5 Issues with Common Investment Mindsets
Your investment mindset could be costing you money.
Before you hire a financial advisor, learn the importance of the term fiduciary.
Even if you’ve been handling your investments for years, there comes a time where the process can become too complex, time-consuming, or otherwise challenging. Luckily, trusted financial advisors can alleviate this stress and offer comprehensive investment advice. As you begin to find the right financial planner for you, empower yourself with information about what it means to use a fiduciary financial advisor.
Simply put, a fiduciary is required to act in their clients’ best interests by abiding by fiduciary duty. Financial professionals that follow these guidelines eliminate the concern of potential conflicts of interest and can offer more trustworthy financial advice. We dive into the implications of these titles and terms below.
Generally, if you hear the term fiduciary while searching for a financial advisor, it’s a good thing. Fiduciaries are required to seek the best prices and terms for their clients’ interests. Additionally, they aim to provide accurate and thorough advice and disclose any potential conflicts of interest. The title can apply to anyone that you designate with your legal, financial, or personal decisions. Primarily, though, fiduciary’s are bankers, accountants, financial advisors, and investment management professionals.
There are obvious benefits to having a financial planner that puts your best interests at heart. Plus, there are legal benefits to working with a fiduciary advisor. If your advisor doesn’t disclose relevant information to you or acts in their interests instead of yours, you may have legal recourse due to a breach of fiduciary duty. Even if their actions don’t harm you, you’re entitled to damages for decisions made by a fiduciary that aren’t in your best interest. On the other hand, working with a non-fiduciary doesn’t allow you the same legal standing.
Financial planners aren’t one size fits all. Do you love researching your investments? If you only need help to place trades, then you may not need a fiduciary. Instead, you may be comfortable working with a broker-dealer or stockbroker to manage your investments. Generally, these titles aren’t held to the fiduciary standard and instead are held to a suitability standard. To meet the suitability standard, non-fiduciaries provide recommendations that are suitable to their clients. However, they are allowed to put their own interests at the forefront.
The U.S. Securities and Exchange Commission’s (SEC) advisor information database and the National Association of Personal Financial Advisors both offer search tools to find fiduciary advisors near you. Additionally, you can always ask an advisor if they work on fee-only or commission-based payments. Typically, a fiduciary will work on a flat fee, while a non-fiduciary earns a commission on trades or from other investment companies that they sell products for.
As you determine the right advisor to assist with your financial planning, consider reaching out to Royal Oak Financial Group. Whether you’re getting a jump start on your future or nearing retirement, our financial advisors offer investment planning and estate management services that put you first. Get in touch today to schedule an appointment and start working on your investment strategy.