Why Working With a Fiduciary Advisor Can Provide the Best Financial Outcomes

Hiring an expert to help manage your finances is a vital decision for your future. Many financial experts have lengthy industry track records and have assisted countless clients in reaching their financial goals. 

There are multiple advisor types in the field, however, and you should be aware of the differences as you select a professional to handle your assets. A fiduciary advisor is someone with legal and ethical obligations to make decisions with your best interests in mind, often providing better outcomes.

The professional you select could influence the success of your investments and how safe your money is going forward. This guide provides an overview of the job fiduciary advisors do and explains the benefits of working with them.

What Is a Fiduciary Advisor?

Fiduciary advisors are highly regulated, fee-only financial experts who must put your economic interests first. They’re different from broker-dealers because they don’t have the same incentive to generate additional fees through commissions and product sales, which could cost you significant money and lead to bad investments. 

A broker-dealer is regulated by the Financial Industry Regulatory Authority, which has relatively low standards. A fiduciary advisor, on the other hand, must be a registered investment advisor and have Securities and Exchange Commission certification as defined by the Investment Advisers Act of 1940, making them one of the most highly regulated entities you’ll come across when investing your money.

Benefits of a Fiduciary Advisor

A fiduciary advisor offers numerous benefits to clients because of their legal obligations. Understanding how going in this direction can help you reach your financial goals is essential before you begin. Some reasons working with a fiduciary advisor can be advantageous include the following:

They Act in Your Best Interest

Perhaps the most significant benefit a fiduciary advisor provides is the obligation to act with your best interest in mind. Other advisors are only bound to a suitability standard, which means they don’t necessarily have to ignore their personal financial gain when making decisions for you. A fiduciary advisor has a legal duty to do what’s truly best for your finances, and they must disclose any potential conflicts of interest.

There’s No Commission

Fiduciary advisors don’t earn commission on the products they sell you, ensuring they’re more likely to recommend products with your best interest in mind. Other advisors can recommend products that are suitable for you but aren’t necessarily the best. The difference could be substantial over time.

A Thorough Discussion of Decisions Is Mandatory

Your fiduciary advisor must discuss all decisions with you thoroughly, providing all the relevant information and facts before completing an action. This duty ensures you understand where your money is going and how your assets are performing so you can make the best decisions for your financial future. 

Financial advisors aren’t looking to lose your money, but they aren’t obligated to put your best interests ahead of their own. Your fiduciary advisor has the legal duty to put you first, potentially creating better outcomes as you grow your assets.

Six Duties of Fiduciary Advisors

Fiduciaries have legal and ethical duties toward their clients as part of retaining their certifications. These obligations help ensure clients can trust these advisors with their money. The rules fiduciary advisors must follow include the following:

1. Duty of Care

Your fiduciary advisor must inform themselves of your financial circumstances and investments to exercise sound judgment that protects your assets. A careful examination of the situation is necessary before making any adjustments to your investments, and all choices must be made in the most sensible manner possible. 

2. Duty of Loyalty

An advisor must act in your best interest at all times, including recusing themselves from taking action when there’s a conflict of interest between your assets and their personal assets. Having an advisor who can only act if the scenario will improve your financial outcomes is incredibly valuable as you inch closer to retirement

3. Duty of Confidentiality

All your financial information must remain confidential. Your fiduciary advisor isn’t permitted to use your personal data or spoken communication to their personal benefit and must keep this information private. This duty of confidentiality is similar to a doctor-patient relationship. 

4. Duty of Prudence

A fiduciary’s duty of prudence means the advisor must make all decisions using the highest degree of caution, critical awareness, and professional skills. Your advisor must incorporate all the industry knowledge they have when making an investment or other financial decisions on your behalf to make positive outcomes more likely.  

5. Duty of Good Faith

Your fiduciary must follow the law when making any decisions on your behalf. This advisor isn’t permitted to break the law under any circumstance, even when the result would benefit you financially. 

6. Duty of Disclosure

Fiduciaries must disclose any information that could influence their ability to carry out their duties in your best interest. This rule typically applies to assets the fiduciary might hold in a personal account that conflict with assets you hold. Disclosing conflicts is only part of the obligation, though, as there’s a chance advisors might have to remove themselves from a decision or account if a conflict is significant. 

Understanding the rules of a fiduciary advisor can make your choice more manageable when you select a financial planning expert to help grow your money as you approach retirement. A fiduciary’s duties ensure your best interests are always at heart, making it less likely you’ll lose money because of a conflict of interest or other unforeseen scenarios. 

Safely Investing Your Money

Working with a broker-dealer is risky because conflicts of interest could arise, and the advisor is under no obligation to disclose them as long as they continue making suitable recommendations. A registered investment advisor, however, has a fiduciary duty to act in your best interest, addressing your unique investment needs and offering customized care.

Bogart Wealth is an independent financial planning firm that is obligated to operate according to its fiduciary duty. We’re legally required to act in your best interest and disclose all material facts, providing you with all the information you need on your assets. Contact Bogart Wealth to learn more about our fiduciary advisors.

Please remember that past performance is no guarantee of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Bogart Wealth, LLC [“Bogart Wealth”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Bogart Wealth. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Bogart Wealth is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Bogart Wealth’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.bogartwealth.com
Please Note: Bogart Wealth does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Bogart Wealth’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. 
Please Remember: If you are a Bogart Wealth client, please contact Bogart Wealth, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently.
Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

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