What Are Fiduciary Advisors and What Can They Do for You?

Since 2006, fiduciary advisors have shaken the world of financial planning and financial advice. In that year, the Pension Protection Act implemented fiduciary advisors as a new kind of financial professional. This happened amid the relief given to individuals and institutions through taxes and retirement planning.

If you haven’t worked with a fiduciary advisor in the past, it may be in your best interest to do so now. Using a fiduciary advisor has become more and more companies come to value the importance of employee financial wellbeing.

To learn more about fiduciary advisors, keep reading.

What Are Fiduciary Advisors?

Fiduciary advisors are financial professionals for employees. Usually, companies will hire fiduciary advisors to advise employees on their retirement plans and investments. With this, fiduciary advisors can help employees sort out other important financial information.

We should clarify that fiduciary advisors are not responsible for the employees’ retirement plans. Instead, they give advice about the retirement plans that employees have. In other words, they are only responsible for the advice that they give, not the plans themselves.

What Is the Fudiciary Duty?

You can’t ignore the name of a “fiduciary advisor.” The Pension Protection Act gave these financial professionals that name for a reason. They based the title on the term “fiduciary duty.”

Fiduciary duty is a legal term that represents the responsibility of an individual, company, or other entity to put the needs of others above their own needs. This means that fiduciary advisors are legally required to give advice based on what is best for their client rather than what is best for them.

If you’ve been worried about financial professionals who may push a certain product or service, you don’t have to worry anymore. Fiduciary advisors will only give advice based on what they think is best. There’s no kickback or paycheck that they’re trying to get.

They are simply giving the best financial advice that they can give. That’s the fiduciary difference.

If you believe that a fiduciary advisor has violated fudiciary duty, this is known as a breach of fiduciary duty. Because it is a legal obligation, the failure to adhere to the obligation is grounds for legal action.

You have the option to hold a fiduciary advisor accountable financially and civilly if they do not act in your best interest. Even if their actions do not cause harm, you are entitled to damages.

How Can I Tell if an Advisor Is Fiduciary?

The easiest way to find a fiduciary advisor is by looking at the National Association of Personal Financial Advisors (NAPFA). They have an online search tool that makes it easy to find fiduciary financial planners in your area. Whether you’re looking for a fidicuary advisor in New Jersey or California, their tool can help.

Another way to find only fiduciary advisors is through the United States Securities and Exchange Commission. Every individual that registers with them has to follow their fiduciary duty.

Once you’ve identified that the advisor is going to act fiduciously, you need to start asking more questions.

Are Robo-Advisors Fiduciary?

Robo-advisors are computer algorithms that programmers and financial experts developed to provide investment advice. These robotic entities are more popular with lower-income households that can’t afford a full-time financial advisor.

But, the question is, “are robo-advisors fiduciary?

Well, the United States Securities and Exchange Commission says that that are. Like human fudiciary advisors, robo-advisors are registered with the Securities and Exchange Commission.

However, there is a debate among financial professionals. The other side of the argument claims that robotic advisors cannot and will not ever be 100% fiduciary. Because robotic advisors operate via algorithm, they cannot take the client’s situation and produce an unbiased answer.

Financial advisors and programmers based robotic advisors on a list of financial obligations. This means that the robotic advisors are still biased in how they approach situations, because they only have the information that the developers programmed them with.

Why Should I Hire a Fiduciary Advisor?

Fiduciary advisors are priceless additions to any company. If you’re looking to hire a financial fiduciary, you should consider all of these benefits:

• A fiduciary advisor will provide better help than a customer service department
• There is no computer program that can compare to the expertise of a financial fiduciary
• Employers don’t have to worry about employees getting financial advice from other services
• Employees get the financial assistance and advice they need and want
• Employees have a full-time financial planner
• Fiduciary advisors gets to know the employees individually
• Fudiciary advisors have each employee’s best interest in mind

By hiring a fiduciary advisor, you’re investing in your employees and their future. The amount of good advice and helpful information that your employees can get from a financial professional is priceless.

By having a fiduciary advisor, you’re showing your employees that you care about their finances now and later. Plus, it’s a great selling point for potential employees who are looking to work with your company.

How Do I Choose a Fiduciary Advisor Near Me?

Before someone can become a fiduciary advisor, they have to go through extensive training as well as meet other criteria. The Pension Protection Act of 2006 is the document that set forth these requirements and continues to act as the regulation for these requirements.

The act states that employers should screen applicants looking to be fiduciary advisors on the criteria listed below. We suggest that you look through all of these qualifications before hiring a financial fiduciary.

Expertise and Knowledge. An employer should ensure that he’s hiring a competent financial fiduciary. To do this, he/she must review the potential advisor’s educational and professional history. 

Specializations and Other Considerations. In addition to basic schooling and professional work, an employer must look at whether or not the potential fiduciary advisor is knowledgeable in the area that the employer would like to hire him/her for. If you’re hiring a fiduciary advisor to assist with stocks, you should make sure that they know about stocks.

Included Services and Requested Services. As the employer is meeting with potential hires, he/she should make sure that he/she knows what the potential advisor offers. The employer should also clarify what services are included versus what services are extra requestable services.

Personal and Professional Affiliations. The employer should also consider what people and organizations that the individual is affiliated with. The key here is to make sure that the individual isn’t involved with any conflicts of interest.

Regulatory and Disciplinary History. The employer must evaluate whether or not the applicant has ever had any legal issues prior to applying for the position. Furthermore, they must evaluate whether or not these legal issues led to the individual having a judgment.

Previous Experience and Client Satisfaction. The employer should determine whether or not the fiduciary advisor worked successfully with clients in the past. In addition, they should decide whether or not the financial fiduciary has had enough experience working in finance.

Compensation. Finally, after considering everything that the potential hire has to offer, the employer needs to evaluate how expensive it is going to be to have that advisor. He/She has to determine whether or not the advisor is worth the money that they’re asking for.

Watch Out for the Suitability Rule

As you’re looking for a fiduciary advisor, you might find yourself coming across the suitability rule. This is not the same as the fiduciary rule.

The fiduciary rule requires financial advisors to give financial recommendations that are in the best interest of the client, while the suitability rule requires financial advisors to give financial recommendations that are suitable for the client.

“Suitable” doesn’t necessarily mean that that choice is the best choice for you.

The financial advisor may find a good-enough option for you that actually benefits him/her at the same time. If they followed a fiduciary code, they would have to give you the best option, no matter how it affects him/her.

In addition, the suitability standard doesn’t require that financial advisors share conflicts of interest. The rules surrounding conflicts of interest for those following the suitability standards are less strict than those rules for those following the fiduciary standards.

If you hire a financial planning that is following the fiduciary standards, you don’t have to worry about hidden information. This is because the fiduciary standards require that these individuals disclose any and all conflicts of interest with their clients.

Some financial professionals like investment brokers and insurance agents follow the suitability rule rather than the fiduciary duty. You should be careful to avoid those who only go by suitability standards.

Fiduciary Financial Advisors in New Jersey

After reading all of this information about fiduciary advisors, we’re sure that you’re excited to get started with the hiring process. You and your employees will benefit from a fiduciary financial advisor on your side.

If you’re looking for a fiduciary advisor in New Jersey, feel free to contact our team. We’d love to discuss your goals and how we can help you reach them.

Our independent, fee-only financial advisors have your best interest in mind. Start today with a free financial assessment.