By Jonathan Harner, CFP®
When you’re thinking about getting financial guidance, the idea of consulting a financial advisor may be the first thing that comes to mind. However, it’s important to understand that many financial advisors vary in how they operate.
Surprisingly, not all financial advisors are legally obligated to prioritize your best interests. Some may recommend financial products solely because they earn higher commissions, rather than considering what’s truly ideal for you.
The good news is that when you specifically seek out fiduciary financial advisors, you’re ensuring a higher level of care and commitment to your financial well-being. Read on to learn what this term means and how it can have an impact on your financial picture.
What Do the Different Titles Mean?
If you’ve ever researched financial advisors, you may have noticed there are many different types of advisors from which to choose. Some of the most common types of financial advisors are brokers, fee-only fiduciaries, and independent financial advisors. It’s important to know the standards each type of advisor is held to as you’re deciding who to hire.
Here’s the breakdown:
- Brokers manage your portfolio but also sell financial products such as mutual funds or insurance policies, for which they earn a commission. They are not held to a fiduciary standard, so they may not always act in your best interest.
- Fee-only fiduciaries may charge a flat fee, or a percentage of your portfolio, but they are always held to a fiduciary standard, in which they are required to act in your best interest.
- Independent financial advisors have started their own financial firm. Most independent advisors act as fee-only fiduciaries, but some may act as fee-based advisors and sell additional financial products on a commission basis.
What Exactly Is a Fiduciary?
In general terms, a fiduciary is a person or entity who has the power to act for another in situations that require complete trust. When it comes to the financial industry, financial advisors who work for a Registered Investment Advisor firm must always act as a fiduciary for their clients. CERTIFIED FINANCIAL PLANNER™ professionals are also held to this duty when providing financial advice to their clients. By law, a fiduciary advisor must be completely transparent and always act in their clients’ best interest. They are also obligated to avoid and disclose any potential conflicts of interest.
Additionally, the ongoing services and investment monitoring they provide also falls under the fiduciary duty. In other words, their job doesn’t end after the initial meeting or purchase. They must regularly review your accounts to help align your investments with your best interest.
There are financial professionals whose services do not fall under the fiduciary standard. This doesn’t mean that they are out to steal your money and can never be trusted—far from it. These financial professionals who register with FINRA are held to a standard known as Regulation Best Interest (Reg BI). This is a step in the right direction, but doesn’t take things as far as the fiduciary standard for Financial Advisors who work for a Registered Investment Advisor firm that registers directly with the Securities and Exchange Commission.
What Does it Mean to Work With a Fiduciary?
There are several benefits to working with an advisor who serves in a fiduciary capacity. For one, they are open and transparent. Aside from the obvious goal of maximizing value for your money, working with a fiduciary can give you confidence that your advisor is working in your best interests rather than their own. They’ll give you their true, professional opinion (even if it’s not the answer you want to hear). This is extremely valuable when you’re facing a big life decision, whether it’s purchasing a second home, transitioning into consulting work, or retiring earlier than anticipated. Reviewing your entire financial picture, an advisor can show you the impact a decision may have on your future and how you can pursue certain goals.
By working with an advisor who holds to the fiduciary standard, you can be confident in your financial future. Clients have the power to ask questions and to demand the highest value for the service that advisors are providing. As a Registered Investment Advisor firm, we understand people’s reservations or even negative connotations toward the underlying motivations of some advisors. We want to assure you that you can trust in the fact that our relationship with you is built on integrity and putting your interests above our own.
A Holistic Approach
Independent, fiduciary advisors do so much more than just pick your stocks. Working with an experienced financial specialist can be a realistic sounding board to help provide you with a litmus test when you have questions or face a big financial decision. They actively coordinate the accumulation, distribution, and transfer of your wealth, as well as the estate, tax, and financial planning areas of your retirement plan. An advisor who looks at the big picture of your financial life can help you optimize income and mitigate taxes in retirement.
For example, this type of advisor helps you create a retirement income plan that strategizes when you take your withdrawals and what accounts you take them from first; not to mention, they also design a Social Security strategy that optimizes your benefits, manages Medicare confiscation, and addresses long-term care so you can feel confident that you’re on the right track as you pursue your long-term goals. The objective advice of an independent fiduciary advisor can make an incredible impact on your financial situation in retirement.
Is a Fiduciary That Important?
If you aim to feel confident in making the best choices for your financial future, the answer is a resounding “yes.”
At Wichita Wealth Management, our mission is to help you create a portfolio that performs at its highest level while providing tailored solutions that bring your financial goals within reach. Unlike large brokerages and wire houses, we are an independent firm that does not earn commissions or have any affiliations with specific investment strategies or products. In simple terms, we select investments based on your risk tolerance, individual circumstances, goals, and other aspects of your life, prioritizing your interests over our own.
To take the first step today, don’t hesitate to schedule an introductory phone call by contacting me at 316-722-1010 or jonathan@wichitawealth.com.
About Jonathan
Jonathan Harner is a CERTIFIED FINANCIAL PLANNER™ practitioner at Wichita Wealth Management, a fee-only, fiduciary financial advisory firm dedicated to helping their clients thoroughly prepare for retirement. Jonathan’s goal is to simplify the complex so his clients can experience confidence and peace of mind as they work toward and live out their retirement dreams. He specializes in developing and implementing tax strategies that maximize his clients’ money and builds a tax-efficient withdrawal plan for retirement. Jonathan loves finding opportunities for his clients to save money and is dedicated to continual learning and growing in his profession so he can provide solutions for his clients’ financial needs. When he’s not working, you can find Jonathan spending time with his wife, Annie, and their daughter, staying active in his church community, and participating in his two favorite (but vastly different) hobbies: CrossFit and Dungeons & Dragons. To learn more about Jonathan and how he can help you, connect with him on LinkedIn.