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The Role of a Fiduciary Advisor

by Caldwell Trust

If you're like many people, you probably don't know exactly what a fiduciary financial advisor does and how working with one can help you. These are some of the main roles and benefits of working alongside a fiduciary financial advisor and why you should consider it.


Related Blog:  When Should I Start Thinking About Retirement Options?


What is a Fiduciary Financial Advisor?

Maybe you've heard of the term "fiduciary financial advisor" but you may not understand what it means. Put simply, a fiduciary is an individual or an institution who has been entrusted to manage and protect money and/or property. In other words, a fiduciary has the responsibility and power to act for someone else, who's known as the beneficiary. 


Most fiduciaries are trustees who have been named to serve over assets that are held in a trust for a beneficiary.


The Difference Between a Financial Advisor and a Fiduciary Financial Advisor 

A financial advisor is not the same as a fiduciary financial advisor even though these terms are often used interchangeably. Their main difference involves the standard of care to which they're held when they advise clients.


Although most financial advisors sell their clients suitable investments, a fiduciary uses a higher standard, regarding how they care for their clients. This is why fiduciary advisors generally cost less since the client accounts don't entail a commission charge.


Roles of a Financial Fiduciary

Financial fiduciaries have several roles:

  • Besides managing your money and assets, a financial fiduciary recommends investments. They help you to select the best possible investment options for your 401 (k) plan.
  • Moreover, a financial fiduciary provides a fair and full exposure of material facts that a reasonable investor considers to be important.
  • Fiduciaries regularly monitor the financial situations and investments of their clients, maintaining the highest quality of conduct for as long as the client relationship lasts. Furthermore, financial fiduciaries always put the best interests of their clients ahead of their own by looking for the best prices and terms.
  • They do everything possible to make sure the counsel they give is thorough and accurate. What's more, these professionals do not use their clients' assets to benefit themselves.


Benefits of Working With a Fiduciary Financial Advisor 

There are several advantages for using a fiduciary financial advisor, including:

  • Peace of mind—When you hire a fiduciary financial advisor, you're assured that your money is being managed properly and that decisions are being made with your greatest interest in mind. Consider how a fiduciary looks for the best prices and terms for his or her clients. As a result, you receive the recommendation or product that's right for you.
  • More transparency—By thoroughly discussing their decisions with clients, fiduciaries present all the relevant facts and information, regarding the assets as well as the financial future of their clients. This helps clients understand why decisions were made.
  • Loyalty and trustworthiness—A fiduciary acts in utmost good faith and with undivided loyalty.
  • Assurance there's no conflict of interest, such as self-dealing—This typically happens when someone who's in management accepts a deal from a company benefiting the manager, while hurting the business or its clients. Another type of conflict of interest is gift issuance, which involves a corporate manager accepting gifts from clients.


Other Considerations

  • Fiduciaries will never recommend a plan that hurts their clients, such as a strategy that involves a kickback.
  • They do not mislead their clients.
  • Fiduciaries can't do anything that's considered to be breaking the trust of a beneficiary. For instance, they can't make decisions that benefit them at the expense of their clients.
  • Sometimes, a financial advisor is not a fiduciary. Besides asking them, there are other ways to find this out. For example, you could search directories or find out if an advisor has broken any rules.
  • Ask a potential financial fiduciary how they earn money, along with any licenses and/or certifications they may hold.
  • Ask them how often they talk with their clients, besides inquiring about the services they offer.

At Caldwell Trust Company, we've earned a reputation for placing our clients' needs and interests ahead of our own and are proud of the trust our community has instilled in us. For more information about how we can help you, contact us today.


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