January 6th, 2020
January 6, 2020
Joseph Vecchio CPA, CFP, MBA

Find Out If Your Current Financial Pro Has YOUR BEST INTEREST!

The benefits of working with a fiduciary advisor are easy to see. These advisors are legally obligated to put their clients’ financial interests above their own, and they have to disclose how they’re compensated and avoid potential conflicts of interest that could affect the recommendations they make.
Yet not all financial advisors are required to be fiduciaries. Here’s how to figure out whether the financial professional you’re working with has your best interests at heart:
Just ask. The easiest way to find out if your advisor is a fiduciary is simply to ask. If your advisor says they’re not a fiduciary, ask why. The advisor should offer a clear, concise and logical explanation. They also should be willing and able to spell out how they work with clients and what rules apply to the advice they give.
Also ask how the advisor is compensated. A complicated fee structure is a red flag. Likewise, think twice if the advisor earns most of their money from commissions on the investments they sell.
Know the different types of advisors. Here are some common types of advisors who are likely to be fiduciaries:

Investment advisors who work with retirement accounts are now held to the Department of Labor (DOL) fiduciary standard. These advisors must disclose all fees and conflicts of interest. They cannot recommend products that represent a conflict within retirement accounts. In other accounts, RIAs can recommend products that represent a conflict as long as they disclose the conflict first.

Fee-only financial planners charge a flat fee or a fee based on the percentage of assets they manage for you. They don’t accept commissions for the products they recommend. Many fee-only advisors voluntarily adhere to fiduciary standards, and those who are also investment advisors must do so by law.

Broker-dealers are regulated by the SEC, but they are not required to be fiduciaries. Rather, they are held to the “suitability standard”—they only have to prove that an investment is suitable for their client at the time of its purchase, not that the advice was in the client’s best interest. Broker-dealers typically earn a commission on sales of investments.

Tax professionals and insurance brokers are not held to a fiduciary standard.

Know advisor designations. You may have noticed that many advisors list abbreviations after their names. These letters represent professional designations, which can provide insight into advisors’ fiduciary status. Here are a few common designations:

Certified Financial Professionals (CFPs) are held to a fiduciary standard by the CFP Board of Standards. CFP fiduciary standards apply to a broad scope of financial planning, including retirement, tax and insurance advice. This standard is not enforced by a government agency, such as the SEC or DOL.

Chartered Financial Consultants (ChFCs) are held to a fiduciary standard by the American College of Financial Services’ Code of Ethics. The ChFC designation covers the same core curriculum covered by the CFP designation plus additional electives that focus on areas of personal finance.

Accredited Investment Fiduciary (AIF) is a designation issued by the Center for Fiduciary studies. It requires designees not only to be fiduciaries, but also prove knowledge of fiduciary rules and to engage in ongoing education.

When you work with Shore Financial Planning, the financial advice we provide is ALWAYS in your best interest.
As a Certified Financial Advisor, NAPFA Professional, and Fiduciary Advisor, Joseph Vecchio offers unbiased and conflict-free financial advice & retirement planning services.