If you are considering hiring a fiduciary-focused financial advisor, it is in your best interest to know the basic facts about this role and its related responsibilities.
Duties of a Fiduciary-Focused Financial Advisor
Fiduciary-focused financial advisors have the responsibility to always act in the best interests of their clients. They are required to disclose any potential conflicts of interest as soon as they arise.
Fiduciaries are responsible for keeping their client's assets separate from the advisor's assets and must clearly communicate their financial credentials, including education, professional credentials, and experience.
All these things are what separate fiduciary-focused advisors from other brokers, who operate under “the best interest standard” but are not held to the higher standard of care. Any investments, financial decisions, and direction by a fiduciary advisor should not have any ulterior motives. Their advice’s sole focus is always on their client’s best outcomes in mind.
Breaches in Fiduciary Duty
If a financial advisor breaches their fiduciary duty to the client and makes decisions that are not in the client's best interest, the client may take legal action against the advisor for compensation for any resulting losses. This is essentially a legal obligation of the highest character, requiring the utmost good faith and honesty.
With most financial advisors and professionals, the failure to disclose potential conflicts of interest is just one area where they breach their fiduciary duty. For example, accepting gifts or incentives from companies or individuals that are affiliated with the client's investments is wrong and can potentially harm the client.
Even more shocking is when advisors purposefully mismanage their clients' funds or place the client in investments that benefit the advisor, rather than the client. Other major breaches include misrepresentation, account churning, unauthorized financial activity, and negligence.
The client should always have confidence that the advisor is acting for the benefit of the client and is not making decisions because of other influences.
Types of Fiduciary Relationships
There are various types of fiduciary relationships. These relationships can be very broad, depending on the type of advisor, but are broken down for you to gain a better understanding of the relationship between you and your advisor.
Who is managing your money?
As you can see, there is a lot more to this than meets the eye. It is important to look at the type of relationship you have with your financial advisor and see if they are indeed acting in your best interests.
Your financial advisor should be providing you with all the tools, research, and guidance you need to make informed decisions.
If you are looking for a fiduciary-focused financial advisor in Albuquerque, contact LPL Financial Advisor Michael R. Rose to schedule a complimentary consultation today!