If you’re researching advisors, you may find yourself asking what is a fiduciary financial advisor? How do you know if your financial advisor is a fiduciary? And what’s the difference? Financial titles can be confusing, so we’re here to provide some clarity.

A fiduciary is any person or entity that has a legal responsibility to act in good faith for a beneficiary. In the financial world, this translates to any advisor or firm who has the fiduciary duty to act in your best interest when it comes to financial planning and investment management.

By the end of this article, we hope that you have a better understanding of the benefits of hiring a fiduciary financial advisor Houston, how they differ from a broker-dealer, and be able to recognize the difference in Avidian’s approach to holistic wealth management.

What does it mean if your financial advisor is a fiduciary?

A fiduciary financial advisor’s responsibilities are both legal and ethical. They are held to the highest duty of care, meaning that they have a fiduciary responsibility that requires them to make decisions in good faith and in a prudent manner. This includes disclosing and avoiding conflict of interests (when the duty to act solely in your best interests is compromised or impeded by any other interests).

Fiduciary advisors can provide financial advice for everything from investment management in Houston to helping you decide which types of IRA are best for you. 

According to the Security and Exchange Commission (SEC), fiduciary duty includes:

  • Acting with undivided loyalty and good faith
  • Providing beneficiary with full and fair disclosure of all facts
  • Eliminate and expose any potential conflicts of interests
  • Serve clients best interests at all times without subordinating client’s interests to their own

If a fiduciary firm or advisor does not follow the above standard, they risk the revocation of their registration and legal action may be taken against them.

How to know if your financial advisor is a fiduciary

When hiring a financial advisor, you cannot implicitly trust that they will put your interests before those of their investors, themselves, or their entity unless they are a fiduciary. If the financial professional you are working with is an Investment Adviser Representative (that is, associated with a Registered Investment Adviser, or RIA), then they are a fiduciary.

To be certain you are working with a fiduciary financial adviser, simply ask them.

Fiduciary vs Broker-dealer

At the beginning of 2020, the Security and Exchange Commission (SEC) passed a new regulation called “Regulation Best Interest” or “Reg BI” that acts as a new standard of care for broker-dealers.

Previously, financial broker-dealers were only held to the suitability standard, which solely required fair dealing and best execution so long as the advisor thought it was in your best interest. This left room for the broker-dealer to act in his/her own best interests as long as his/her recommendations were considered suitable — regardless of whether it was the best financial decision for you.

The Reg BI buttons up this process, requiring broker-dealers to act in the customer’s best interest before their own. Although this is a step up from requiring broker-dealers and advisors recommendations to be “suitable” to the client, there is still a way to go before they meet the duty of care required by a fiduciary.

When it comes to investment advice, taxes, retirement, finances, and/or estate planning in Houston, you want to be certain you are working with someone who is serving your interests first. Here are a few (of the many) differences to consider between a broker-dealer and a fiduciary wealth advisor.

Ongoing Education

Fiduciary

  • Follows tax/ estate/ charitable law changes and what impact these changes have on wealthy families
  • Avoids getting caught up in fads and appreciates a more conservative approach

Broker-dealer

  • Often follows what investment company wholesalers are promoting
  • Follows latest hot investment products or stock, and looks for new investment ideas (shiny objects) to sell

Meeting Review Topics

Fiduciary

  • Cash flow and budget — long-term cash flow projection
  • Financial plan review, tax/charitable projection, estate/insurance review, overall allocation review

Broker-dealer

  • Investment portfolio review, short-term investment performance focus (less than 12 months), commentary about the market or economy

Tax Planning

Fiduciary

  • Can review and discuss tax strategies with clients and provide tax planning in Houston as it is not what an investor makes that counts… it is what he or she keeps that counts (i.e., your after-tax return)

Broker-dealer

  • Is not typically allowed to discuss tax strategies if not immediately related to investment management

Advisor Compensation

Fiduciary

  • Does not receive commissions for buying/selling

Broker-dealer

  • May receive commission for buying/selling that are not transparent/disclosed
  • Receives additional and separate compensation for selling certain investment products, bank products, mortgages, credit cards, etc. making it difficult to act without potential conflict of interest

Is a fiduciary advisor worth it?

If you’re a high-net-worth investor considering finding a financial advisor, it’s in your benefit to hire someone who follows the fiduciary standard of care. Unlike non-fiduciary advisors who are held only to Reg BI, a fiduciary financial advisor has a fiduciary duty to act on your behalf.

Benefits of working with a fiduciary advisor

Avidian Wealth Solutions is proudly held to the fiduciary standard. As such, we not only promise to work in your best interests, but we are also legally required to.

Here are several of the many benefits to working with our team of fiduciary advisors:

  • You receive accurate, honest, and thorough financial advice aligned with your goals and objectives
  • We act in good faith and provide you with all of the relevant facts
  • Any conflicts of interest will be avoided and disclosed to you
  • We are fully transparent about our compensation
  • Your best interests will always be placed before our own

This is the Avidian difference.

Avidian Wealth Solutions in Houston

Avidian is a fee-only, independent fiduciary wealth management firm made up of Certified Financial Planners®, Certified Public Accountants, MBAs, Attorneys, and Chartered Financial Analysts. 

As fiduciaries, Avidian is held to the highest standard of care. We are conservative, disciplined, and here to make a positive impact in the lives of the families we serve by helping them make informed financial decisions. Request a meeting with us today!

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If you’re researching advisors, you may find yourself asking what is a fiduciary financial advisor?…

If you’re researching advisors, you may find yourself asking what is a fiduciary financial advisor?…

Disclaimer:

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Avidian Wealth Solutions, LLC), or any non-investment related content, referred to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Avidian Wealth Solutions, LLC. Please remember to contact Avidian Wealth Solutions, LLC, in writing, if there are any changes in your personal/financial situation or investment objectives to review/evaluating/revising our previous recommendations and/or services. Avidian Wealth Solutions, LLC is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of Avidian Wealth Solutions, LLC’s current written disclosure statement discussing our advisory services and fees continues to remain available upon request.

Financial Planning and Investment Advice offered through Avidian Wealth Solutions (Avidian), a registered investment advisor. Avidian does not provide tax or legal advice and the information presented here is not specific to any individual’s circumstances. To the extent that this material concerns tax matters or legal issues, it is not intended or written to be used, and cannot be used, by a taxpayer to avoid penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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