Hiring a Fiduciary

When you’re deciding on a financial advisor to guide you on decisions regarding your financial life (taxes, retirement, investments, insurance, estate planning, and more) you want to ask the right questions. One of the most important questions is whether the advisor, and their firm, serves in a fiduciary role when providing advice. You might assume a financial advisor always has the best interests of the client at heart. That, unfortunately, is not always true.

What is a Fiduciary?

When a person or organization acts as a fiduciary, they are legally bound to act in the best interests of the party to whom they are providing advice. If there are conflicts, those conflicts need to be disclosed. Fee-based investment advisors, held to a fiduciary responsibility, are regulated either by the State in which they operate, or by the Securities and Exchange Commission (SEC). A fiduciary has the duty of “loyalty and care,” which is another way of stating that the client’s interests are always put above their own.

Broker-dealers, on the other hand, operate differently. They are sales representatives, and while they must make “suitable” recommendations to clients, their primary loyalty is to the brokerage firm for which they work, not necessarily the client. Often, brokers and their representatives are paid by commission, which may be in conjunction with additional fees. While there are plenty of honest broker-dealers in the business, there are also those who will direct clients toward high commission offerings rather than those charging no commission. For example, a broker-dealer could sell a client a mutual fund, which charges a commission, while a similar mutual fund without a commission may be available. An advisor acting as a fiduciary cannot do that. The Council of Economic Advisors estimated $17 billion annually is lost by investors overpaying for such investment products.

Asking the Fiduciary Question

When interviewing a financial advisor or wealth manager, inquiring whether they are a fiduciary should be one of the initial questions. If the advisor responds affirmatively, ask them to put it in writing. You should also ask how they are paid for each of their services as the answer will help you learn whether or not they are a fiduciary. In many cases, you are entrusting your life savings to this advisor and as such we believe it is vitally important to ensure they are always acting in your best interest.

Fiduciary Kansas City 

At Buttonwood Financial Group, we proudly serve our clients in a fiduciary capacity. When it comes to your financial life, generally investment products don't provide the solution; coordinated strategy does. Our Team develops and implements real strategy designed to protect and grow wealth, leaving our clients time to focus on family, career, and life. Contact us today to learn more about our Family CFO services and our fiduciary duty. 

This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.