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What is a Fiduciary Financial Advisor?

One day you wake up and realize that it’s time to get your financial affairs in order.

You do a quick Google search for ‘Financial Advisor near me’.

What you get is a load of financial advisors who may or may not have your best interests at heart. In fact, they may not even request payment directly from you, providing the illusion of trust. But their income has to come from somewhere – and it comes in the form of sales commissions from the products they sell, such as mutual funds and bonds. They are salespeople, first and foremost.
The fact of the matter is that many financial advisors don’t really care if you make money or not. They are only worried about getting sales commissions, regardless of whether the product is best suited to your needs. Just like a robo-advisor, they don’t take your personal situation into account, such as putting kids through college, travel plans, or a career change.

Let’s take a real-world example

Let’s imagine that you have $10,000 to invest. Your financial manager advises you to put it into a mutual fund that subsequently performs poorly over the next few years. But you need that money to help put your kid through college – you were hoping to get a thousand extra dollars out of your investment to help pay for college room and board. Now, you’re forced to keep your money in a poorly performing mutual fund. If you sell, you lock in losses. Unfortunately, you or your child will have to take out a college loan with a high-interest rate because your advisor wanted to make a quick buck.
But it’s not even that the mutual fund would be a bad choice in the long run – it will probably become a good investment in 10 or 20 years. But for you, it’s already too late. And your Financial Advisor went home with a pretty penny the same day of the sale!
So here’s a little tip: search for ‘Fiduciary Financial Advisor‘ instead – you’ll get entirely different results and you can start your research from there.

What does fiduciary mean?

A fiduciary, simply put, means someone who acts in the best interest of someone else, and not in their own best interests.

So who is a Fiduciary Financial Advisor?

A Fiduciary Financial Advisor is a financial advisor who has taken an oath to always put their clients’ interests ahead of their own, much in the same way a doctor or attorney takes an oath. And this isn’t just a few words and a handshake – it’s a legal obligation upheld in the court of law. Just like a doctor can’t prescribe medication if it’s not in the best interests of a patient, a fiduciary can’t recommend an investment vehicle to a client if it’s not in that client’s best interest or causes a conflict of interest.

Let’s return to our college-money example above.

A Fiduciary Financial Advisor would have taken everything into account and asked many questions as to when and for what reason you need your Return on Investment. In this case, considering you need college money in a few years, a Fiduciary would perhaps choose an investment vehicle with a much shorter investment horizon and a guaranteed high-yield rate of return – a CD, for example. A $10,000 investment into a 3-year CD with an interest rate of 2.5% will land you an extra $768, the perfect amount for a brand new set of textbooks.

It’s very important that you specifically seek out the services of a Fiduciary.

They’re easy to identify as they market themselves as Fiduciary Advisors. To be sure, ask for their Form ADV Part II. Of course, we here at Walters Strategic Advisors are Fiduciary Financial Advisors. To get to know us better, check out our introductory blog post. Or just shoot us a message to begin a relationship you know you can trust!

About the Author

  • Douglas Walters

    Doug is the Managing Partner of Walters Strategic Partners, LLC, a licensed Registered Investment Advisory firm. Doug is a licensed Certified Public Accountant (CPA) in the state of Florida and holds a Series 65 Investment Advisor Representative securities license. He is also a member of the AICPA. With over 28 years of experience as a CPA, he believes investment decisions should be based on decades of peer-reviewed research rather than relying on the latest “hot tip” from media outlets. This empirical evidence puts the science of investing to work for his clients.

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