recommendation of certain investment products. Or, perhaps, they are so specialized in one area of financial advisory, that they might not see the broader picture.
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They may be so focused on assets under management and rate of return, that their investment decisions can have big cost implications for the client.
Or worse, they may be a large listed entity and all they care about is maximizing the firm’s profits and creating “shareholder value”.
Not every financial advisor works on a fee-only model that Pillar Wealth Management does for individuals with $5 million to $500 million in investible assets.
But you might wonder, if you are paying the financial advisor a fee, then aren’t they supposed to make decisions that serve your best interests? Shouldn’t there be alignment between the advisor’s work and your goals, interests, and requirements?
And if you are a high net worth or an ultra-high net worth individual, then the stakes are much higher for you. A wrong decision can potentially cost you millions of dollars.
Therefore, there is a need for a financial advisor’s behavior to be ethically and legally bound to the best interests of the client. And the word for that concept is fiduciary.
In this article, we will discuss what is a fiduciary, what is fiduciary duty, how to know if a financial advisor is a fiduciary, and why working with a Pillar Wealth Management advisor is important for you.
What Is a Fiduciary?
In wealth management, acting as a fiduciary generally means acting on behalf of the client to manage his/her assets in good faith and trust. The fiduciary has to manage the assets for the benefit of the client rather than their own. There can be no personal benefit for the fiduciary from the management of a client’s assets.
As explained in this book on choosing the best financial advisor for those with $5 million to $500 million in liquid assets, you will realize how choosing to work with fiduciary advisors for high net worth individuals can save high net worth individuals millions of dollars over the course of retirement.
A good example of a committed fiduciary is Pillar Wealth Management, a wealth management firm that specializes in portfolios from $5 million to $500 million.
An experienced advisor who is also a fiduciary will advise you on multiple aspects of a seemingly simple decision. For example, if your real estate makes up an unusually large chunk of your total liquid net worth, then the fiduciary will work out a plan for asset diversification.
It means that the fiduciary will figure out which property’s sale you should prioritize, how you can minimize taxes when you do the deal, and where the windfall should be re-invested. If you have kids and a family, then setting up a living trust could also be recommended.
As you can see, multiple areas are covered. First is concentration risk (having too much wealth into one asset class), asset allocation and investment management (where to invest the windfall), tax planning, and estate planning.
As a fiduciary, the wealth advisor has to act in the best interest of the client wherever there is a need to do so. It requires having a broad perspective that takes into account the long-term goals and well being of the client.
You can schedule your free consultation with Pillar Wealth Management to know how it approaches wealth management for high net worth individuals from a fiduciary perspective.
An investment advisor who has the capacity to act as a fiduciary is registered with the state regulator or the SEC. In order to maintain this registration, the fiduciary has to always act in the best interest of the client. The fiduciary has to also inform the client whenever there is any potential conflict of interest.
This duty is something that is required by law. So, when someone claims that they will act as a fiduciary, it is serious business. Therefore, it is a good idea to verify the fiduciary registration of that advisor to be certain about the claim.
What Is Fiduciary Duty?
Now that you know what is a fiduciary, it is natural to ask what is fiduciary duty? A fiduciary duty is a responsibility or obligation to act in the best interests of a party.
A fiduciary duty generally exists when a client relies on the expertise, advice, special trust, or confidence of the person or entity acting as the fiduciary.
A fiduciary is expected to exercise his/her discretion to always act in the best interest of his/her client.
In fact, once a person or entity agrees to act as a fiduciary, the law forbids that person or entity to act in any way that is deemed to be going against the interests of the client. This also includes the fiduciary acting for only his/her own benefit.
Pillar Wealth Management is one of those fiduciary advisors for high net worth individuals that places its fiduciary duty at the top of its priorities.
It has even turned down high net worth clients who have made special requests that would make the firm go against certain principles of being a fiduciary.
If you are someone with $10 million or more in liquid assets, then download this complimentary guide on financial advisors. You can read how committed Pillar Wealth Management is with its fiduciary duties.
This kind of commitment is not common within the industry. In fact, you might be surprised at how little some of the large branded discount brokers and banks care about the various commitments involved in acting as a fiduciary.
Carrying out fiduciary duties also means taking some tough decisions. Imagine that you worked at a company for many years and were rewarded stock options over that time. Your stock holding increased in number until they end up accounting for a, say, 70% of your investible assets.
