Why “Fiduciary” is critical when Choosing a Financial Advisor

When choosing a financial advisor you want someone who has only your best interest in mind. Often times non-fiduciaries may steer you towards risky or sub-par investments that pay them a bigger commission.

Fiduciary Financial Advisors Do Their Research

Fiduciaries must make sure their recommendations are based on accurate and complete information. This means that they are required to thoroughly analyze your accounts, goals and circumstances before recommending that you buy an investment or use a particular savings vehicle. Fiduciaries must then monitor their recommendation to make sure that it remains appropriate for their client on an ongoing basis.

They Are Clear About Their Fees

Advisors who follow fiduciary requirements must be upfront about all of the fees they charge and commissions they receive. This kind of transparency is critical because fees, expenses, and commissions can be major detractors from your portfolio’s long-term performance.

Even a seemingly small annual fee of 0.75% can cost investors tens of thousands of dollars in lost investment growth over a 20-year period, according to the Securities & Exchange Commission. 

Fortunately, the fiduciary standard discourages advisors from offering investment recommendations that cause clients to pay higher fees and commissions. Therefore, working with a fiduciary can help keep your costs down and your savings up. 

Fiduciaries Must Avoid Conflicts of Interest

Fiduciary advisors must disclose any instances in which they are compensated for making a certain recommendation. In fact, under the Department of Labor’s recently enacted fiduciary rule, advisors working with retirement accounts are barred from making recommendations that represent a conflict. For example, an advisor can’t buy a stock and then try to pump up the price by buying it for their clients’ portfolios, nor could they recommend a product that resulted in higher commissions or fees for themselves.

Here at Shore Financial Planning we help you minimize fees, avoid conflicts of interest and put you at the center of any financial advice. If your current financial advisor doesn’t seem to model these behaviors, we strongly suggest you consider finding one who does.