Working with a financial planner can be a decision of your life as it comes with multiple risks like financial security, risk of fraud, personal interest, and more. Regardless of the risks, sometimes, your business requires more than yourself to look after the finances and money-related matters.
This is where a fiduciary financial planner comes to course. Known as professionals with expertise in finance-related matters, fiduciaries can work in the interest of your personal or corporate wealth.
Let’s dig deeper into the subject to find out more about fiduciary planners and their importance in wealth management.
What Is A Fiduciary?
A fiduciary is a finance professional with a legal degree to act in the best interest of their clients. A fiduciary financial planner is required by law to be transparent and avoid conflict of interest when dealing with money-related matters of their clients. Whether it is asset management or providing investment options, a fiduciary can assist you in personal and corporate matters.
Anyone from financial advisors to lawyers, estate executives, and real estate agents can be a fiduciary, depending on the area you need help with. They will recommend strategies that benefit your financial situation without withholding any information from you.
Two Main Duties of a Fiduciary
As a body to fully benefit its clients, a fiduciary has two main responsibilities towards you: care and loyalty.
- Care by Fiduciary
While making well-informed decisions for you, a fiduciary must review and process all the available information regarding your finances, assets, and liabilities to create a well-thought-out and constructive strategy.
- Loyalty by Fiduciary
A fiduciary displays loyalty towards his client by not disclosing their sensitive information. They must also not use the provided information in their personal interest. For instance, a fiduciary gives you a plan to sell a product but also expects some commission from you. Besides this, secrecy and maintaining security and adequate privacy when creating financial management goals.
Fiduciary Oath
A fiduciary oath is a legally binding contract, or a promise that fiduciary financial planners take to ensure their commitment towards the client. It contains the following elements:
- Working in the best interest of client.
- Complete disclosure of all material information.
- Avoiding conflict of interest.
- Maintaining the confidentiality of the client.
- Adherence to the professional code of conduct and financial ethics.
Fiduciary Planner vs. Financial Planner — Are They the Same?
Both a fiduciary planner and a financial planner might look the same to you as their niche of service is quite similar; there are a couple of differences between the lot that, once explained, can help you understand the concept better.
A fiduciary financial planner offers a range of services that are always in the best interests of their clients. They must disclose all kinds of information related to the subject and maintain a no-secret policy towards their clients. Besides this, it is also mandatory for a fiduciary to stop you from making risky decisions.
A financial planner, on the other hand, provides all kinds of financial information, but they are not required by law to withhold their interests. A financial planner can consider their interests when creating a plan for their clients, and come up with something that benefits them, the client, and even the other party.
Both a fiduciary planner and a financial planner require certification to practice their business. We can say that all fiduciaries are financial advisors but all financial planners are not fiduciaries.
Pros and Cons of a Fiduciary Financial Planner
Now that we are clear on what a fiduciary financial planner does let’s look into the pros and cons and see whether they are worth giving a shot.
Fiduciary Financial Planner Pros
- High Expertise
A fiduciary financial planner makes well-rounded decisions that cover all the circumstances related to their clients. Since making decisions that only benefit the client is quite challenging, fiduciaries often opt for high-end certification that leads to better expertise and professionalism.
- Provide a Clear Picture
Working solely for their client’s benefit, a fiduciary will provide you with a clearer picture of how good or bad things are. They will not withhold any information from you, increasing transparency and better reflection upon financial matters.
- Safe Approach
You are working with someone legally bound to give you advice that works in your favor. If that isn’t safe decision-making, what is?
Cons of Fiduciary Financial Planner
Although an ideal way to manage finances, there are some limitations to working with a fiduciary financial planner, there are some limitations to the process.
- Limited Investment Options
There might be a lot of opportunities out there, but realistically, not everything is bound to work in your favor. So, the chances of obtaining that ideal financial situation under the guidance of a fiduciary advisor can be limited.
- Revealing Everything
For a fiduciary to make informed decisions, you are required to give them a detailed picture of your assets, liabilities and capital. Despite the requirement, some people might not be comfortable in giving away everything about their personal and business wealth.
Choosing the Right Fiduciary Financial Planner
A fiduciary financial planner can bring significant change in your business. However, the thought of picking someone from the lot can be overwhelming. Here are a few tips for choosing the right fiduciary financial planner.
- Ask your friends, family, and colleagues to provide you with options. You can also use search engines to find fiduciary financial planners in your region by using keywords such as ‘fiduciary financial planner near me’ or ‘fiduciary financial planner in [location].
- Shortlist the people who seem ideal and most relevant to you. Contact them on the provided details and request for their legal certifications. You can also request a resume to assess their experience. Don’t forget to ask them about any conflicts of interest that might arise if they are hired.
- Verify their registration to ensure that the financial planner is legally authorized to work for you.
- Discuss a budget and ensure that their communication method seems comfortable to you. Discard the ones who don’t meet this criteria, as you will be working with one in the longer run.
- Once all boxes are checked, have a contract and get your fiduciary financial planner onboard.
Conclusion
A fiduciary financial planner can act in your best interest, but it is essential to lay out your terms and conditions beforehand to ensure that you get high-end, expert services.
