Choosing a financial advisor means placing trust in someone to help guide important financial decisions. Below are some common questions individuals have when pursuing an advisory relationship.
What is a fiduciary financial advisor?
A fiduciary advisor is a financial professional who is legally obligated to act in their clients’ interests when providing investment advice and other financial recommendations. This fiduciary duty is designed to help ensure recommendations are based on your financial goals and circumstances rather than the advisor’s personal interests.
Not every financial advisor is held to the same legal standard. Some financial professionals are registered representatives of a broker-dealer and may instead be subject to a suitability standard. Under that standard, recommendations generally must be suitable for a client’s needs, but advisors may be permitted to recommend products that pay higher compensation, provided those recommendations are considered suitable.
Understanding which standard your advisor follows can help you make a more informed decision about who you trust with your financial future.
What does a fiduciary advisor do?
A fiduciary advisor helps individuals and families make informed financial decisions while putting their clients’ interests at the center of every recommendation.
Depending on your needs, a fiduciary advisor may provide guidance on investment management, retirement planning, tax-efficient strategies, estate planning, charitable giving, insurance planning, and other aspects of your financial life.
Working with a fiduciary advisor can also provide greater confidence that recommendations are being made with your interests in mind. While no advisor can eliminate every potential conflict of interest, a fiduciary standard establishes a legal and ethical obligation to manage those conflicts appropriately and act in the client’s interests.
What does it mean to serve under a fiduciary standard?
Serving under a fiduciary standard means taking the time to understand your goals, your family, your priorities, and your long-term vision before making recommendations. Rather than focusing on individual financial products, a fiduciary advisor develops personalized financial strategies designed to support your objectives as your life evolves.
What qualifications does a fiduciary advisor have?
There is no single certification required to become a fiduciary advisor. However, many fiduciary advisors pursue professional designations that demonstrate advanced education, experience, and an ongoing commitment to ethical standards.
Credentials such as Certified Financial Planner (CFP®), Chartered Financial Analyst (CFA®), Certified Private Wealth Advisor (CPWA®), and Certified Investment Management Analyst (CIMA®) generally require rigorous coursework, examinations, professional experience, and continuing education. Many of these programs also emphasize ethical responsibilities and fiduciary principles.
Other specialized designations, such as Certified Divorce Financial Analyst (CDFA®) or Chartered Advisor in Philanthropy (CAP®), reflect experience in specific planning areas that may be valuable depending on your financial situation.
While professional credentials can be helpful, they are only one factor to consider. An advisor’s experience, communication style, planning philosophy, fee structure, and ability to understand your goals all play an important role in determining whether they’re the right fit for your needs.
How do I choose the right financial advisor?
Every financial journey is different, which is why choosing the right advisor matters. Before making a decision, consider these questions:
- Do their services and experience align with your financial goals and level of complexity?
- Have they worked with clients who have financial situations, assets, or life events similar to yours?
- How do they communicate, and how do they coordinate with your CPA, attorney, or other trusted professionals?
- Do they communicate clearly and make you feel comfortable discussing your finances?
Finding an advisor you trust is just as important as finding one with the appropriate experience.
What is it like to work with Hightower Signature Wealth?
At Hightower Signature Wealth, our advisors serve clients under a fiduciary standard of care. Our advisors are not compensated through commissions. Instead, we use a transparent fee structure based on a flat rate and a tiered asset-based fee schedule. This helps reduce the potential for conflicts of interest by helping ensure our recommendations are not driven by the sale of a particular financial product.
Instead, our focus is on helping you build a thoughtful financial strategy aligned with your goals while taking into account changing market conditions, your risk tolerance, and your long-term objectives.
We believe financial planning is built on lasting relationships, not transactions. Our advisors take the time to understand your vision, develop a personalized path forward, and leverage the resources and capabilities across the Hightower network to help support your financial journey.
Frequently Asked Questions
1. How can I verify whether a financial advisor is acting as a fiduciary?
The way to determine if your advisor is a fiduciary is simple. You can ask them directly whether they act as a fiduciary at all times in your relationship. You can also verify the advisor or advisory practice through the SEC’s Investment Adviser Public Disclosure website or FINRA BrokerCheck. Additionally, for reassurance, you can request a written letter or statement confirming that they are bound to a fiduciary standard when working with you.
2. How are fiduciary financial advisors typically compensated?
Fiduciaries must disclose how they are compensated. Some advisory practices charge a percentage of assets under management (AUM), while others may receive commissions. Fee-only advisors, however, are compensated directly by their clients and do not receive commissions for selling financial products. Fiduciaries are also required to put their clients’ interests first and disclose potential conflicts of interest related to their compensation.
3. What is the difference between a fee-only, fee-based, and commission-based financial advisor?
Fee-only advisors are financial advisors who are paid directly by their clients for advice. They don’t accept commissions, kickbacks, or bonuses for selling specific financial products. A fee-based advisor is an investment professional who charges direct fees for advice or asset management but may also earn commissions or third-party compensation for selling certain financial products. A commission-based advisor earns income through the sale of specific financial products.
4. What questions should I ask a fiduciary advisor during an introductory meeting?
Here are some important questions to ask your advisor during an introductory meeting:
- Are you a fiduciary?
- What services do you offer?
- What professional organizations are you involved with?
- Do you have experience serving clients “like me”?
- Tell me about financial planning you have done for people “like me.”
- What are your fees?
- How would you work with my other advisors?
- With whom will I work?
- What is your investment and planning philosophy?
- How comfortable do I feel working with this advisor?
5. When should I consider working with a fiduciary financial advisor?
You should consider working with an advisor when your financial life becomes too complex to manage on your own or when you are experiencing significant life transitions, such as retirement, divorce, the loss of a spouse, or an inheritance. Hightower Signature Wealth can help clients navigate their financial lives through any of these stages.
6. What should I bring to my first meeting with a financial advisor?
It’s helpful to bring information that gives your advisor a clear picture of your finances, such as investment and retirement account statements, income information, insurance policies, estate documents, and details about your assets and liabilities. Just as important, come prepared to discuss your goals, concerns, priorities, and any financial decisions you’re currently considering.
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Hightower Signature Wealth is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC (member FINRA and SIPC). Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.
This is not an offer to buy or sell securities, nor should anything contained herein be construed as a recommendation or advice of any kind. Consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. No investment process is free of risk, and there is no guarantee that any investment process or investment opportunities will be profitable or suitable for all investors. Past performance is neither indicative nor a guarantee of future results. You cannot invest directly in an index.
These materials were created for informational purposes only; the opinions and positions stated are those of the author(s) and are not necessarily the official opinion or position of Hightower Advisors, LLC or its affiliates (“Hightower”). Any examples used are for illustrative purposes only and based on generic assumptions. All data or other information referenced is from sources believed to be reliable but not independently verified. Information provided is as of the date referenced and is subject to change without notice. Hightower assumes no liability for any action made or taken in reliance on or relating in any way to this information. Hightower makes no representations or warranties, express or implied, as to the accuracy or completeness of the information, for statements or errors or omissions, or results obtained from the use of this information. References to any person, organization, or the inclusion of external hyperlinks does not constitute endorsement (or guarantee of accuracy or safety) by Hightower of any such person, organization or linked website or the information, products or services contained therein.
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