{"id":7556,"date":"2016-06-22T08:05:01","date_gmt":"2016-06-22T15:05:01","guid":{"rendered":"http:\/\/blog.paladinregistry.com\/?p=7556"},"modified":"2024-04-05T02:31:30","modified_gmt":"2024-04-05T06:31:30","slug":"what-is-a-fiduciary-financial-advisor","status":"publish","type":"post","link":"https:\/\/www.paladinregistry.com\/blog\/advisors\/what-is-a-fiduciary-financial-advisor\/","title":{"rendered":"What is a Fiduciary Financial Advisor?"},"content":{"rendered":"

Perhaps you have read about a new Department of Labor regulation that mandates anyone who provides financial advice and services for retirement assets must be a fiduciary financial advisor.<\/a><\/span><\/strong><\/p>\n

Retirement assets include qualified plans (401ks) and IRAs.<\/p>\n

What does this mean and how does it impact you?<\/p>\n

Fiduciary<\/strong><\/p>\n

According to Wikipedia, a fiduciary is a person who holds a legal<\/a><\/span><\/strong> or ethical relationship of trust<\/a><\/span><\/strong> with one or more other parties<\/a><\/span><\/strong> (person or group of persons). Typically, a fiduciary prudently takes care of money or other asset<\/a><\/span><\/strong>s for another person.<\/p>\n

Financial Advisor<\/strong><\/p>\n

A financial advisor is a person or firm that is registered as a Registered Investment Advisor (firm) or Investment Advisor Representative (professional). This registration enables them to provide financial advice and services for fees.<\/p>\n

A financial advisor who holds one of these registrations is a fiduciary.<\/p>\n

Salesmen who claim to be financial advisors do not hold this registration.<\/p>\n

Ethical Standard<\/strong><\/p>\n

Fiduciary is the highest ethical standard in the financial service industry. Financial advisors, who are fiduciaries, are required to put their clients\u2019 financial interests first.<\/p>\n

Salesmen, who masquerade as financial advisors, are held to a lower ethical standard called suitability. They are supposed to make suitable recommendations, but this vague standard is very difficult to enforce.<\/p>\n

Warnings<\/strong><\/p>\n

Selecting a financial advisor who is a fiduciary should be a simple task, but it is riskier than you might think for these five reasons:<\/p>\n

    \n
  1. This is a critically important financial decision<\/li>\n
  2. Salesmen know how to convince you they are financial advisors<\/li>\n
  3. Undocumented sales pitches may not be true<\/li>\n
  4. Salesmen are paid to sell, not advise or provide ongoing services<\/li>\n
  5. Salesmen do not have to put your financial interest first<\/li>\n<\/ol>\n

    How do people who sell financial products get away with it?<\/p>\n