At Capital City Financial Partners, we consider financial planning as a higher calling because it is one of the four things that people hold closely and value the most – Health, family, faith, and money.
Just like the professionals in these other areas, we believe sound advice should be given the same careful attention. You would not want to talk to a pharmaceutical sales representative to determine the best treatment for a medical condition, and in the same way, you should not rely on a broker to create your holistic financial plan. What separates financial advisors is the standard they are held to when advising clients – Fiduciary vs. Suitability standard.
Most financial advisors must sell investments that are suitable for clients, but fiduciaries must act with an even higher standard of care. Being held to a fiduciary standard requires advisors to put clients’ interests ahead of their own. A financial advisor who is a fiduciary has an ethical duty to recommend the best investment for you. Further, there is no financial incentive to act any other way because client accounts are not charged commissions or transaction fees. On the flipside, brokers are held to a suitability standard which only requires a “reasonable belief” that an investment, transaction, or the frequency of transactions is suitable for the customer. This reasonable belief leaves room for the broker dealers to recommend products that will increase their bottom line through commissions but may not necessarily be the best investments for clients.
If your financial advisor does not have a fiduciary duty to you, they may be able to recommend investments or products that pay them a bigger commission over ones that would be the best, true fit for you – which could end up costing you more. Brokers do just enough planning to justify a sale. However, fiduciary advisors understand that the planning is the most important part and therefore, nothing is sold before that step is fully complete. Further, we believe that updating that plan regularly is more important than any product you may buy.
To go even deeper, a fiduciary advisor is required to avoid potential conflicts of interest, or at a minimum, disclose them. This is why it is better to work with a fiduciary rather than an advisor who is simply following the suitability standard. The easiest way to verify that a financial advisor is a fiduciary financial advisor is to simply ask and then verify their status online by checking to see if he or she is registered with the SEC or the state. You can also look for the letters RIA. Any Registered Investment Advisor is held to a fiduciary standard.
Please reach out to our team if you have any additional questions!