What is a Fiduciary?

September 30th, 2020

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Building your investment portfolio to give it the best advantage possible means that you need to make sure that it is in the right place and hands.

Without it, you could be losing a considerable increase in your total net worth, which may mean thousands of dollars lost. Just because someone that is managing your money says they are a financial advisor does not guarantee that your money cannot perform better.

Getting a fiduciary, on the other hand, can help you rest assured that your money will perform well.

This article will explain what a fiduciary is and why you might benefit from working with one.

The Fiduciary Difference

A financial advisor is a general term that is given to people who advise others about their handling of money and financial matters.

This includes helping clients make good decisions about how they handle things like their finances, debt, investments, taxes, retirement, and more.

They have at least a college degree, specialized training with an investment company as an intern, and they must be certified and licensed.

A fiduciary, who may also be a financial advisor, is an individual that also handles the client's money in the same areas and provides financial advice.

The difference is that the fiduciary must always work toward the client's best interest and not their own.

Why Having a Fiduciary Matters

All investment firms are going to have financial advisors working with them. Clients will go to see them when they are looking for someone to handle their finances and provide good advice for building a suitable portfolio and a retirement income, etc.

A financial advisor that is not a fiduciary, or working as one, may not always work toward the client's best interest.

They are not required to do this at all – although some will. It is possible that they may sell you a financial product that will profit the company more than you. Of course, if this is the case, they will never tell you that that is what they are doing.

When that happens, your portfolio suffers. You will not see the profit you expected or need. Instead, it only makes the company richer that presented you with that program and you only see a small portion of the gain. This practice is not at all unusual and happens all too often.

Different Types of Fiduciaries

The rules for fiduciaries vary with the different types of investments. There is also a little blurring of the lines in some cases, depending on the type of investments. It does especially apply to retirement investors. I

n some cases, such as when dealing with an investment broker, they may be allowed to make a profit since this is how they make their income – but it must be reasonable.

Retirement Planning

Planning for your retirement, especially when long periods of saving are involved, can result in quite large sums of money.

This means that a non-fiduciary financial advisor or planner, or their company, may see it as a chance to gain some profit off of the money that could be yours. Of course, if they did, you would never know about it.

While many companies are honest in their dealings, you can never be sure. Having a fiduciary financial advisor from the start can take away the lack of certainty that may exist. It will also help ensure that your investment and retirement planning is in the best hands.

How a Fiduciary Can Help You

The main goal of a financial advisor who is also a fiduciary can help you rest assured that your money is in good hands. They will do this in several ways that can help you know that you are putting your money in the right places and investing it for your best profit. They do this by:

  • Placing your interests and profit above their own.
  • Give you transparency, ensuring you know what is involved, including all costs and fees.
  • Help you get the best prices on investment products.
  • Reveal potential conflicts of interest.
  • Ensure thorough research before providing financial advice on particular investment products.

Violations of a Fiduciary Trust

When a financial advisor operates as a fiduciary, they can be held liable for the abuse of your trust. An advisor that does not hold the certification of a fiduciary and does not claim to be one cannot be held liable even when obviously operating in their own interests.

This means that they could sell you products that have high fees and knowingly will not perform well – putting more money in their pockets and less in yours.

An advisor can also break a fiduciary trust in other ways that could make them legally liable. They could, for instance, also fail to act responsibly.

Simply not paying attention to your investments to ensure that they are making a good profit could be enough grounds for legal action on your part. They also cannot make trades without your permission.

Once a financial advisor accepts the responsibility of becoming a fiduciary, they come under the responsibility of providing the highest level of care required.

When a product falls into the category of being in your best interest, they become obligated to recommend it to you even if they do not receive any compensation for it or only a little.

Trading for You

When you enter into a fiduciary relationship with a financial advisor, you can trust him or her with your finances.

They will need to be allowed to make trades without your permission when an investment begins to dwindle in potential earnings.

This enables them to balance your portfolio to ensure it is always bringing in peak earnings.

Get a Fiduciary for Your Investments

When you want to ensure that your investment money is being properly cared for, you need to find a fiduciary to help manage your money.

This will ensure that it will give you an edge over money placed in a non-fiduciary situation.

If you want to have some control over where your money is going and like to ensure that your portfolio stays balanced, you can use our specialized Passiv software.

It will make keeping your portfolio balanced much easier, and Passiv also works directly with various well-known fiduciary investment companies that include Ameritrade, Alpaca, Interactive Brokers, Questrade, and more.

It also helps to ensure that your money is invested for your profit and not merely collecting dust in your account.

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