Imagine a world where every professional had to act in your best interest. Wouldn’t that be nice?
That’s what it means to be a fiduciary financial advisor.
In the world of wealth management, a fiduciary advisor is someone who is a registered and certified investment advisor and is mandated to act in their clients’ best interest at all times. Being a fiduciary isn’t something you can turn on and off whenever you want. Advisors are required to file Form ADV to register with both state and federal authorities in order to become fiduciaries. This form describes the advisor’s business in detail—including information about ownership, clients, employees, business practices, affiliations, and any potential disciplinary actions taken against the firm. Fiduciaries also must disclose all fees and conflicts of interest in a brochure that would be given to potential clients.
Very simply, fiduciaries are required to put their clients’ interests before their own.
Fiduciaries have a number of legal responsibilities. For starters, they have to provide their clients with a full and fair disclosure about all the facts of the relationship. They also are required to eliminate all conflicts of interest. In the event that they can’t eliminate a conflict of interest, they need to disclose it to their clients.
What’s more, fiduciaries are bound to a duty of loyalty. They need to communicate information that supports the decisions they make in order to meet the standards they’re held to. As mentioned above, they also have to file Form ADV with the SEC to provide transparency to their operations (find out whether an advisor has filed Form ADV here). Through these disclosures, clients will be able to see whether a firm is fee-only or fee-based, whether advisors receive commissions, and what kind of residual revenue they might earn, if any.
No, just because an advisor is a fiduciary doesn’t mean they are fee-only. It only means that they have to disclose the fees that they charge. You could be paying a fee and commissions for advice. Even broker-dealers, historically only judged on a suitability standard, now have to advise in your best interest and disclose where they charge you fees. This can result in conflicted advice, which the White House suggests U.S. investors lose roughly $17 billion each year taking conflicted advice.
Make sure to evaluate the fees of your advisor, even if they say they have to advise in your best interest.
As you begin looking for an advisor who works best for your specific situation, you first need to understand how they get paid. Do they have any conflicts of interest? If so, how will that affect the value of their advice?
You’ll also want to consider the advisor’s knowledge level. Are they an expert? Do they have a wide breadth of knowledge on multiple topics (e.g., insurance, investments, Social Security, and annuities)?
Finally, you’ll want to find out whether the firm is subject to SEC violations or lawsuits.
Since the decision of which financial manager to work with is an incredibly important one, none of this information should be withheld.
At EP Wealth, our fiduciary financial advisors believe that trust is a necessity for any client-advisor relationship to be successful. That’s why we only charge a fee for our advice, and not for commissions on products. We work hard every single day to make sure we are meeting our fiduciary duties, operating under the expectations of our regulatory and legal mandates, and delivering on our obligations to clients.
Since opening our doors in 2004, we’ve stuck to our principles. As of September 30, 2019, we had more than $5.9 billion in assets under management— and we’ve never received a single blemish on our record, something we pride ourselves on. This, of course, doesn’t imply that we are perfect. But it does imply that we have a culture of compliance that we work hard to maintain.
To learn more about how EP Wealth’s fiduciary financial advisors can help your financial future, schedule a consultation today.
The EP Wealth Advisors financial planning process starts with the relationship between you and your financial advisor. How do you value a financial coach? Developing a partnership that ensures we understand your goals lets us help you prioritize and organize your financial decisions—so you can achieve peace of mind and live your life.
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