As you may know, there are fiduciaries in many different industries.
But the definition of “fiduciary” is not the same in every industry.
For example, a lawyer’s fiduciary duty is to treat his client with the utmost candor, rectitude, care, loyalty, and good faith—in fact, it means to treat the client as well as the lawyer would treat themselves.
But leave it to the financial services industry to use a different definition!
Being a fiduciary in the financial services industry means they will put their client’s interests before their own.
But it DOES NOT mean that the advisor will give you the best advice possible, and it DOES NOT mean they will ignore their own interests altogether.
(I don’t know about you but I like the lawyer’s version better.)
Still, a fiduciary relationship is, without a doubt, the best option available in the financial services industry.
And as long as you know what to look for, working with a fiduciary advisor can be one of the best financial moves you can make.
Here are a few tips on how to find a good fiduciary and how to minimize the potential conflicts of interest between you and the advisor.
- Ask how they're paid. Ask whether anyone besides you pays them, and where that's disclosed in their Form ADV.
- Check that they aren’t using third-party trading services. A third-party trading service can save the advisor time but add another layer of fees for you. Plus, having your advisor do the trades better aligns your interest together.
- Make sure their fee includes full-service planning and advice. Because if you are paying 0.65%-1% and all you are getting is money management and a few questions answered, then you are paying too much.
- Pay attention to what they say about taxes. Taxes can be one of your largest expenses. If they offer tax-loss harvesting as their tax plan, ask more questions: harvesting usually postpones tax rather than removing it, so it's no substitute for a broader plan. BONUS: Remember, tax planning is talking about the future, never the past.
In chapter 12 of my book, I go into depth on how to evaluate an advisor relationship and determine if you even need an advisor at all.
Click here to download that chapter for free.
We’d like to hear from you. Email us at jones@jonesfwm.com
About the author
Founder of Jones Fiduciary Wealth Management. He spent nearly two decades on the legacy side of the industry before building a fiduciary advisory firm where the tax strategy comes first and the portfolio follows. Author of UnBrainwashed Investing.
