Choosing to work with a financial advisor is an important decision. You are literally allowing this person to spend and invest your money. In fact, you are entrusting them to make wise decisions about your financial future. So, how much trust should you place in your financial advisor?
You have the right to confidently expect that your advisor will hold your financial interests above their own gain. There are a few things to know that may help determine your financial advisor’s “trustworthiness.”
Certain “titles” in the financial industry carry with them an implication of trustworthiness. That’s because these titles imply that they have a fiduciary relationship with you, as their client.
What is a fiduciary relationship? It is a relationship in which the person providing you with a financial service is committed to placing your best financial interest ahead of his or her own.
A fiduciary relationship means that the advisor will consistently act in good faith and have your best interest (as the client) in mind at all times. Usually, this pledge of good faith is in writing. In fact, when interviewing your financial adviser, ask for a fiduciary pledge in writing. A fiduciary relationship is held to a higher standard of trust than other professional relationships.
Not every financial advisor has to adhere to a fiduciary standard or relationship. I’m sure you believe it is implied that by holding themselves out as a financial advisor, they will act with due care and caution when dealing with your money. Quite frankly, not all financial advisors do. That’s why it is so important that you do your homework when choosing a financial advisor.
These are some of the job titles you’ll find in the financial industry:
Financial Analyst, Financial Advisor (Adviser), Financial Consultant, Financial Planner, Investment Consultant or Wealth Manager. Titles do not mean that they possess advanced degrees or certifications. It is up to you to ask the right questions and analyze the answers.
When dealing with a financial professional three job titles automatically imply a fiduciary relationship: Attorney; Certified Public Account (CPA) and Registered Investment Advisor (RIA).
Some professional organizations such as the National Association of Personal Financial Advisors have their members take a fiduciary oath.
I’ll say it again, do your homework and ask the tough questions before hiring your Financial Advisor. You have a right to ask for credentials, billing procedures and if any complaints have ever been filed against them professionally. Get your questions answered in writing. It is your money and your financial future – be proactive and do your homework!
**Please check with a financial professional before making financial decisions. This article is not intended as investment or financial planning advice.**
I recommend David Bach’s Smart Women Finish Rich because there is an entire section on choosing and working with a financial advisor. I've included a link to Amazon.com: Smart Women Finish Rich
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