By Mark Thatcher, CRPC®
There’s plenty of financial jargon that you don’t need to know in order to succeed financially. But one term that is essential to your money and how it is handled is the word fiduciary. The concept can seem confusing to many, as most people assume that all advisors, whether they’re stockbrokers or financial planners, are required to put you first. But that’s not the reality. The truth is that it is often difficult to determine what information is correct and what is just opinion. It’s hard to know who to trust when every expert says they have your best interests in mind. That’s why it’s important to understand the distinction between different types of advisors’ roles and what it means for you and your money.
The primary duty of a fiduciary is to put your needs first and to provide advice and recommendations that will benefit you. Think of a fiduciary as a trustee, someone who is given and accepts the responsibility of managing assets for someone else. This duty protects you from conflicts of interest.
For example, fiduciary duty prevents an advisor from making an investment with your money solely for a kickback commission. For those who don’t adhere to a fiduciary standard, a recommendation made by advisors only has to be “suitable.” The problem with this is that some advisors could then sell high-fee products, even if a lower-priced option was just as suitable or available, in order to receive a higher commission.
The fiduciary standard includes providing guidance that is objective and beneficial to you and charging fees that are clear and up front. The fiduciary standard can give you confidence that your hard-earned money is in good hands.
While some advisors use the term lightly, not all advisors are fiduciaries. Brokers, insurance agents, and real estate agents acting on the other party's behalf are not required to serve in a fiduciary manner. They represent themselves or their company and are only required to provide you with “suitable” financial products, rather than those recommended based on your unique circumstances.
Wall Street brokerage firms can sell proprietary products, so their advice may potentially be biased. For example, annuities and other high-fee investments that provide brokers with a higher commission can still be sold into your retirement account. Additionally, while brokers must inform clients that they’re choosing to be paid commissions, if the investor neglects to read the email notification, they won’t know where their broker’s interests lie.
At Cypress Wealth Services, we are an independent firm committed to offering an objective, unbiased approach to financial planning to help you reach your goals. Our approach to investing is founded upon the highest fiduciary standards. Our independence serves as a basis to create a personalized investment strategy tailored to meet your financial goals. We strive to create individualized solutions for our clients with high ethical standards. Our advice is driven by one concern alone: the best interests of our clients.
We are dedicated to providing you with the best advice we can give without any pressure to promote a certain product. We act with undivided loyalty to you and provide complete transparency and disclosure when it comes to our compensation or investment approach.
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 will give you confidence that your advisor is working in your best interests rather than their own.
By working with an advisor who holds to fiduciary standards, you can feel empowered to make the best decisions for yourself and your finances. Clients have the power to ask questions and to demand the highest value for the service that advisors are providing. As a firm in the financial world, 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 that our relationship with you is built on integrity.
It’s important to thoroughly research an advisor before choosing to work with him or her. An advisor should be open to sharing their business philosophy, how they choose investments, what their process looks like, any potential conflicts of interest they face, and how they’re paid.
We take pride in our transparency and objectivity. If you’re unsure about your current financial strategies, haven’t reevaluated your investments in several years, or are just interested in learning more about what it means to work with a fiduciary, we are happy to offer a complimentary second look at your financial plan. Contact one of our offices today!
Cypress Wealth Services (CWS) is an independent Registered Investment Advisory (RIA) firm that provides proactive financial advice and investment management for high net worth families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience, qualifications and is uniquely qualified to serve a broad range of client needs. CWS’s experience and expertise have been the foundation for their proactive client service process and client Standard of Care. CWS’s multi-generational approach focuses on efficiently protecting and growing wealth while providing proactive financial advice as a client moves through each new stage of life. With offices in Palm Desert, CA, and Anchorage, AK, the firm serves clients across the country. For more information: visit www.CypressWS.com or call 760.834.7250.