Fiduciary /fi·du·ci·ar·y  fəˈdo͞oSHēˌerē/

adj Law [1] – Involving trust, especially with regard to the relationship between a trustee and a beneficiary. a fiduciary capacity; a fiduciary duty.

adj [2] Fiduciary – The fiduciary manages the investments for the benefit of the other person rather than for his or her own profit. a fiduciary obligation

Synonyms: Advocate, guardian, trustee, executor, custodian, authentic, credible, reliable

Libertas [Lih-bur-tahs] was the name of an ancient Roman goddess who fought for freedom.  She is also the gatekeeper of New York City who welcomed new immigrants to the United States of America for so many years on Ellis Island – the Statue of Liberty.  At Libertas Wealth Management Group, we believe the Latin word serves us and our clients well, as we provide those we help with financial liberty, freedom, and independence.

Questions to Ask Before Hiring A Financial Advisory Firm

 

Are you legally obligated to put my best interests ahead of yours? Will you be serving as my fiduciary?

A Fiduciary is a fee-only adviser, sworn by oath to act as your advocate. He/she is someone who cannot accept commissions.

What is your track record?

Ask for a copy of the Form ADV. The ADV will describe, among other things, fees & compensation, types of clients, disciplinary information, conflicts of interest, and education.  If the financial advisor cannot provide you with an ADV, then the financial advisor is most likely a fee-based or commission-only broker.  Bear in mind that just because you get an ADV however, doesn’t mean that the financial  advisor doesn’t also put on the broker hat from time to time if he/she is dual registrant.

Are you fee-only or fee-based?

This is a big one that should provide you with the answer you’re looking for. Fee-only advisers will be fiduciaries.  Fee-only advisors cannot legally accept commissions and their only source of revenue is the fee they charge for advice and investment management.  Since fee-based advisors can use an advisory account with a flat-fee one day, but charge commissions on investment products, insurance, or annuities the next day, the conflicts of interests are present and thus, they cannot legally hold themselves out as fee-only.

What educational background do you have in the financial planning field?

There are many financial people out there who do not have sufficient industry credentials and/or training for providing advice. They are really salespeople in advisor’s clothing. Many advisors tack on letters after their name to create the impression of expertise.  The most prestigious mark for financial planners is the CFP®.  A CERTIFIED FINANCIAL PLANNER™ certificant has completed extensive training on financial planning topics, passed a rigorous two-day exam, has at least three years of planning experience and has agreed to abide by a strict code of ethics.

Who will watch my portfolio?

Too many investors learn the hard way that no one is monitoring their investments when the market bubbles burst or the economy has a financial crisis.  Holdings that are great one year, can become huge losers a few years later.  Ask the advisor: who will be watching the portfolio and what systems are in place to make changes as market conditions change?  Your portfolio should be proactively managed.  If they say that ‘mutual fund managers are watching and managing’ your money, understand that almost all mutual funds have investment policy statements and mandates that require they stay invested in the market, all the time, from top to bottom, peak through the crash.

Why do you think you would be a good financial advisor for me?

The person you choose will be advising you on your money and giving projections that you should be able to trust.  Make sure he or she can accommodate you and your needs.  Spending a few hours meeting advisors may be time-consuming, but connecting with one who suits your goals is good for you and your financial health in the long run.

Final Considerations

After you’ve asked some of these questions, go online to FINRA’s website (whether or not your advisor is a Fiduciary) and look your advisor up on Broker Check, which will give you a good history of the advisor, from who they’ve been affiliated with and/or where they’ve worked in the last several years, to any legal actions that have been taken against them.

Helpful Quotes from the Wall Street Journal

“Investment professionals who aren’t fiduciaries are often held to a lesser standard, the so-called suitability standard. That means that anything they sell you merely has to be suitable for you, not necessarily ideal or in your best interest. This point is critical, and should be a deal breaker if a prospective planner is not a fiduciary.”  – The Wall Street Journal on “How to Choose a Financial Planner

Anyone can hang out a shingle as a financial planner, but that doesn’t make that person an expert.  They may tack on an alphabet soup of letters after their names, but CFP (short for certified financial planner) is the most significant credential.  The CFP credential is a good sign that a prospective planner will give sound financial advice.”  – The Wall Street Journal on “How to Choose a Financial Planner