The “F” word. Fiduciary. What is it and what does it mean? At it’s most basic level, a fiduciary means acting in the best interest of the client. It’s the golden rule. Do unto others as you would have them do unto you.
There are two duties of a fiduciary. The duty of loyalty and the duty of care. Basically, not only are you acting in the client’s best interest, but that you know the landscape of possibilities to make the most appropriate choice.
While it is important to work with a fiduciary, the term itself can be subjective. For example, an advisor who is new to the business might do what they feel is the best thing for the client, but do they have enough experience and education to be able to tell the difference? How can an advisor that sells only a proprietary product claim that product is truly the best in the market? Or an advisor who truly believes that variable annuities (which I typically don’t recommend) are the best thing for his clients? Who is to say that they aren’t acting in the best interest of the client when their conviction is strong that they are?
It's morals vs. law. “Doing the right thing” is a virtue, especially when money comes into play. Incentives become misaligned and things get rationalized easily.
So here are some things that you can do as a consumer:
-Interview multiple financial advisors
-Work with someone that was referred by a trusted person
-Get educated. Have the advisor explain the options and choose what you feel is best.
-Go with your gut. If you feel like you are getting sold something, GET OUT. Your relationship with an advisor is consensual. You should never feel like you are pressured into a decision.
We approach every recommendation with the “what would you do for your parents or yourself” mentality and, as a Certified Financial Planner, are a fiduciary. But it comes back to the Golden Rule, and we hold true to it.