Is Self-reliance Standing in your Wealth’s Way? Learn to Trust a Fiduciary Advisor

You’ve worked hard to get to where you are, and self-reliance has allowed you to forge your own path. The long hours, perseverance, and independent-thinking paid off, which makes it easier to look in a mirror with some pride. But we have to give credit where it’s due, or our sense of self-reliance can work against us. Anyone who’s succeeded in business knows they didn’t do it alone.

Everyone has had help along the way. Whether it was friends, family, team members, or mentors, someone supported their growth. But before that growth could happen, something else had to happen first. They had to have trust in the person helping them.

It can be easier to have faith in ourselves over others. Especially when our hard-earned wealth is at stake. But when we do this we risk burnout long before realizing our potential. If you want your next chapter to be abundant in exploration, opportunity, and freedom, you’ll need a financial partner you can rely on. And you can start by looking for a fiduciary advisor.

What is a Fiduciary Advisor?

As you know, the best businesses and relationships are built upon trust. And when it comes to furthering your wealth, you’ll want more of the same. But how do you know whether or not you can trust a financial advisor?

Well, you can start by having a firm understanding of what it means to be a fiduciary advisor.

Fiduciaries are legally bound to keep their clients’ interests ahead of their own. That means they’re held to the highest standard in the industry when it comes to managing your investments and giving financial advice.

One way to spot a fiduciary advisor, is to see whether or not they’re a Registered Investment Advisor (RIA). This classification identifies firms (or individuals) with fiduciary obligations to their client(s). You can verify their RIA registration through the state securities administrator or the Securities and Exchange Commission (SEC).¹

View our registration here.

It’s the continuous fiduciary duties RIAs adhere to that will set your mind at ease. Let’s take a deeper look into what these duties are, and how they look in practice.

Why Trust a Fiduciary Financial Advisor?

So, fiduciary advisors are bound to your interest above their own and top-of-the-line standards. But what does this actually look like in practice? Let’s let some of the SEC’s formal interpretations of RIA duties do the talking:²

• Duty to Provide Advice In The Client’s Best Interest: This stipulates that an RIA must have a reasonable understanding of your objectives, and belief in the solutions they’re providing to solve them. This means they must take a deep look at your situation, clarify what you’re after, and make recommendations based on that information.
• Duty to Seek Best Execution: This standard revolves around maximizing value and minimizing costs for the solutions they provide you with. The RIA must consider each option along multiple performance and cost dimensions to determine what solution has the best overall qualitative execution.
• Duty to Provide Advice and Monitoring: RIAs are also responsible for advising at an interval that’s in the best interest of their clients. This will vary depending on the scope of services being provided, but is nonetheless required for all on-going relationships. With RIAs, you’ll receive regularly-scheduled, integrity-based performance reviews.
• Duty of Loyalty: This duty requires that your RIA fully discloses and provides you with sufficient information on any conflicts of interest that arise. Once all relevant information has been made transparent, you’ll then have the ability to make an informed decision on how to move forward.

You might be wondering why this isn’t the norm. Afterall, wouldn’t every advisor be required to understand your needs, find the best solution, check in with you regularly, and disclose any conflicts of interests? Well, unfortunately, that’s not always the case. Advisors who are not fiduciaries are not bound by these laws and code of ethics in the same way.

Fiduciary Duty vs. Best Interest

It can be alarming to think that not all professionals who give financial advice are legally bound to a standard of “fiduciary duty.” And until you know what to watch out for, you won’t be able to relax that self-reliance muscle. So let’s review fiduciary duty vs. what is now known as the “best interest” standard.

Many brokers aren’t held to the same standard as the fiduciary standard. Instead, they’re held to what is confusingly called “best interest.” As of June 30, 2020 the SEC’s Regulation Best Interest (Reg BI) elevated the former suitability rule for brokers; however, it is still far short of a fiduciary standard. ³

Reg BI relies on new disclosures of conflicts of interest, such as use of proprietary products for which they receive commissions or soft-dollar compensation and incentives. The legislation fails to eliminate these inherently conflicted practices. In short, these new rules still do not require brokers to put investors’ interests first.  So, while brokers will be able to state with caveats that they are acting in the “best interests” of their clients, only advisors adhering to a “fiduciary” standard are upholding the Duty to Provide Advice In The Client’s Best Interest.

Fee Only Financial Advisors

Regulation Best Interest requires that any financial professional who provides guidance for personal investments must share their Client Relationship Summary (Form CRS).  This form provides a full rundown of how your relationship works and will reveal important insights into the standard an advisor upholds. You’ll want to dig in and learn how your advisor or broker gets paid.  View our Form CRS here. 

When a firm is fee-only, it means they’re only compensated for the services they render. They receive no commissions on any products sold or trades executed, which only further establishes fiduciary trust and transparency.

When you see the word “commission” you need to also hear “sales rep.” Once incentivized compensation enters the picture, objectivity takes a serious hit. An espresso machine on Amazon would have you comparing customer reviews to seller claims. Surely your wealth deserves the same? Trust an RIA’s best-fit review over a broker’s recommendation for a proprietary product.

And in case you’re wondering, we’re fee-only.

How Can The Advisory Group Help You?

Since our inception, we’ve taken pride in being fiduciary pioneers on the behalf of our clients. We understand how much effort our clients have put into building the wealth they have. And we also understand how difficult it can be to trust, and accept guidance in how to manage and invest their wealth.

However, we’re also aware of how helpful delegation can be in securing bandwidth, free time, and financial peace of mind. The ability to count on ourselves is critical, but it can’t come at the cost of valuable collaboration. It’s easy to be wary of the financial industry, especially when it’s dealing with your life’s work. But realize going it alone can cause harm on its own. You’ll need help to build the life you want.

With our devotion to the fiduciary standard, and fee-only compensation, we make entrusting your wealth to us simple. We come to understand what our clients are trying to create for the next chapter of their lives, and recommend solutions centered around maximizing value. We do this not only because we’re legally obligated, but because we take pride in serving this way.

If you’re ready to relax a bit, and realize more freedom from your success with the help of a responsive team, let’s talk. You can get started by setting up your complimentary consultation, or calling us directly at (415) 977-1200.

References:

1. https://www.investopedia.com/terms/r/ria.asp
2. https://www.sec.gov/rules/interp/2019/ia-5248.pdf
3. https://www.sec.gov/regulation-best-interest