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Posted on October 1, 2019

What Is A Fiduciary And Why Is It Important?

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Published by Mark Ring, Wealth Advisor

Have you ever heard of the term fiduciary? It’s one of the best words you can hear when searching for a financial advisor. But what does it mean? And why is it so important? Many people aren’t aware of the benefits of a fiduciary and how it may affect the way your money is managed.  

Today we’ll talk about what it means to be a fiduciary and how you can make sure your financial advisor is one.

What Is A Fiduciary? 

Fiduciary financial advisors are legally and ethically required to act in their clients’ best interests. They have a duty to be loyal to their clients and ensure they disclose any potential conflicts of interest that may come up. Any advice they give is based on the client’s financial situation and investment goals—not the advisor’s ability to make a profit. 

A fiduciary advisor can’t, for example, suggest you buy a security that will provide a kickback for them but not benefit you. They aren’t out to make a commission or sale. Their #1 priority is giving you advice that helps you reach your financial goals. 

Choosing a fiduciary financial advisor means that you should not be misled or mistreated. It means you have a professional in your corner rooting you on as you journey toward financial security.

3 Questions To Ask Your Next Financial Advisor

Before you hire your next financial advisor, ask them these three questions. 

1. Are you a fiduciary advisor? 

Let’s start with the most obvious question. Yes, you can ask an advisor if they’re a fiduciary! A fiduciary advisor should have proof they’ve signed a Fiduciary Oath, which declares an advisor’s commitment to a fiduciary code of ethics. (1) They should also provide you with a copy of their Form ADV Part 2, which discloses their obligations as a fiduciary advisor. (2)

2. How do you get paid? 

Financial advisors get paid all types of ways—from flat hourly rates down to a combination of fees and commissions. There’s nothing inherently wrong with any of these payment methods, but many fiduciary advisors are fee-only. This removes any conflicts of interest that may crop up if they were to receive a commission from your investments.

3. What’s your financial planning process like? 

A fiduciary advisor asks questions and gets to know your financial goals before they ever make investment recommendations. They know that a good look at your entire financial picture is paramount to your long-term success. So ask your advisor to describe their financial planning process. If it doesn’t start with you, keep looking.  

Help Secure Your Financial Future Today

Think of that first meeting with a financial advisor as a first date. It’s important to ask all the right questions to see if the relationship is worth pursuing. A fiduciary financial advisor should always be transparent, communicative, and willing to share their process and philosophy. 

At Jacob William Advisory, we pride ourselves on being fiduciaries. Whether you’re looking for an advisor for the first time or have been burned by bad financial advice in the past, we’re here to help you create a solid plan that helps you pursue your goals. To get started, contact our office by calling 410-821-6724 or emailing info@jacobwilliam.com

About Mark

Mark Ring is the co-founder and Managing Partner of Jacob William Advisory, a wealth management firm whose sole mission is to service their clients’ needs beyond their expectations. Mark has over 30 years of industry experience and for the past decade, he has been committed to building Jacob William Advisory into one of the foremost wealth advisory firms. Mark graduated from the University of Maryland with a Bachelor of Science in Economics and spends his time outside of the office with his wife, Nancy, and his two wonderful children. He gives his time to numerous nonprofit organizations related to education and the arts, often serving as a board member. He enjoys playing tennis, golf, bicycling, cooking, and traveling. Learn more about Mark by connecting with him on LinkedIn.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor.

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(1) http://www.thefiduciarystandard.org/fiduciary-oath/

(2) https://www.sec.gov/about/forms/formadv-part2.pdf