Is Your Advisor Really a Fiduciary?

Over the weekend, I read a 225-page book explaining how individual investors can determine whether their financial advisor is truly a fiduciary. It was well written and thorough. That said, I can’t imagine many investors taking the time to wade through hundreds of pages of regulatory nuance — especially when the industry itself often seems designed to obscure, not clarify.

Part of our responsibility as advisors is to distill jargon and legalese into something that actually makes sense. When you strip away the disclosures, titles, and marketing language, the litmus test is surprisingly simple:

How is the advisor paid?

If an advisor’s compensation is 100% fee-based, they are acting as a fiduciary. Their obligation is to act in your best interest at all times.

If an advisor’s ADV contains disclaimers — and most investors never read them — that advisor is a part-time fiduciary. They may act in your best interest some of the time, but in other situations, they are allowed to sell products that only have to be “suitable,” not necessarily what’s best for you. In those moments, their legal obligation shifts, even if their title does not.

This isn’t about good advisors versus bad advisors. It’s about clarity. If an advisor can switch standards depending on how they’re paid, the burden quietly shifts to the investor to know when that switch happens. Most don’t — and shouldn’t be expected to.

You shouldn’t need 225 pages to understand whether your advisor is always on your side.  Want to learn more?  Call us at 256-417-4870 or 407-220-1040

 

Mike

 

Mike Mickels is the President and Chief Compliance Officer of CochranMickels Retirement Specialists, LLC, and an avid sporting clay competitor. Our firm provides personalized planning and investment services to individuals approaching and in retirement. Disclaimer: This content is intended solely for informational purposes. CochranMickels Retirement Specialists, LLC and its representatives are only authorized to offer advisory services where properly licensed or exempt from licensure. Investing carries risks, including potential loss of principal capital. Our firm does not endorse external links, nor is it responsible for third-party content