What a Fiduciary Is…and Isn’t

What a Fiduciary Is…and Isn’t

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Financial Fiduciary – Retirement Fiduciary – Decker Retirement Planning, Inc.

There is a lot of buzz about the word “fiduciary” right now, but the trouble is, there is also a lot of confusion. Some advisors who claim to be a fiduciary really are not.

Series 7 LicenseNot a Fiduciary

A Series 7 license allows someone to give investment advice, and to be paid commission to do so. In fact, commissions are typically the largest way that an advisor with a Series 7 license gets paid.

Most brokers and bankers hold this license, and they are highly-compensated to sell the investment products that their employers offer. They’re basically salespeople. And beware—with some investment products there are hidden, multiple layers of charges, fees and commissions paid to non-fiduciaries who are not required to disclose them to you.

Three Ways to Tell If a Financial Advisor Is a Fiduciary

Don’t just ask an advisor if they are a fiduciary, check all three of the following points. And if they don’t have all three, they are not a fiduciary. Just walk out.

  1. Series 65 License – Is a Fiduciary

First of all, if they do not have a Series 65 license, they cannot be a fiduciary.

This license basically says that only financial advice which is in the client’s best interest must be given. It’s fee-based, so there’s no conflict of interest or selling of high-commission products. The financial advisor with a Series 65 license is required by law to advise you on what is in your best interest even if they make no money at all on a particular investment, like a no-load mutual fund.

  1. Independence

The other huge, important thing to look for is an advisor’s independence.

If the company an advisor is working for is not independently-owned, they are not a fiduciary. They may tell you that they’re fiduciaries, but they’re not. The analogy would be going to a doctor who worked with only one pharmaceutical company and could give you only one drug no matter what your individual symptoms were.

Unless an advisor is independent they cannot really give you fiduciary advice because they don’t have access to many of the products that might be best for you—they have an agenda because they are being pushed to offer a limited range of investments.

  1. RIA, a Registered Investment Advisory Firm

Thirdly, they have to be an RIA.

Structuring a company as an RIA, a Registered Investment Advisory firm, means that it is purposely set up to be a fiduciary—a firm which is required by law to put the client’s best interest before the company’s best interest.

Bankers, brokers, insurance salesmen–none of those categories are fiduciaries if they are not an RIA.

A Fiduciary Firm

A financial advisor who is a fiduciary will make financial recommendations which are in your best interest, not theirs. They’re not just looking to sell high-commission investment products. They are held to strict legal standards, and they work on a fee-basis with full disclosure on how they make money. They will pull out calculators, do Excel spreadsheets, look at the statements and/or call companies directly to ensure that you have full disclosure on the investments in your portfolio.


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