Is Your Financial Advisor a Fiduciary?

By John Benedict

What’s in a name? Shakespeare certainly believed what you call yourself isn’t the most important thing, as he famously wrote, “A rose by any other name would smell as sweet.” While we can debate the importance of a name, what’s even more important is what you believe and what standard you hold yourself to. Financial advisors may go by various names; financial planner, wealth manager, and investment advisor name just a few of the titles that abound in the world of financial and retirement planning. So, how do you decide who to work with and whether or not you can trust them to preserve and grow your wealth? 

That’s where the title of “fiduciary” comes in. Rather than choosing someone by their job title, instead, ask your current or prospective financial advisor whether or not they are held to the fiduciary standard. Their answer will let you know if they truly have your best interests at heart.

What Do These Different Titles Mean?

If you’ve ever researched financial advisors, you may have noticed there are many different types of advisors from which to choose. Some of the most common types of financial advisors are brokers, fee-only fiduciaries, and independent financial advisors. It’s important to know the standards each type of advisor is held to as you’re deciding who to hire.

Here’s the breakdown:

• Brokers manage your portfolio but also sell financial products such as mutual funds or insurance policies, for which they earn a commission. They are not held to a fiduciary standard, so they may not always act in your best interest.
• Fee-only fiduciaries may charge a flat fee or a percentage of your portfolio, but they are always held to a fiduciary standard, in which they are required to act in your best interest.
• Independent financial advisors have started their own financial firm. Most independent advisors act as fee-only fiduciaries, but some may act as fee-based advisors and sell additional financial products on a commission basis.

What Exactly Is a Fiduciary?

In general terms, a fiduciary is a person or entity who has the power to act for another in situations that require complete trust. When it comes to the financial industry, financial advisors who work for a Registered Investment Advisor firm must always act as fiduciaries for their clients. CERTIFIED FINANCIAL PLANNER™ professionals are also held to this duty when providing financial advice to their clients. By law, a fiduciary advisor must be completely transparent and always act in their client’s best interest. They are also obligated to avoid and disclose any potential conflicts of interest.

Additionally, the ongoing services and investment monitoring they provide also fall under the fiduciary duty. In other words, their job doesn’t end after the initial meeting or purchase. They must regularly review your accounts to help align your investments with your best interest.

There are financial professionals whose services do not fall under the fiduciary standard. This doesn’t mean that they are out to steal your money and can never be trusted—far from it. These financial professionals who register with FINRA are held to a standard known as Regulation Best Interest (Reg BI). This is a step in the right direction but doesn’t take things as far as the fiduciary standard for Financial Advisors who work for a Registered Investment Advisor firm that registers directly with the Securities and Exchange Commission.  

What Does it Mean to Work With a Fiduciary?

There are several benefits to working with an advisor who serves in a fiduciary capacity. For one, they are open and transparent. Aside from the obvious goal of maximizing value for your money, working with a fiduciary can give you confidence that your advisor is working in your best interests rather than their own. They’ll give you their true, professional opinion (even if it’s not the answer you want to hear). This is extremely valuable when you’re facing a big life decision, whether it’s purchasing a second home, transitioning into consulting work, or retiring earlier than anticipated. Reviewing your entire financial picture, an advisor can show you the impact a decision may have on your future and how you can pursue certain goals.

By working with an advisor who holds to the fiduciary standard, you can be confident in your financial future. Clients have the power to ask questions and to demand the highest value for the service that advisors are providing. As a Registered Investment Advisor firm, we understand people’s reservations or even negative connotations toward the underlying motivations of some advisors. We want to assure you that you can trust in the fact that our relationship with clients is built on integrity and putting your interests above our own.

A Holistic Approach

Independent, fiduciary advisors do so much more than just pick your stocks. Working with an experienced financial specialist can be a realistic sounding board to help provide you with a litmus test when you have questions or face a big financial decision. They actively coordinate the accumulation, distribution, and transfer of your wealth, as well as the estate, tax, and financial planning areas of your retirement plan. An advisor who looks at the big picture of your financial life can help you optimize income and mitigate taxes in retirement. 

For example, this type of advisor helps you create a retirement income plan that strategizes when you take your withdrawals and what accounts you take them from first; not to mention, they also design a Social Security strategy that optimizes your benefits, manages Medicare confiscation, and addresses long-term care so you can feel confident that you’re on the right track as you pursue your long-term goals. The objective advice of an independent fiduciary advisor can make an incredible impact on your financial situation in retirement. 

Do I Need a Fiduciary?

The short answer is yes. If you want to feel you can trust your advisor and know they are working for your best interests and not their own, and want to feel educated and empowered about your financial future, then you want to work with a fiduciary professional. 

At J2 Capital Management, we specialize in offering in-house financial planning services, which means we are essentially a one-stop shop for all your financial needs. Our team of fiduciary professionals can help you plan, build wealth, and manage risk so you can pursue your financial goals with confidence. 

Wondering what makes J2 Capital different from other financial advisors? (Hint: It’s got everything to do with our simplicity and value of services.) Check out our free webinar that explains our approach and what sets us apart!

If you want to learn more or are ready to get started today, schedule a meeting online or reach out to us at info@j2cmonline.com or 248-641-4444.

About John Benedict

John Benedict is CEO, investment advisor representative, and portfolio manager at J2 Capital Management, a boutique financial advisory firm specializing in in-house custom financial planning, tax, estate, and investment management. With over 20 years of experience, John is passionate about helping clients navigate uncertain markets, reduce risk, and plan for a sound future. John combined his talents and passion for statistics and technical analysis to create J2’s tactical strategies, managing them since the beginning of the organization. He is known for being a visionary and continually looking for ways to improve J2’s services and strategies to better serve his clients. John graduated from Central Michigan University with a degree in business administration and finance, and his thoughts on markets and technical analysis have appeared in The Wall Street Journal, Investment News, and on Moneyshow.com. He was also a contributor to the book The StockTwits Edge: 40 Actionable Trade Set-Ups from Real Market Pros. 

When he’s not working, you can find John boating or participating in water sports and spending time with his wife, Janine, and his three children, Jack, Alexis, and Saraphina. To learn more about John, connect with him on LinkedIn. You can also register for his latest webinar on What Makes J2 Capital Management Different From Other Financial Advisors.