By Jake A. Castillo CFP®, AIF®, Associate Wealth Advisor
Is your financial advisor really on your side? If they are acting as your fiduciary, you can know that with certainty.
Throughout my career I’ve had many interactions with prospective clients who did not understand the different roles financial advisors can play. Unfortunately, in the financial services industry, it can be quite difficult to determine the specific “hats” that financial advisors can wear.
Many so- called “financial advisors” don’t take the time to understand your personal and financial goals. They are quick to gather your assets and stick you in a cookie-cutter portfolio. Many advisors may not take the time to advise you on different areas of your financial life such as wealth protection and management, tax planning, cash flow management, and estate planning.
All these elements can have a serious impact on your financial wellbeing. If you’re seeking a professional to advise you on investing and planning, it pays to know the meaning of a fiduciary—and how working with one can make a real difference.
What Is a Fiduciary?
Simply put, a fiduciary advisor is an advisor who is legally required to place their clients’ interests above their own. Think of a fiduciary advisor as a strategic partner who will help you navigate the different complexities of your financial life.
There are substantial differences between a fiduciary financial advisor and a nonfiduciary financial advisor. Most financial advisors do not serve their clients in a fiduciary capacity. Their legal standard is that their recommendations must be “suitable” for the client—not “best.” These standards for nonfiduciary advisors are far less stringent compared to the rigorous code followed by fiduciary advisors.
In the financial services industry, it can be challenging to distinguish among the many types of roles and business models you may encounter. Many times, individuals working as traditional brokers or insurance agents will label themselves as financial advisors. In reality, they’re constrained by their firms to only sell certain products to a client to earn a commission.
What are the Benefits of Working with a Fiduciary?
A fiduciary advisor takes the time to understand your current financial situation and future financial goals. Fiduciary advisors are usually fee only, meaning that they get paid a flat fee or a percentage of assets under management (AUM). This practice helps eliminate any conflicts of interest.
How Does a Fiduciary Compare with a Certified Financial Planner?
The CERTIFIED FINANCIAL PLANNER™ (CFP®) designation is provided by the CFP® board and enforces stringent experience requirements, ethical standards, coursework, and a rigorous examination on a variety of aspects of the financial planning process. Earning the CERTIFIED FINANCIAL PLANNER™ designation has given me the tools to offer comprehensive financial planning to serve clients effectively.
Earning the designation is a testament to the rigorous experience the CFP® board requires to earn the certification.
A CFP® is obligated to abide by stringent ethical standards and must act as a fiduciary when acting as a financial advisor in an ongoing capacity. Many fiduciary financial advisors will hold the CERTIFIED FINANCIAL PLANNER™ designation. The expertise, experience, and vetting necessary to achieve this milestone pairs well with the ethical commitment that working as a fiduciary requires.
A CFP® is obligated to abide by stringent ethical standards and must act as a fiduciary when acting as a financial advisor in an ongoing capacity. Many fiduciary financial advisors will hold the CERTIFIED FINANCIAL PLANNER™ designation. The expertise, experience, and vetting necessary to achieve this milestone pairs well with the ethical commitment that working as a fiduciary requires.
How Do I Know if an Advisor is a Fiduciary?
One way to determine if an advisor is a fiduciary is to investigate their business model. For example, does the “financial advisor” work for an insurance company or broker dealer? Or a registered investment advisor? Only the latter of the three could qualify as a fiduciary.
Another way to determine an advisor’s status is to review how they are compensated. For example, some advisors will earn commissions by selling an annuity, life insurance, or a particular investment fund. These have the potential to create a conflict of interest because the advisor might recommend a product that earns a higher commission—even though there may be a similar product that earns them less compensation.
As I mentioned earlier, if the financial advisor has earned the CERTIFIED FINANCIAL PLANNER™ designation, this is also a good indicator that they are likely acting in a fiduciary capacity—but it is still important to confirm the business model that the advisor is practicing.
Should I Work With a Financial Advisor or a Financial Advisor?
It can be tempting for many a financial professional to steer clients towards investments that will earn them higher compensation, such as a large commission. Why not take that off the table? That’s why we believe it’s in your best interests to work with a fiduciary financial advisor.
Planning for your future financial security is critical. If you’re looking to start working with an advisor, a fiduciary advisor who is also a CERTIFIED FINANCIAL PLANNER™ deserves serious consideration. Anyone working in the financial services industry can label themselves as a “Financial Planner” or “Financial Advisor,” but earning the CERTIFIED FINANCIAL PLANNER™ designation gives the expertise and foundational knowledge of financial planning.
Consult a Certified Fiduciary Today with Halbert Hargrove
At Halbert Hargrove, our clients’ interests always come first. As fiduciary financial advisors, we refuse to sell proprietary products and fearlessly dedicate ourselves to providing objective advice.
As your life evolves, so should your financial strategies. We balance investment risk and reward for your life circumstances as each new challenge, aspiration and opportunity arises. Our aim is to help you feel confident and supported in your decisions, knowing that you have an experienced fiduciary and thoughtful financial partner by your side.
Disclaimer:
Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com. This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant.
