Fiduciary or Not? How to Know if Your Financial Advisor Has Your Back

By Net Worth Advisory Group

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In your search for a financial professional, you may have come across a host of options, each with different titles, making the decision-making process confusing and challenging. Should you choose a financial advisor? A fiduciary? Or a fiduciary financial advisor? Understanding that a financial advisor is not always a fiduciary—and vice versa—is important information to know if you want to optimize your portfolio’s performance. 

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Knowing the differences between a fiduciary vs. a financial advisor can help you select the right fit for your needs. In this article, we’ll demystify the different roles, explore their overlaps, and provide insights to give you a clearer understanding of which type of financial professional aligns best with your circumstances.

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What Do These Different Titles Mean?

If you’ve ever researched financial advisors, you may have noticed there are many different types of advisors from which to choose. Some of the most common types of financial advisors are brokers, fee-only fiduciaries, and independent financial advisors. It’s important to know the standards each type of advisor is held to as you’re deciding who to hire.

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Here’s the breakdown:

• Brokers manage your portfolio but also sell financial products such as mutual funds or insurance policies, for which they earn a commission. They are not held to a fiduciary standard, so they may not always act in your best interest.
• Fee-only fiduciaries may charge a flat fee, or a percentage of your portfolio, but they are always held to a fiduciary standard, in which they are required to act in your best interest.
• Independent financial advisors have started their own financial firm. Most independent advisors act as fee-only fiduciaries, but some may act as fee-based advisors and sell additional financial products on a commission basis.‍
• Fee-only vs. fee-based advisors: A fee-only advisor always acts as a fiduciary, whereas a fee-based advisor can wear a fiduciary hat sometimes and be held to the “suitability standard” when selling products. Although fee-based advisors often still refer to themselves as fiduciaries, they’re not bound by the fiduciary duty at all times like a fee-only advisor.

What Exactly Is a Fiduciary?

In general terms, a fiduciary is a person or entity who has the power to act for another in situations that require complete trust. When it comes to the financial industry, financial advisors who work for a Registered Investment Advisor firm must always act as a fiduciary for their clients. CERTIFIED FINANCIAL PLANNER™ professionals are also held to this duty when providing financial advice to their clients. By law, a fiduciary advisor must be completely transparent and always act in their clients’ best interest. They are also obligated to avoid and disclose any potential conflicts of interest.

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Additionally, the ongoing services and investment monitoring they provide also falls under the fiduciary duty. In other words, their job doesn’t end after the initial meeting or purchase. They must regularly review your accounts to help align your investments with your best interest.

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There are financial professionals whose services do not fall under the fiduciary standard. This doesn’t mean that they are out to steal your money and can never be trusted—far from it. These financial professionals who register with FINRA are held to a standard known as Regulation Best Interest (Reg BI). This is a step in the right direction, but doesn’t take things as far as the fiduciary standard for Financial Advisors who work for a Registered Investment Advisor firm that registers directly with the Securities and Exchange Commission.  

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What Does it Mean to Work With a Fiduciary?

There are several benefits to working with an advisor who serves in a fiduciary capacity. For one, they are open and transparent. Aside from the obvious goal of maximizing value for your money, working with a fiduciary can give you confidence that your advisor is working in your best interests rather than their own. They’ll give you their true, professional opinion (even if it’s not the answer you want to hear). This is extremely valuable when you’re facing a big life decision, whether it’s purchasing a second home, transitioning into consulting work, or retiring earlier than anticipated. Reviewing your entire financial picture, an advisor can show you the impact a decision may have on your future and how you can pursue certain goals.

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By working with an advisor who holds to the fiduciary standard, you can be confident in your financial future. Clients have the power to ask questions and to demand the highest value for the service that advisors are providing. As a NAPFA-registered fee-only advisory firm, we understand people’s reservations or even negative connotations toward the underlying motivations of some advisors. We want to assure you that you can trust in the fact that our relationship with you is built on integrity and putting your interests above our own.

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A Holistic Approach

Independent, fiduciary advisors do so much more than just pick your stocks. Working with an experienced financial specialist can be a realistic sounding board to help provide you with a litmus test when you have questions or face a big financial decision. They actively coordinate the accumulation, distribution, and transfer of your wealth, as well as the estate, tax, and financial planning areas of your retirement plan. An advisor who looks at the big picture of your financial life can help you optimize income and mitigate taxes in retirement. 

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For example, this type of advisor helps you create a retirement income plan that strategizes when you take your withdrawals and what accounts you take them from first; not to mention, they also design a Social Security strategy that optimizes your benefits, manages Medicare confiscation, and addresses long-term care so you can feel confident that you’re on the right track as you pursue your long-term goals. The objective advice of an independent fiduciary advisor can make an incredible impact on your financial situation in retirement. 

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A Fiduciary You Can Trust

Our core mission at Net Worth Advisory Group is to help you create a portfolio that performs at the highest level, while providing tailor-made solutions that make your financial goals more reachable. Unlike larger brokerages and wire houses, we operate as an independent firm, free from commission-based compensation or affiliations with specific investment approaches or products. In essence, we prioritize investments based on your risk tolerance, circumstances, goals, and other aspects of your life—with the focus always on you and your needs.

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If you’re ready to feel empowered to make the best decisions for yourself and your finances, we invite you to call us at 801-566-6639 to schedule a complimentary, no-obligation consultation.

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About Net Worth Advisory Group

Founded in 2003, Net Worth Advisory is an independent, fee-only, CERTIFIED FINANCIAL PLANNER™ and investment advisory firm located in Salt Lake City, Utah. We specialize in helping people transition from the workplace into retirement, and ensuring that those who are already retired will not outlive their nest egg. Our top priority is to have clients experience a greater sense of ease with diligent, personalized wealth care and the implementation of customized financial plans and ongoing personalized asset management. We equip all clients with a comprehensive financial plan, meeting every six months to update as needed and review investment performance. Our team is passionate about providing comprehensive financial planning with the fee-only model, and we love feeling like we’re making a difference in our clients’ financial lives. 

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As a NAPFA-registered fee-only advisory firm, our recommendations are untainted by a hidden agenda to sell financial products paying large commissions. Unlike our competitors at brokerage firms, insurance companies, and banks, we are compensated solely by our clients, so we are financially motivated to provide objective advice that is always in our clients’ best interests. Anyone can call himself or herself a financial planner, but only an advisor with the CERTIFIED FINANCIAL PLANNER™ (CFP®) designation has met the education, examination, experience, and ethical requirements mandated by the CFP® board. Of the estimated 800,000 financial advisors in the U.S., only 55,000 have earned the CFP® designation. All Net Worth advisors are either CFP® professionals or CFP® professionals in training.

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Net Worth Advisory’s mission is to significantly improve the lives of our clients by delivering exemplary financial planning and wealth management advice that enables them to live the lives they have imagined.