Why is it essential to work with a fiduciary financial advisor?
In a few words: Peace of mind. With fewer conflicts of interest, no lure of commissions, and no tug from corporate bosses to use proprietary products, fiduciary advisors are more likely to choose investment products that are right for you specifically.
What's more, fiduciary advisors are generally more transparent than their commission-earning counterparts: Fee-only fiduciary financial advisors offer advice based solely on the client's best interest. Wholesalers and attractive commissions, by contrast, can color the advice that fee-based advisors provide.
Comparing advisor types
Fee-only fiduciary advisors and financial planners:
These advisors are often entirely independent (as we are) and are only paid either an hourly rate or a percentage of the assets they manage for you. In our case, it is 1%. We only select investments for your account if they are in your best interests:
Is the portfolio aligned to your risk tolerance?
Are the internal fees on your investments low?
Do the portfolio investments align to your life objectives?
We act in your best interest all the time.
VS.
Fee-based advisors and broker/dealers:
These advisors are typically salespeople working in large firms. Unlike fiduciary advisors, brokers receive commissions on the products they sell. They may also charge a fee on your account on top of the commissions they receive.
They are not held to the fiduciary standard, but rather to the suitability standard. That means they can put you into any investment that is suitable for your risk tolerance and time horizon, even if it is more expensive or performs worse than other alternatives.
They can sell you investments that pay them more, as long as they are “suitable.”
