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Equity Financial Group | Investments | Estate Planning | Insurance

Why Use A Fiduciary Advisor?


Making long-term decisions about money can be difficult and even a little scary. Many people turn to an advisor for help with their financial decisions. Many advisors offer good advice but deciding whether they're worth the price can be difficult. Before an investor hires an advisor, they should make sure that the advisor has their best interests in mind.

There are many benefits to hiring an advisor as they often have a broader, deeper knowledge of money management, taxes, social security and insurance allowing them to help investors figure out their savings strategies, retirement options, and overall retirement plan. A professional opinion can be especially helpful towards the beginning of the retirement planning process when most people are trying to set new goals. Very few investors know the critical importance of selecting an advisor that operates as a fiduciary. Advisors come in all shapes and sizes, from a lower quality sales representative that sells products for substantial commissions, to a fiduciary that solely has the investor’s best interests in mind.

What’s a Fiduciary Advisor?

The Securities and Exchange Commission (“SEC”) identifies a financial or investment advisor as either a Registered Investment Advisor (“RIA”) or an Investment Advisor Representatives (“IAR”), carrying a Series 65 license or in some cases the Series 66 license. By law, advisors with these licenses must act in a fiduciary capacity. They are independent and frequently use job descriptions such as: Financial Advisor, Investment Advisor, Financial Consultant, Financial Planner, or Money Manager. Most importantly, they acknowledge they are a fiduciary when they provide investment advice and services for an amount the client must understand and agree to. RIAs and IARs are held to the highest ethical standards in the industry. They are the only professionals who can provide financial advice and ongoing services at a reasonable expense and they are required to put the investor’s interests ahead of their own.

All advisors at Redhawk Wealth Advisors, Inc. serve in a fiduciary capacity and we have developed key principles to guide advisors when acting as a fiduciary. The principles are collectively called the FiduciaryShieldTM Promise (see picture to the right) and each advisor goes through an education process and formally commits to uphold these covenants.

Fiduciaries are regulated under the Investment Advisers Act of 1940 and are held by law to the highest standard of responsibility to their clients, therefore requiring them to always act in their clients’ best interests. This encourages a unique level of personalized service not always found in investor-advisor relationships. The fiduciary duty is a well-established legal principle, backed by decades of precedent. A Fiduciary will have an agreement that lists the services they will provide, the terms and conditions of the relationship, and the costs. If an advisor isn’t willing to put their services in writing and disclose their pricing structure, walk away!


What’s a Non-Fiduciary Advisor?

Financial professionals that are not required to act in their client’s best interests are sales representatives and hold securities licenses, such as Series 6, 7, and/or 63 which limits them to selling investment products for commissions (see our “7 Reasons Why Variable Annuities are Horrible for a 401(b) or 457 Retirement Account” for more information). Many of these advisors sell the product that pays them the highest commission versus placing an investor in an appropriate investment that’s in the investor’s best interests. This creates an enormous conflict of interests because the commission is paid by the investment company!

Many brokers and insurance agents call themselves “financial advisors” or “financial planners,” but they do not have a fiduciary duty and in fact they aren’t required to put the investor’s interests first. A nonfiduciary advisor primarily represents themselves or their company, rather than a legal responsibility to act in the investor’s best interests. Instead, they only provide the investor with “suitable” financial products. This “suitability standard” is very broad and difficult to impose. Fiduciary duty is stricter than the suitability standard. It's not enough for an advisor to just provide "suitable" recommendations; they must provide the best advice possible.

It is critical that an investor finds out if an advisor is willing to act as a fiduciary. Fiduciaries are required by law to recommend investments in the investor’s best interests, not their own or what their firm is telling them to sell. The critical question an investor should be asking themselves is if they want a sales representative investing assets that will impact their standard of living during retirement and their financial security late in life?



Key Questions To Ask An Investment Advisor


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