Not All Fiduciaries Are Created Equal

Written by Investment Advisor, Rick Rivera

The word “fiduciary” has popped up a lot lately in commercials, in print ads, and in general conversation regarding financial advisors. But what exactly is a fiduciary — and how do you know you’re working with the right one for you?

Definition of Fiduciary

Investopedia defines a fiduciary as “a person or organization that acts on behalf of another person, putting their clients’ interests ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other’s best interests.”¹

Put another way? A fiduciary has to do what’s good for you, not their firm. Unfortunately, there are financial professionals out there who are not required to put your best interests first. Instead, they make recommendations based on what’s good for their firm.

For example, let’s say you’re shopping for life insurance. You visit Company A, a branch of a large, nationally known insurance company. After telling the agent about your needs, he or she recommends several products. The problem? Those products are all sold by Company A. While they may be somewhat of a match for your needs, they may not be the perfect fit.

But during your search for life insurance, you hear about Advisor B, a financial advisor with an independent firm. Following your conversation and getting a little bit more information about what you need, Advisor B recommends several options from different life insurance companies. Advisor B explains all the options. Then together, you select the right option for your budget and needs.

Similarly, some financial professionals and brokerage firms operate a lot like Company A. As their customer, you only have access to the investment products and options they sell. On the flip side, financial advisors who serve as fiduciaries can offer you a wider range of choices, enabling them to tailor a financial plan that’s custom fit for your situation.

To be considered a fiduciary in the financial planning world, the advisor or firm must:

• Hold a Series 65 license
• Put your best interests first
• Disclose any potential conflict of interest
• Not be bound to any specific institution or product

Unfortunately, just because someone is a fiduciary doesn’t mean they’re the right fit for you. In your search for a financial advisor, there are three questions you should ask before agreeing to become a client:

Question 1: What services do you provide?

Just because someone is a fiduciary doesn’t mean they provide the services you need. For instance, some fiduciaries offer only stock market investing and money management. If you’re looking for a financial advisor who looks at all aspects of your money — including taxes, investments, insurance, health care and estate planning — then you may want to seek out an advisor who provides a more holistic approach to financial planning.

Question 2: What is your experience?

Financial advisors have a wide range of experience and backgrounds. It’s OK to ask questions like: How many years have you worked in the industry? Who do you typically work with? Have you worked with people in similar situations as me? The advisor’s answers to your questions can give you a better sense of whether or not they’re the right fit for you.

Question 3: What do you specialize in?

In the investment world, there are generalists and specialists. Generalists might work with anyone who walks in the door, while specialists tend to focus on working with certain types of people. For instance, some advisors work with people in specific occupations, such as doctors or lawyers. Others may work with people in specific stages of life. Here at Safeguard, for instance, we work with people who are nearing in or already living in retirement.

Advisors who specialize often become experts in their areas of focus. They also learn from their clients’ experiences and can proactively apply that knowledge when a similar scenario pops up with other clients. For example, an advisor who specializes in working with retirees may be more familiar with some of the challenges that are unique to retirement planning.

At Safeguard Investment Advisory Group, we are a fiduciary who always puts your best interests first. To learn more about our services, click here to schedule a complimentary 15-minute strategy call with one of our advisors.

¹ Julia Kagan. Investopedia. Sept. 2, 2021. “Fiduciary.” https://www.investopedia.com/terms/f/fiduciary.asp#:~:text=A%20fiduciary%20is%20a%20person,in%20the%20other%27s%20best%20interests. Accessed March 10, 2022.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.