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The Highest Standard: Fiduciary Financial Advisor

The Highest Standard: Fiduciary Financial Advisor

April 04, 2024

When you’re choosing a financial advisor or private wealth manager, you want someone who’s reliable, available and, most importantly, ethical. That’s where having a fiduciary financial advisor comes in.

While lawyers and doctors are legally obligated to act in your best interests, financial advisors aren’t always held to the same standard - unless they’re a fiduciary.

Fiduciary financial advisors maintain the highest standards for their clients. And if you’re a high-net-worth client, you want to ensure your assets are protected - and that your advisor is always doing what’s best for you. Read below to learn what a fiduciary financial advisor is, where to find one and why you should use one. You can also reach out to Inspire Financial Planning to learn about their independent fiduciary investment services in Wilmington, Raleigh, Charlotte, Greensboro, and Asheville, NC. 

A fiduciary financial advisor refers to a financial advisor who has a responsibility and duty to only recommend products, investments and advice that is in their client’s best interest, not what will help the advisor rake in more in commissions or fees. 

This is the highest standard possible for wealth management and financial planning customers. When you have an initial discovery call with a financial advisor, you should ask them directly, “Are you a fiduciary financial advisor?” or alternatively “Do you have a fiduciary duty to your clients?” 

If they don’t answer with a straightforward and unqualified “yes,” then you can assume they aren’t a fiduciary financial advisor.

Why you should look for fiduciary wealth management

Fiduciary wealth management means your assets are in safe hands - and that you’re not overpaying for management.

Without being held to a fiduciary standard, financial advisors could potentially feel free to make more frequent trades. These could result in excessive fees that would put more money in your financial advisor’s pocket, while leaving your accounts diminished.

Also, advisors might recommend funds that have higher fees when lower-fee funds are readily available. Some advisors may even recommend funds that provide a kickback directly to the advisor. As an ultra-high-net-worth client, you could lose thousands or even tens of thousands of dollars if you’re not invested in the most appropriate funds.

Fiduciary vs suitability

Financial advisors without a fiduciary duty may only maintain a suitability standard, which means any recommendations they offer you only have to be suitable. Unfortunately, a suitability standard may result in a direct conflict of interest.

If a client suspects that a financial advisor with a fiduciary standard has broken their legal promise, the advisor can be held legally liable for any suspected losses from inappropriate recommendations.

FAQs

  • Should I switch to a new financial advisor if mine isn’t a fiduciary? 

If your current wealth manager doesn’t have a fiduciary standard, it may be time to switch financial advisors. 

Think about it - would you want a doctor who doesn’t have to prescribe you the best medicine, but instead recommends a medicine from a pharmaceutical company that they have a relationship with?

  • How do I double-check my advisor’s fiduciary standard?

While Certified Financial Planners (CFPs) are always fiduciaries, the CFP® designation is not a requirement to be a fiduciary. For example, members of the National Association of Personal Financial Advisors (NAPFA) are also required to have a fiduciary responsibility. Another designation that is perhaps the most specific is the Accredited Investment Fiduciary or the AIF®The Accredited Investment Fiduciary® (AIF® ) designation is a professional certification that demonstrates an advisor as a professional investment fiduciary who has met certain training and experience requirements to earn and maintain the credential.

You can also ask a potential advisor to sign a form attesting that they are a fiduciary. Make sure to store a copy of this in a safe place.

Bottom Line

Finding a fiduciary financial advisor or wealth advisor doesn’t have to be hard. If you make it a priority, you should be able to find an advisor you like and respect and who also has your best interests at heart. Just make sure to ask about their fiduciary status during your introductory call so you know exactly where they stand.


Zina Kumock is a freelance personal finance writer. She has written for U.S. News and World Report, Newsweek, Forbes, and Business Insider. You can learn more about Zina here.