Do I Need a Fiduciary?

Do I Need a Fiduciary?

Fiduciary financial planners offer objective financial advice.
The names sound similar, but there are important differences between these types of financial advisors.
  • The first difference is in how they are compensated.
Fiduciary financial advisors get paid in one of three ways: an hourly rate, a fixed annual retainer or a percentage of the investment assets they manage for their clients. Fiduciary advisors specialize in financial planning, retirement planning, wealth management, tax planning, investment management, estate planning, philanthropic planning and more.
Fiduciary advisors can charge either a one-time or ongoing fee, depending on the types of services they provide. They may charge a flat fee, an hourly fee, or a fee based on a percentage of the client’s assets under management.
Fee-based advisors combine the commission-only and Fiduciary models. If they sell you a product, they will get a commission on the transaction, and they can charge you a percentage of assets to manage your portfolio. They are compensated on products such as mutual funds, annuities, life insurance, and REITs. The more transactions they do, the more they get paid.
Ordinarily, fee-based or commission-based advisors don’t have a “duty to disclose” their method of compensation, so it can confuse those who may not fully understand (or who have not been told) when their fee-based advisors are working for commissions. This potential for misunderstanding emphasizes how essential it is to know exactly how financial advisors are compensated. The various compensation methods can create a conflict of interest between what is best for the client and what is best for the advisor’s bottom line.
  • The second difference is what standard of care they follow.

Fiduciary advisors follow the Fiduciary Standard, which means they must always act in the best interest of the client. The Fiduciary Standard was established as part of the Investment Advisers Act of 1940. Fiduciary advisors can be regulated by the SEC or state securities regulators, both of which hold advisors to this standard. They are required to follow a duty of loyalty and care to their clients, disclose any conflicts of interest, get the best execution possible when investing, and analyze their recommendations thoroughly and accurately.

Fee-based advisors follow either the Fiduciary Standard, depending on the situation, or the Suitability Rule (meaning they can sell products to their customers that they believe meet the customers’ needs and objectives). They do not follow a duty of loyalty to their clients but instead are first loyal to the broker/dealer holding their license. Also, they do not have to disclose conflicts of interest with the Suitability Rule. Unfortunately, you can never be exactly sure which standard these advisors are following when they’re making recommendations. 

Be sure to ask which standard your financial advisor is following, and then determine which type of advisor is suitable for your specific needs and your goals.
Turning Point Financial follows the Fiduciary Standard.

Get In Touch With Us

Address

15720 Brixham Hill Ave. Ste 300 Charlotte, North Carolina 28277

Phone

(704) 243-4222
(704) 228-4261

Email

mark@turning-point.us

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