When Should You Hire a Financial Advisor?

Even without all of the ups and downs of the market, managing your money and retirement can be stressful. Throw in advice from your friends, unsolicited tips from your coworkers, and advertisements for professionals with all sorts of backgrounds and titles, and it can be easy to feel overwhelmed by it all.

Instead, what if you could find an advisor who has not only the experience but also the motivation and obligation to put your needs first? That sounds like the beginning of a long-lasting partnership, right?

It is this unique combination of perspective and expertise that attracts many to the support that a fiduciary financial advisor can provide. 

So why should you consider hiring a fiduciary financial advisor? Here are some key reasons.

Fiduciary Financial Advisors Have Different Legal Standards

A fiduciary financial advisor is a professional who has a legal duty to put your needs above their own and always act in your best interests. In practice, this means that a fiduciary financial advisor has an obligation to only buy and sell investments and give advice that is the best fit for their clients, without being influenced by what could potentially earn them a higher commission. 

The fiduciary obligation is rooted in the Investment Advisers Act of 1940. Although the fiduciary standard is broad, it is still a clear distinction from the suitability standard that governs other financial advisors. Under this standard, which is governed by the Financial Industry Regulatory Authority (FINRA), non-fiduciary advisors, who can also be called brokers, must simply have a “reasonable belief that an investment, transaction or frequency of transactions is suitable for the customer.”

This different standard means that a non-fiduciary advisor could recommend a product that, even if it is beneficial, is not the best option for you—and still earn a commission.

Fiduciary Financial Advisors Often Have Different Compensation Models

The second key way that fiduciary financial advisors are different from other financial professionals is related to how they are compensated for their work.

Whereas other financial advisors commonly use commission-based models that are connected to the products they sell or manage on behalf of a client, fiduciary financial advisors often use one of the following compensation models:

• Flat percentage fee
• Flat dollar fee
• Percentage of assets managed

This compensation model helps to reinforce the fiduciary relationship, build trust in how a portfolio is managed, and keep a wide perspective on the types of strategies and options considered by the advisor. In other words, someone looking for advice, a recommendation, or help with a small part or portion of their portfolio may choose a financial advisor or broker, whereas those looking for someone to advise them on their entire portfolio may be better suited with a fiduciary.

Connect with Your Own Experienced Financial Advisor

Everyone’s needs and goals are different, which is why the first step in identifying the type of advisor you need is to understand your goals and how any advisor you’re considering approaches their relationship with their clients. You can then review the available options and ask yourself questions about which standards, compensation models, and levels of advice work best for you and your family.

If your answers to these questions lead you toward a team that is focused on helping you live life to the fullest and enjoy the moments that matter, we would love to get to know you and share our depth and breadth of financial services experience. 

We welcome you to learn more about the Harvest Wealth Group team here.