Looking for a financial advisor or a financial planner? An important distinction to learn is whether or not the advisor is a fiduciary.
A fiduciary financial adviser has a legal obligation to act in the clients’ best interest, to disclose any conflicts of interest that may arise, and to avoid using clients’ assets in any way that benefits itself.
In contrast, the standard that is expected of broker-dealers, stockbrokers, and insurance agents is simply the fulfillment of a suitability obligation. This means that, while they must provide suitable recommendations to their clients, they don’t have to put their clients’ interests before their own. An investment adviser who is not a fiduciary is able to make investment decisions that may be in his or her own favor, such as choosing an investment vehicle for the client that will provide the adviser with higher commissions.
However, those decisions may not be in the best interest of their clients, who, for example, could pay a higher commission or other charge for the investment product.
Finding out whether your prospective financial advisor is a fiduciary or not is an important part of the selection process, but determining which advisors are fiduciaries and which are not is not always clear. Here we offer a few ways to help find an advisor who is also a fiduciary.
How to Find a Fiduciary Financial Advisor
To find a fiduciary financial advisor, we recommend you ask friends and colleagues for recommendations, consult trusted advisors, or use online sources to find fiduciary financial advisors near you. We elaborate on each of these methods below.
Ask a Friend, Family Member, or Colleague
We recommend that your search for a financial adviser begin with people in your life who you trust. You may or may not get recommendations for a fiduciary adviser, but you will get honest feedback from someone whose opinion you value. Be sure to ask any advisers who are referred to you if they are, in fact, fiduciaries.
Check Online Sources
Advisory firms who are Registered Investment Advisers (RIAs) are regulated by an agency of the US government, the Securities and Exchange Commission (SEC). The SEC has strict rules and regulations governing advisers, and by law RIAs must be fiduciaries and are required to act only in the best interests of their clients. You can use a few online databases to find firms who are registered as RIAs.
- NAPFA.org (The National Association of Personal Financial Advisors)
NAPFA.org provides a database of financial advisers who have a fee-only structure and who are fiduciaries. Learn more about why a fee-only structure is important in our article, What is a Fee-Only Financial Planner? / Fee-Only vs Fee-Based Financial Planning. To search the NAPFA database visit napfa.org - SEC (U.S. Securities and Exchange Commission) Adviser Database You can also research potential advisers through the SEC’s adviser search tool. If the adviser is a registered investment adviser, they are fiduciaries and will have a Form ADV Part 2A filing available online. This document is a plain-English brochure of the firm’s or individual adviser’s services and compensation methods.
About Modera Financial Planners
We are proudly a fee-only, independently-owned financial planning firm that acts as a fiduciary for our clients. We have built our organization to put our customers’ interests first, as evidenced by our fee-only fee structure and fiduciary responsibility.
If you’re interested in our services, please contact us. If you would like to learn more about financial planning, wealth management, and finding a financial advisor, please visit other areas of our education section.
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