It's Time to Find Out If Your Advisor Is a Fiduciary

Benjamin Haas |

Adam and I have been fortunate to meet several new families over the course of the last couple weeks. They found us in many different ways. Two came to us based on a referral from someone working with us already. Another sold a business after 30 years, and now needs to consider what’s next in retirement. The other had an advisor retire. And the other two feel they haven’t been getting adequate communication from their current advisor(s) and are considering our services instead.

While they found us in different ways, in every single case, we noticed one of two common themes (and in some cases, both themes):

  1. Their current advisor(s) did not appear to have been acting as fiduciaries for them. A fiduciary is to act on behalf of you and with the obligation of good faith and trust. For more information on fiduciaries, click here [Tracking #1-493533]
  2. Their current advisor(s) have not been providing comprehensive financial planning services. That means they haven’t looked at the full financial picture and in many cased have solely focused on investments.

When we meet someone for the first time, we want to know what they are looking to accomplish, what makes up their financial life, but then also, how did they get to where they are. Oftentimes we are able to assess what type of service and/or advice they have (or have not) been given. Here’s how we could tell if services were provided by fiduciaries and if it was through financial planning services:

  • We saw significant gaps in things that should be addressed in a basic financial plan, so they weren’t doing financial planning. We saw lack of attention to cash flow and having a cash reserve, insurance issues, lack of estate documents, and in some cases, saw tax issues too.
  • We fielded a number of questions in those introduction meetings that had gone unanswered by previous advisors. For example, questions on taxability of retirement accounts, confusion on how Social Security would work for them and what Medicare would cost. This met they didn’t have a retirement plan in place.
  • There were a number of times where we heard “I didn’t know about that.” This tells me there probably wasn’t adequate conversation outside of investment allocations and risk and return.
  • There were a number of times when these persons didn’t know how they were compensating their current advisors. That’s usually a tell tale sign that the advisor is not getting paid to give financial advice. Which means they may be compensated instead for selling a product and earning commissions.

If you’re wondering if you’re working with a fiduciary, or wonder if you’re paying for advice versus buying a product, here are a couple tips to consider. First, don’t be afraid to ask questions. Ask about their training and background. Look up their credentials. These must be made public and can tell you a lot about the type of advisor you’re working with, since titles tend to leave things awfully vague. And ask about how they are compensated. Is it based on advice, through a product, through assets under management, etc. Again these answers go a long way toward determining what type of communication and service you can expect.

And then think about your friends and family who you care about and may have expressed concerns recently. Encourage them to seek a second opinion. It can’t hurt. Many places offer complimentary consultation, just like us, to help educate and see if a partnership is appropriate. We think it’s time for everyone to find out if they are working with a fiduciary, or not.


[Tracking #1-816685]