What If Your Financial Advisor Uses the F-Word?

The Internet has brought investment opportunities to the masses. However, the tremendous strides in investment technology are not matched by easy access to expertise. In fact, the ability of people to put themselves "out there" as financial experts to the masses can actually make it difficult to discern the experts from the pretenders. It can be difficult for investors to find true financial expertise.

The financial advisor you choose to work with is just as important as the investments you choose for your portfolio. With many people pledging to get help with their finances this year, here are a few things we want you to know:

What is a Fiduciary?

A fiduciary financial advisor is held to the highest ethical standards in the financial industry. Fiduciaries are legally required to put their clients’ financial best interests ahead of their own.

Fee-only is also an important characteristic. This means that an advisor’s only source of compensation is a fee that is paid by the clients. Fee-only fiduciaries, like those at Linscomb & Williams, are not paid commissions by third parties. Such commissions understandably represent a conflict of interest.

The fiduciary standard mandates 5 key duties: 

  • Serve clients’ best interest
  • Act in good faith; use prudence with the care, skill and judgment of a professional
  • Avoid and disclose potential conflicts of interest
  • Share all critical, material facts
  • Keep investment expenses under control

 

At Linscomb & Williams, we’ve assembled a team of fiduciary financial advisors who are passionate about helping clients achieve their goals. Contact us to see how we can help you, too.

 

Why You Need a Fiduciary in 2021

The stock market can be a volatile, uncertain place, as we all saw in 2020. If you followed the market last year, think about how different it felt to be investing in stocks in late March versus the end of the year. The dangers of volatility and uncertainty increase as you near retirement. When you’re relying on your investments for income, watching them fluctuate in value can be an anxiety-inducing experience. Naturally, this causes you to think: "Will I have financial security late in life when I need it the most?"

How you handle volatility in the early years of retirement can have a ripple effect on how you fare throughout the later years. Deploying the appropriate strategy, one that protects your portfolio while offering growth opportunities, can be a difficult balance to reach. It’s a complicated process that can be extremely challenging to navigate by yourself.

Because of the growth in the Internet, digital tools are available to help. "Robo-advisors" can be convenient and inexpensive, but they can come up short, as investment algorithms are unable to dig into the deeper, intimate details of your life.

This is where a fee-only fiduciary financial advisor can be a game-changer. While no one has a crystal ball that can accurately predict the future performance of the stock market, a financial advisor can help you create a financial plan with the best chance of weathering periods of market volatility and attaining your goals. Advisors who owe their sole loyalty to your best interest can provide disciplined advice that will help you weather these inevitable storms.

A fiduciary financial advisor must serve your best interests and execute proper judgment beyond investments being only “good enough” or "good for now." Your dedicated fiduciary will likely have a deeper relationship with you than an ordinary broker, knowing when to take potential investment opportunities, and how these decisions fit with your life goals, debt needs, family needs, and future plans.

Your Needs May Be More Complex

Your financial life likely has many moving parts – and 2020 only added to this complexity. Your retirement plan, tax strategy, monthly budget, portfolio and more, must all work together to advance your wealth. When your financial advisor follows a fiduciary standard of care, you can rest assured that he or she is consistently implementing a plan that serves your needs.

With markets, laws, and working conditions in flux at this time, a fiduciary can help you make sense of ever-changing market conditions, combined with the know-how to quickly make changes to your financial plan if the investment climate takes a new turn.

Don't Take Fiduciary Status For Granted

Ironically, recent surveys show that more than half of the people shopping for financial advice believe that all financial advisors are always legally required to put the best interests of their clients first. That seems to make common sense, right? 

Unfortunately, that belief is mistaken. The result is a landscape that can be confusing for families because financial advisors can agree to be a legal fiduciary for certain limited functions and services, while not committing to be so obligated in the other services they may offer to you. 

Imagine how difficult that makes it when you are interviewing potential firms and ask a simple question: "Are you a fiduciary?" You may get an answer of "Yes," but that will not really tell the full story. The best data indicates that the percentage of financial advisors who can affirm being 100 percent subject to the fiduciary legal standard in all interactions with their clients is a distinct minority, likely only about a third. Most likely, if you are asking the fiduciary question in the first place, you are not seeking an advisor to talk the talk on a part-time basis. You probably want someone who walks the walk, full time, all the time. 

The Fiduciary Standard is Your Advantage

If you’re looking for a financial advisor to work with, a "100 percent fiduciary advisor" can be your wealth-building advantage. From keeping track of market swings in today’s new normal, to crafting a precise financial and estate plan for your family, working with a fiduciary through 2021 and beyond gives the best chance possible to stay on track and reach your wealth-building goals.

Regardless of what’s going on in the world, the fiduciary code of conduct is the gold standard for your financial life, and it will be a key differentiator in your financial future.

 

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Lantz Bowman, CFP®

Lantz Bowman, CFP®

Lantz Bowman is a wealth advisor for Linscomb & Williams.

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