Detailed explanation of fiduciary

What is a Fiduciary Financial Advisor?

What exactly does this funny word Fiduciary mean?  For financial advisors, it’s not as easy to determine as it should be.  Due to multiple government agencies and associations, many types of advisors can answer “yes” when asked if they are a fiduciary.  Most of those have to say “no” when asked if they are a fiduciary at all times.  This is such a big deal that I even wrote an article about it.

Earlier in my career, I worked in parts of the industry that required me to sell products for a commission.  Needless to say, it wasn’t a good fit – and it’s why I eagerly founded Provision Financial Planning as a Fee-Only firm. The only compensation I receive is from my clients, which allows me to be a Fiduciary at all times.  

 View our Fiduciary Oath.

Imagine you go to the doctor, and the doctor does not charge you (or your insurance) at all.  Instead, the doctor is paid by the pharmaceutical company when you purchase a prescription.  When this doctor prescribes you a medication, would you trust that this doctor is acting in your best interests?  Fee-Only means that we do not sell any financial products for a commission, receive any referral fees or other revenue sharing.  Unlike sales-based representatives, a Fee-Only advisor is ONLY compensated by the client. We don’t even hold the sales licenses required to get a commission.

This eliminates many of the conflicts of interest so prevalent in the financial industry.  

But, we believe that is just table stakes. A true Fiduciary should also be competent.

As a NAPFA-Registered Advisor, I’m required to complete 60 hours of Continuing Education every two years.  Since I am also an Enrolled Agent (highest credential the IRS awards), I must complete an additional 24 hours per year on tax Continuing Education.  While there is some overlap, that’s a lot of continued learning!

When you go to a doctor, you want to know they are competent.  While we believe relationships are crucial, you should expect the same from your financial planner.

Another great resource is Wall Street Journal columnist Jason Zweig’s Questions to Ask a Financial Advisor.