By Kyle Louvar, CFP®, AIF®
What comes to mind when you hear the term “financial advisor”? What about “investment advisor”? There are many titles in the financial planning world to describe someone who manages either one or all aspects of your finances. So how do you know what the differences are, and how do you choose who to work with?
This can be a challenging prospect, but one thing we recommend you ask your current or prospective financial advisor is if they are held to the fiduciary standard. This is how you’ll know they have your best interests at heart.
If you want to feel empowered to make the best decisions for yourself and your finances, you need to partner with a fiduciary. So let’s discuss what a fiduciary is and why it matters when choosing a financial advisor.
What Do These Titles Mean?
If you’ve ever researched financial advisors, you may have noticed there are many different types of advisors to choose from. Some of the most common types of financial advisors are brokers, fee-only fiduciaries, and independent financial advisors. It’s important to know the standards each type of advisor is held to as you’re deciding who to hire.
Here’s the breakdown:
- Brokers manage your portfolio but also sell financial products such as mutual funds or insurance policies, for which they earn a commission. They are not held to a fiduciary standard, so they may not always act in your best interest.
- Fee-only fiduciaries may charge a flat fee or a percentage of your portfolio, but they are always held to a fiduciary standard, in which they are required to act in your best interest.
- Independent financial advisors have started their own financial firm. Most independent advisors act as fee-only fiduciaries, but some may act as fee-based advisors and sell additional financial products on a commission basis.
What Is a Fiduciary?
In general terms, a fiduciary is a person or entity who has the power to act for another in situations that require complete trust. When it comes to the financial industry, financial advisors who work for a registered investment advisor firm must always act as a fiduciary for their clients. CERTIFIED FINANCIAL PLANNER™ professionals are also held to this duty when providing financial advice to their clients. By law, an advisor must be completely transparent and always act in their client’s best interest. They are also obligated to avoid and disclose any potential conflicts of interest.
Additionally, the ongoing services and investment monitoring they provide also fall under the fiduciary duty. In other words, their job doesn’t end after the initial meeting or purchase. They must regularly review your accounts to help ensure your investments are in your best interest.
There are financial professionals whose services do not fall under the fiduciary standard. This doesn’t mean that they are out to steal your money and can never be trusted—far from it. These financial professionals who register with FINRA are held to a standard known as Regulation Best Interest (Reg BI).
What Does it Mean to Work With a Fiduciary?
There are several benefits to working with an advisor who serves in a fiduciary capacity. For one, they are open and transparent. Aside from the obvious goal of creating value for your money, working with a fiduciary will give you confidence that your advisor is working in your best interests rather than their own. They’ll give you their true, professional opinion (even if it’s not the answer you want to hear). This is extremely valuable when you’re facing a big life decision, whether it’s purchasing a second home, transitioning into consulting work, or retiring earlier than anticipated. Reviewing your entire financial picture, an advisor can show you the impact a decision may have on your future and how you can pursue certain goals.
By working with an advisor who holds to the fiduciary standard, you can be confident in your financial future. Clients have the power to ask questions and demand the highest value for the service that advisors are providing. As a registered investment advisor firm, we understand people’s reservations or even negative connotations toward the underlying motivations of some advisors. We want to assure you that you can trust in the fact that our relationship with you is built on integrity and putting your interests above our own.
A Comprehensive Approach
More than just picking your stocks, an independent fiduciary advisor can be a realistic sounding board to provide a litmus test when you have questions or face a big financial decision. They actively coordinate the accumulation, distribution, and transfer of your wealth throughout all areas of your retirement plan. An advisor who looks at the big picture of your financial life can help you optimize income and mitigate taxes in retirement.
For example, we help you create and implement strategies while you work that target your retirement income goals while coordinating your withdrawals and minimizing your taxes. We also design a Social Security strategy that optimizes your benefits, help you decide which Medicare options best suit your needs, and address long-term care so you can feel confident about living comfortably in your retirement years. The objective advice of an independent advisor can help you plan ahead and make an incredible impact on your long-term financial situation in retirement.
Partner With a Fiduciary for Empowered Decision-Making
At Guided Capital Wealth Management, we are fiduciaries who utilize our proprietary process, The Paradigm FORMula, to help you create a dynamic plan that can help you reach your financial potential and keep you on track toward achieving your goals. Schedule a FIT meeting using our online calendar or by contacting us at (832) 975-0711 or by email at email@example.com to learn if we are the right team to guide you on your financial journey.
Kyle is a CERTIFIED FINANCIAL PLANNER™ professional and holds the Accredited Investment Fiduciary® certification. He is the CEO and Wealth Management Advisor for Guided Capital Wealth Management, a fiduciary financial advisory firm offering fee-based advice, guidance, and education. After seeing the impact that the 2008 financial crisis had on families, Kyle became fully committed to helping his clients develop a financial plan that changes as their lives unfold and their needs evolve. Spending nine years working for one of the largest brokerage firms on Wall Street, Kyle holds a high value for process, expertise, objective advice, and customized solutions. His goal is to help his clients experience confidence in their financial future through a disciplined process of financial planning, investment management, and sound financial decision-making.
Kyle graduated from New Mexico State University, where he was a proud 4-year letterman in football for the Aggies and where he’s sat as an NMSU Foundation board member since 2015. When not helping his clients, Kyle enjoys spending time with his wife, Nicole, and their two daughters. You can often find him coaching his daughters’ softball teams, playing golf, cooking, and traveling. To learn more about Kyle, connect with him on LinkedIn.