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Is My Advisor Working in My Best Interest?


Background

Most people have no idea what a fiduciary is or if their advisor is a fiduciary.  However, nearly every person I speak with wants their advisor working in their best interest.

The Department of Labor released a great guide for investors called “How to Tell Whether Your Adviser is Working in Your Best Interest: A Fiduciary Guide for Individual Consumers”

You can read their guide in the link below but I am going to cover some of the highlights.

http://www.dol.gov/ebsa/newsroom/fsfiduciaryoutreachconsumers.html

 “What is a fiduciary?”

According to the DOL:

The adviser is working solely in your best interest, and is not conflicted by compensation arrangements that may encourage him to steer you into investments that are more profitable for him.”

The questions the DOL recommends are relatively straightforward:

1)    “Do You Consider Yourself a Fiduciary”?  The DOL feels this is an important question for investors to know.  They also feel it’s important to ask the advisor if they are not a fiduciary, will they commit in writing to disclose any conflicts of interests that could interfere with the advisor acting solely on the investors behalf.

2)    “How are you compensated?” Is the advisor earning fees for advice or commissions from product sales?  The DOL then gets to the heart of the matter which is if the advisor has the potential to earn higher compensation depending on the investment selected.  The DOL then has the recommendation that if an advisor makes a different level of compensation that all compensation be disclosed in writing by the advisor to the investor.  There are some advisors that are “fee-only” in which neither them nor their firm they work for, earn any commissions and are compensated only by the fee paid by the client.

3)    “Are you a licensed or registered investment adviser?” – Under this question, it asks where the advisor is registered with and any professional designations he or she may have.  Further, it covers how much experience the adviser has and if there have been any disciplinary actions against the advisor.  Brightscope’s advisor pages cover nearly all of these areas and provide a great reference to verify the information. 

https://investwithsteve.com/financial_advisor_insights/articles/

 

What this Means to You

 

1)      Ask the questions, are you a fiduciary, how are you compensated, are you a licensed or registered investment advisor?

2)      Trust but verify your potential advisors using tools such as Brighscope’s advisor search.

3)      Find a great match for an advisor.  If you are uncomfortable with anything in your search, keep looking until you find the advisor that works best for you and is looking out for your best interests.

 

I setup my business to be a fee-only advisory service that operates as your fiduciary because its helps minimizes conflicts of interests and helps my clients know that my recommendations are made with their best interests in mind.

For more articles and information from me, please check out my blog/articles at https://investwithsteve.com/financial_advisor_insights/articles/

 

 

Information in this article is for educational purposes and not intended to be a recommendation.  As a reminder, past results do not guarantee future results.

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