Interested in maximizing your retirement income? Want to grow your assets? How about optimizing your tax planning? Need protection in case of a healthcare catastrophe? If you answered “Yes” to any of these questions, seeking out a financial advisor is a great way to achieve your goals. However, as with all fiscal decisions, deciding who to work with isn’t a decision you should take lightly. It’s important to find an advisor who’s not only knowledgeable and experienced but capable of meeting your particular needs.
That being said, there are some traits that can be considered universally desirable. If you’re starting your search for a financial advisor, here’s one word you definitely want to look for: fiduciary.
What is a Fiduciary?
A fiduciary is a trustworthy individual who must work in the best interest of a person they conduct business with. Some examples include doctors and lawyers. After all, you expect your doctor to prescribe medication that will best treat your symptoms, not what will net the biggest profit for the medical industry. A financial fiduciary works along the same lines: the products they recommend and advice they give must put your interests first over their own financial gain.
As long as they follow the standard of prioritizing clients’ needs over their own, any financial advisor may self-identify as a fiduciary. Here at Cowen Tax, we describe our fiduciary status on our homepage. It’s one of the first things we want potential clients to know about us! If you’re researching an advisor and can’t find any written confirmation, ask directly if they’re a fiduciary. If you get anything but an affirmative answer, it’s time to look elsewhere.
Brokerage Firms and the Suitability Standard
If you’re particularly interested in investing, you might consider working with a brokerage firm. While you might find people who describe themselves as advisors in such places, keep in mind that stock-brokers follow different guidelines than financial advisors. Rather than being fiduciaries, they hold a suitability standard. This means they’re limited to recommending what they have on the shelf, and make it fit to the clients’ suitability. In other words, they may push products that would garner them a higher commission over what best suits the needs of their client. If you’re looking to develop a long-term relationship with a financial advisor, a fiduciary will likely care more about maintaining the relationship by doing what’s best for you.
Exercise Caution
While some states may require particular certifications or licenses to become a financial advisor, the fiduciary descriptor doesn’t have any requirements. Rather, if a financial advisor labels themselves one, they must live up to the expectations, lest they risk being reported to the Securities and Exchange Commision. Still, this ultimately means clients must take a fiduciary at their word.
How can you determine if a self-identified fiduciary is worth trusting, then? One way can be through searching for social proof. Friends and family who have worked with financial advisors can tell you who you can trust – and who you should avoid. You may also want to consider searching the social media channels of the companies you research. Are they involved with their local communities? Do they have a reasonable amount of followers? Such details can help establish credibility. You can also look for advisors on the Securities and Exchange Commission’s Investment Adviser Search. This will give you a general overview of an advisor’s experience and qualifications and describe any disclosures they have, such as complaints or arbitrations.
Now you know the importance of choosing a fiduciary for a financial advisor. If you’re ready to start researching, you’re in the right place! Cowen Tax Advisory Group’s financial advisors are proud fiduciaries, with more than 44 years of experience, testifying to our ability to meet your financial needs. Call 860-676-1100 or click here to schedule your free consultation.
Lindsey Restelli
lindsey@cowentaxgroup.com
As Cowen Tax Advisory Group’s Digital Marketing Assistant, Lindsey provides in-house copywriting and manages the company’s electronic records system, email marketing, and blog.
