Lots of people turn to fiduciary financial advisors to help them manage their finances and plan their futures. It's sort of like hiring an attorney—you'd never jump into court with a case you built yourself. There's no reason to rely on finances you've arranged yourself, either; a fiduciary has years of experience and helps their clients maximize their money.
Related Blog: What are the Benefits of Working with a Financial Advisor?
If you've decided to work with a fiduciary financial advisor, there are some questions that can help you select the best one for your needs. Read on below to find out what sorts of things you should ask a potential fiduciary.
1. What Can You Share About Your History? What Is Your Track Record?
If you want a great overview of a fiduciary's track record, it's easy:
- Request a copy of Form ADV
- Discloses potential conflicts stemming from securities trades
- Request a risk-adjust performance record (that goes back a minimum of five years)
- Request a list of client references (and actually call them)
The ideal fiduciary financial advisor will also share some information about their history outright. It will quickly become evident whether somebody is genuinely experienced or they're hooked on using buzzwords and pressure to convince you to partner up.
2. What Is Your Background? What Are Your Strengths?
A fiduciary's background and experience will directly impact their ability to help you.
Lots of registered investment advisors hold advanced degrees-- do you think you'd prefer someone with more business education or a degree centered around finance? You'll need to speak with potential advisors to learn about their strengths and areas of interest.
Education isn't the only experience that can influence a fiduciary, either. Ask about their experience as a trader or investment analyst, too-- a fiduciary doesn't need this exact experience, but most qualified professionals will have it.
3. Who Pays You?
The source of your fiduciary's income matters.
- Close to 100% of the compensation an investment advisor receives should come directly from his or her clients
If a financial advisor has other sources of income, they should be relatively insignificant-- and a fiduciary should never hesitate to disclose them.
4. Who Will Actually Manage My Investments?
You should ask a potential fiduciary who will actually manage your investments if you decide to partner up. Here's the lowdown:
- Real advisors keep funds in discretionary accounts; they may conduct transactions using mutual funds, ETFs, bonds, stocks, etcetera
- This requires your trade-by-trade approval
- Other advisors really just serve as middlemen between you and a "real" advisor; so if someone isn't directly handling investment research and management for you, they won't make a good fiduciary
5. Are You Legally Bound to Act in My Best Interest? Are You Acting As a Fiduciary?
The only way to guarantee that someone is acting as a fiduciary is to ask as plainly as possible. If they ever answer anything other than "Yes," you are not speaking to a fiduciary.
- If your investment advisor answers affirmatively, get it in writing
- This is a legal precedent and fiduciary duty
Fiduciary Financial Advisor Services in Sarasota, Venice, and Vero Beach Florida
In the end, the relationship you have with Caldwell is something that can’t be duplicated by other firms. Our management is local, our employees are local and our families are local. Our business, community, and lifestyle are just as important to us as it is to you and your family. If you want to build a long-term relationship with an adviser that you know and trust, then choose a local financial advisor such as Caldwell Trust Company to work with you.
Caldwell Trust Company is a Sarasota, Florida company that offers a variety of financial services to our community. If you are looking for an advisor with that local touch that takes true pride in their community, contact us to find out more.
Frequently Asked Questions
What is a fiduciary financial advisor?
A fiduciary financial advisor is a financial professional who is required to act in the best interests of their clients when providing financial advice. When evaluating an advisor, ask directly whether they are acting as a fiduciary and consider requesting that commitment in writing.
How can I verify a financial advisor’s credentials and experience?
Ask about the advisor’s professional background, education, investment experience, and areas of expertise. You can also request documents such as Form ADV, which provides information about an investment advisory firm, its services, fees, potential conflicts of interest, and disciplinary history.
How do fiduciary financial advisors get paid?
Compensation structures can vary, so it is important to ask exactly how an advisor and their firm are paid. Understanding advisory fees, outside compensation, and potential conflicts of interest can help you determine whether the advisor’s financial incentives are aligned with your interests.
What should I bring to my first meeting with a financial advisor?
It can be helpful to bring information about your current investments, retirement accounts, income, expenses, estate planning documents, insurance policies, and financial goals. Providing a complete picture of your financial situation can help an advisor better understand your priorities and recommend an appropriate strategy.
Who actually manages my investments when I work with a financial advisor?
That depends on the firm. Some advisors or investment management teams directly research, select, monitor, and adjust investments, while others may rely on outside managers or investment products. Ask who will be responsible for managing your portfolio and how investment decisions will be made.
What should I look for when choosing a fiduciary financial advisor?
Look for an advisor with relevant experience, transparent fees, a clearly defined investment process, and a willingness to explain how your assets will be managed. You should also feel comfortable with the advisor’s communication style and confident that they understand your goals, risk tolerance, timeframe, and broader financial plan.
How often should I meet with my financial advisor?
The appropriate frequency depends on your needs, but financial plans and investment strategies should be reviewed regularly and when major life changes occur. Retirement, an inheritance, changes in income, marriage, or changes to your estate plan may all be reasons to revisit your financial strategy with your advisor.
