In the news, the word “fiduciary” has been thrown around a lot in regards to financial advisors and their duties. The concept can seem confusing to people, as many assume that all advisors, whether they’re stockbrokers or financial planners, are required to act in their client’s best interest. But that’s not the reality. It’s important to understand the distinction between different types of advisors’ roles and what it means for you and your money.
What is a Fiduciary?
The primary duty of a fiduciary is to put your needs first and to provide advice and recommendations that will benefit you. Think of a fiduciary like a trustee, someone who is given and accepts the responsibility of managing assets for a someone else. This duty protects you from conflicts of interest.
For example, fiduciary duty prevents an advisor from making an investment with your money solely for a kickback commission. For those who don’t adhere to a fiduciary standard, a recommendation made by advisors only has to be “suitable.” The problem with this is that some advisors could then sell high-fee products, even if a lower-priced option was just as suitable or available, in order to receive a higher commission.
The fiduciary standard includes providing guidance that is objective, is considered beneficial to you, and fees that are clear and upfront. The fiduciary standard can give you confidence that your hard-earned money is in good hands.
How Do I Know Who is a Fiduciary?
While some advisors may toss around the term lightly, not all advisors are fiduciaries. Brokers, insurance agents, and real estate agents acting on the other party's behalf are not required to serve in a fiduciary manner. As they represent themselves or their company, they are only required to provide you with “suitable” financial products, rather than those recommended based on your individual circumstances.
Wall Street brokerage firms can sell proprietary products, so their advice may potentially still be biased. For example, annuities and other high-fee investments that provide brokers with a higher commission can still be sold into your retirement account. Additionally, while brokers must inform clients that they’re choosing to be paid commissions, if the investor neglects to read the email notification, they won’t know where their broker’s interests lie.
At The Harvey Group, we are an independent firm committed to helping you reach your goals. Our approach to investing is founded upon the highest fiduciary standards. Our independence serves as a basis to create a specific investment strategy tailored to meet your financial goals. Our advice is driven by one concern alone – the best interests of our clients.
We are dedicated to providing you with the best advice we can give without any pressure to promote a certain product. We act with undivided loyalty to you and provide complete transparency and disclosure when it comes to our compensation or investment approach.
Why Should I Work with a Fiduciary?
There are several benefits to working with an advisor who serves in a fiduciary capacity. For one, they are open and transparent. Aside from the obvious goal of maximizing value for your money, working with a fiduciary will give you confidence that your advisor is working in your best interests rather than their own.
By working with an advisor who holds to fiduciary standards, you can feel more empowered to make the best decisions for you and your finances. Clients have the power to ask questions and to demand the highest value for the service that advisors are providing. As a firm in the financial world, we understand people’s reservations or even negative connotations towards the underlying motivations of some advisors. We want to assure you that you can trust in the fact that our relationship with you is built on integrity.
Your Next Steps
It’s important to thoroughly research an advisor before choosing to work with him or her. An advisor should be open to sharing with you their business philosophy, how they choose investments, what their process looks like, any potential conflicts of interest they face, and how they’re paid.
We take pride in our transparency and objectivity. If you’re unsure about your current financial strategies, haven’t reevaluated your investments in several years, or are just interested in learning more about what it means to work with a fiduciary, we are happy to offer you a complimentary consultation. Book an appointment online or contact us by emailing [email protected] or calling (703) 549-5447.
Steve Harvey is a financial advisor with more than 34 years of industry experience. He is also the founder of The Harvey Group, an independent investment consulting firm based in Alexandria, Virginia. He works closely with middle and upper middle-class families to help them address their critical financial planning challenges, from investing with confidence to planning for retirement. Based in the Washington DC area, he works with clients throughout Virginia and Maryland. Learn more by connecting with Steve on LinkedIn or visiting www.steveharveyllc.com.