Why a Fiduciary Duty Matters When Choosing a Financial Advisor

Good financial advisors pursue certifications and take oaths to separate themselves from the pack. How can you benefit from working with a fiduciary financial advisor, compared to working with financial advisors that aren’t fiduciaries?

Learn more in this guest post from David Rosenstrock, the Director and Founder of Wharton Wealth Planning, LLC.  David earned his MBA from the Wharton Business School and B.S. in economics from Cornell University. He is also a Certified Financial Planner™.  He lives in New York with his wife and their two very active children.

What is a Fiduciary?

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Advisors who possess a fiduciary duty to their clients are required to put their clients’ best interests above their own at all times. Many people are surprised to find out that this obligation isn’t required of all advisors. In fact, most advisors aren’t required to act as a fiduciary in all their interactions with a client.

Advisors who are not fiduciaries often follow the suitability standard, but that only requires that they give clients advice deemed “suitable” for their situations, thus it offers fewer protections/safeguards to clients.

Fiduciary advisors have two main duties while managing money which include a duty of care and a duty of loyalty.  Duty of care means fiduciaries are required to make informed business decisions by reviewing all of the available information about your financial life before making recommendations or plans.

Why Do Fiduciaries Matter?

A major benefit of working with fiduciaries is that they always look out for the client’s best interests and disclose any conflicts that may negatively affect the client (which relates to the duty of loyalty). This can have a profound impact on the decisions you and your financial advisor make in collaboration and what they might have you do to preserve or grow your wealth.

Fiduciary advisors are legally bound to not use a client’s assets for their own benefit. This relationship and standard of care serves to prevent situations where there are conflicts of interest.

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