What you need to know about fiduciaries

While the word fiduciary has been a popular buzz word in the news, like most things in the financial industry, it can be a bit confusing. By definition, a fiduciary is a person to whom property or power is entrusted for the benefit of another. You can see how this broad definition might support the confusion behind this term. There are actually stats to back-up the confusion around fiduciaries. In fact, only 1 in 5 people, understand the difference between a financial adviser who is a fiduciary and one who is not. Furthermore, 93% of Americans think financial advisers should be legally required to work in their clients’ best interest and 53% mistakenly believe that all financial advisers are legally required to do so. In other words, most people believe when sitting down with a financial adviser, that person will be looking out for your best interest.  But that’s not always the case. At this point, you may be wondering what type of adviser you have, so let’s break down the different types:

First, we have those who are registered as a broker.  Brokers sell products and have never been a fiduciary.  Now, there are some pending SEC changes that appear to require brokers to act in their client’s best interest in the near future, but it is still unclear of the final interpretation of the new rule and they will still not be called fiduciaries.

On the other end of the spectrum, there are Registered Investment Advisors or RIAs. They are always a fiduciary and have a legal obligation to act in their clients best interest at ALL times.  They are 100%, full-time fiduciaries and charge on a fee-for-service structure (that means they don’t get commissions or kickbacks).

Sometimes they are a Fiduciary based on account type but they are DUALLY registered wearing both broker and RIA hats depending on the situation. This makes it difficult for you, the client to really know what hat is being worn. This means, within the same meeting, they can be reassuring you that their advice is conflict free, but then the next minute switch hats and earn commissions from selling you products. 

So where are all of these advisers? If you look at the 310,00 financial advisers in America, of those 310,000 advisers, 90% are brokers. So that leaves us with 31,000 advisers, of those 31,000 advisers, 26,000 operate in the gray, hybrid area. Part fiduciary, part broker. That leaves only 5,000 of the nation’s 310,000 financial advisers as pure, 100%, full-time fiduciaries! That’s 1.6%!

So we’ve now covered what a fiduciary is and the confusion behind the term, now let’s get into what this means for you. Here are some steps to consider when thinking about working with an adviser.

1 – You should figure out the “type” of adviser you want to work with.

2 – Next, check out the advisers credentials and if they have the right qualifications for the job. Look for a Certified Financial Planner Professional™ or CFP® (only about 20% of advisers are CFP® Certified).

3 – You should also think beyond just investments, make sure the investment strategy and philosophy is a good fit for you; and make sure the firm has a proven track record of working with people like you.

4 – Finally, find someone you connect with. This is a journey that involves some deep conversations. You want to work with someone you know, like and trust.

As you might have guessed, we at Conrad Siegel are true fiduciaries and we’re quite proud of this. If you ever have any questions surrounding this topic or others relating to investments or financial planning – feel free to reach out to us. We’re here for you.

Immediate questions on this topic or looking to speak with a professional? We’d love to hear from you!

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All investment advisory services and fiduciary services are provided through Conrad Siegel Investment Advisors, Inc. (“CSIA”), a fee-for-service investment adviser registered with the U.S. Securities and Exchange Commission which operates in a fiduciary capacity for its clients. Investing in securities involves the potential for gains and the risk of loss and past performance may not be indicative of future results. Any testimonials do not refer, directly or indirectly, to CSIA or its investment advice, analysis or other advisory services.