An independent fiduciary will advise you to do something that may sound odd to you. The fiduciary will point out that more than 70% of your wealth in one company’s stock is like putting most of your eggs in one basket.
It is perfectly logical that you may be emotionally attached to the stock. After all, it is the company where you gave it your all for multiple years. Perhaps, you have better insights (than the average investor) about where the company is headed in the future.
So, why would you ever think about selling some of your holdings? But that is exactly what the fiduciary will advise you. It is a tough decision, but ultimately in your best interests.
What if a new startup or a new technology disrupts the industry in which your ex-company operates? What is a pandemic breaks out or a financial crisis decimates the core business model? If the stock crashes by 50%, you lose a significant chunk of your net worth in a flash.
And guess what, it is also our fiduciary duty to advise you (or refer you to a CPA if we aren’t qualified) on how to minimize the taxes as you sell a part of your holding.
If you want someone to give you unbiased, sometimes tough but correct advice, then get in touch with Hutch or Chris at Pillar Wealth Management. As a fee-only fiduciary, they work towards your best interests.
How to Know If a Financial Advisor Is a Fiduciary
Once you know the importance of an advisor acting as a fiduciary and what fiduciary duties are, you probably want to know one thing – How to know if a financial advisor is a fiduciary?
After all, there are so many financial advisors just in your area. If you want to find fiduciary advisors for high net worth individuals, then there are a few ways in which you can find one.
Firstly, you can search online to find financial advisors in your area. Once you find a few reputed options, you can visit their website and check if they mention anything about being a fiduciary.
Check out this authoritative guide: The Ultimate Guide to Choosing the Best Financial Advisor: For Investors With $5 Million to $500 Million in Liquid Assets to know more about how you can work with a financial advisor who is a fiduciary. If you do not find any specific information, then you can simply email them or ask them the question when you meet them.
You can also ask the financial advisor about case studies or specific examples of how he/she advised high net worth individuals. You want to watch out for decisions that were in the interest of the client.
You also want to spot instances in which the advisor went beyond the specific decision at hand and advised the client on other seemingly unrelated aspects simple because it was in the long-term interest of the client.
Another intuitive way of finding out if financial advisors take their fiduciary status seriously is to ask them for the reasons that they turn down clients.
Some advisors turn away business because the clients won’t take on-board specific pieces of advice recommended by the advisor. Such client actions are deemed to be interfering with the advisor’s fiduciary commitment.
If that is their thinking, then you know that the advisor is serious about their fiduciary duties, even at the cost of losing business.
You can also discuss the topic of fiduciary advisors by scheduling a chat with Hutch Ashoo from Pillar Wealth Management. He has acted as a fiduciary for multiple ultra-high net worth and high net worth individuals and has multiple examples to share.
Why Working With a Pillar Wealth Management Fiduciary Advisors Is Important For You
At Pillar Wealth Management, we obsess about one thing – your financial serenity. We want you to sleep peacefully at night and achieve all your financial goals during the day.
In order to help you achieve financial serenity for the rest of your lives, we make sure that we listen to you and understand what motivates you.
Pillar Wealth Management is among the quality-focused fiduciary advisors for high net worth individuals. We do not take as many clients as possible to maximize our fees. In fact, we only signed up 17 clients last year.
What we make sure is that we go in-depth into every aspect of our clients’ financial lives and then recommend decisions or actions which are in their best interests. In fact, we encourage you to start a conversation and get to know how we exclusivity helps us cater to the needs of high net worth and ultra-high net worth clients.
Take, for example, something like investment management. We don’t simply recommend investments that we think will earn a market-beating rate of return.
Rather, we look at every investment transaction holistically and focus on the net gain that our clients get after accounting for investment costs. Check this book on improving portfolio performance for investors with $5 million to $500 million in investible assets to know more about our process.
You will understand that we have adopted a unique process because we are a fiduciary. We do what is best for our clients from every possible angle.
We hope we have answered the question of why working with a Pillar Wealth Management advisor is important for you.
Hutch Ashoo and Christopher Snyder are the expert founders of independent, fee-only, and fiduciary wealth management firm Pillar Wealth Management.
If you would like to speak with them or simply ask any questions about how custom and trusted wealth management advice is offered to high net worth individuals with $5 million to $500 million in investible assets, then feel free to start a conversation.
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