You probably know what you are looking for in a financial planner: Someone who is honest, hard-working, ethical, and will always act in your best interests. In fact, you'd expect that to always be the case with financial planners...right?
well...not exactly.
Finding a financial planner who acts in your interests — and your financial interests alone — requires that you work with a fiduciary financial planner. Ensuring your planner is a fiduciary can be critical to getting the best financial advice.
What Is a Fiduciary Financial Advisor?
There are many types of financial professionals out there, and quite a few professional certifications can allow an individual to give you customized advice on your financial situation, help you determine financial goals, and sell you financial products. Finding the right type of individual to help you with retirement or estate planning is critical to achieving your long-term financial goals.
A fiduciary financial advisor is legally required to operate in the client's best interests, and not their own wallet. This individual is typically compensated in a fee-based way. As such, they will charge you a fee and act based on your needs, regardless of where you invest your money. This differs from other brokerage models in which brokers or investment advisors may make commissions if they sell you certain products. This type of brokerage model can incentivize the client relationship to be tainted by the idea of gaining commission for selling certain products.
A fiduciary advisor will make decisions about an investment portfolio and investment strategy as determined by their client's financial goals. This standard avoids potential conflicts of interest and helps ensure that investment advice is customized to the client rather than the advisor's wallet.
What Are the Fiduciary Duties of Financial Planners?
A fiduciary financial planner must manage an individual's assets for that individual's needs. This standard means that a fiduciary financial planner's advice should only be based on achieving their client's financial goals.
Non-fiduciary financial planners or dually registered financial planners — like those that work in some brokerage firms — do not operate with the same standard of care. Instead, they operate with a suitability standard, meaning they can make financial recommendations that are merely "suitable" for their clients.
As such, there are no legal or ethical prohibitions to stop non-fiduciary advisors from potentially selling a client's assets if it would help them generate high commissions or fees. However, this setup creates a possible conflict of interest regarding investment management.
Fiduciary financial planners have a higher level of responsibility to their clients.
The specific rules related to the types of advice and products that a fiduciary financial planner can give and sell change occasionally. Numerous government agencies, including the Department of Labor (DOL) and the Securities and Exchange Commission (SEC) govern these rules. For example, a new DOL fiduciary rule would create updated "universal fiduciary guidance" about what kinds of advice fiduciaries can give. However, legal challenges have delayed that rule's release.
While this new rule winds its way through the court system, already existing rules — like those promulgated by the SEC — lay out specific duties of fiduciary financial planners.
Fiduciary and Transparency Standards
A fiduciary financial planner must adhere to specific standards when giving you financial planning advice or face severe professional consequences. Indeed, a fiduciary financial planner with a breach of duty is dealt with swiftly by governing bodies, often with major professional consequences for the individual in question.
As such, a fiduciary financial planner must adhere to a specific set of standards.
Next Level Discipline and Trust
By the simplest definition, fiduciaries are legally required to decide a client's interests. Their primary responsibility is growing and securing their client's assets, not lining their pockets.
Whereas broker-dealers may be scrambling to get ahead of recent DOL rulings, fiduciaries, like Plancorp, have held themselves to the highest standard for some time. We volunteer for annual audits through the Centre for Fiduciary Excellence (CEFEX) to hold ourselves accountable. In fact, we were the first advisory firm in Missouri and one of the first globally to achieve these marks in 2007.
Additional Financial Services and Planning
Firms that operate on a fee structure provide transparency. By eliminating the conflict of interest of selling proprietary products, firms position a portfolio with investments that make the most sense for the client. At Plancorp, the mutual funds we use have low internal expenses because this course of action provides significant value and improves investment returns to our clients.
Unlike the traditional broker-dealer model, investing is only part of the services we provide at Plancorp. As fiduciaries, we dive deep into estate, tax, retirement, insurance, and education planning. Creating a comprehensive plan based on the client's larger picture is important. We collectively consider clients' specific charitable intents, marginal tax rates, generational gifting, and risk tolerance as we formulate their financial plans.
Deeper Understanding and Presence
The Certified Financial Planner designation is becoming a focal point of credibility in the evolving financial planning culture. Professionals with these marks have been tested on and exposed to the curriculum across all planning areas. In addition, they adhere to fiduciary standards annually through continuing education courses and CFP Board reviews.
At Plancorp, on top of our long list of CFP®s, we have professionals from various lines of work, including JDs, CPAs, and CFA®s. This broad base of professions brings numerous business perspectives to our clients, allowing us to meet clients' needs holistically. We aren't strictly money managers. Regardless of what's happening in a client's financial life, we have the right person for you.
As such, the value you receive from your fiduciary financial planner exceeds an annual fee. Not only do they provide advice, but they also advocate on your behalf. At its core, this answers the question, "What is a fiduciary?" They act in sync with your goals and put your financial requirements ahead of their firm's interests.
The Importance of Having a Fiduciary Financial Planner
At Plancorp, we take our fiduciary duty extremely seriously, and that commitment to the client has been the way we've grown over our 40 years in business. We operate within all relevant statutes and ethical codes to ensure that we meet our client goals, not our own budgetary needs. We believe this helps us stand out from the competition because we followed fiduciary standards long before it was trendy or dual-registration was added to the marketplace. As elite wealth managers, we keep your interests — not our fees — at the top of our minds, and commit to upholding that standard with continued CEFEX audits.
Ready to move forward? Contact Plancorp today, and learn more about your financial options.
