Ask a counselor, “I’m overconfident and gullible.” How can I find a financial advisor who truly acts as a fiduciary?

How can I reliably verify that a specific financial advisor is a true fiduciary in their own right – and that they’re not just scamming and cheating me? Is there a respectable, independent professional body that independently investigates and reliably certifies that individuals named “advisors” are actually acting as fiduciaries? I’ve learned from a lifetime of depressing mistakes that I’m overconfident and gullible, so I have a deathly fear of being lied to and deceived about something so crucial. I can’t afford any mistakes this time.

-Rebecca

I’m sorry you’ve dealt with this in the past.

Fortunately, the direct answer to your question is simple and definitive. Yes, there are several ways to check if a financial advisor is a fiduciary. There are several organizations in the financial services industry that require member advisors to adhere to a fiduciary standard as a condition of membership.

These organizations verify that applicants are registered trustees. They often have public directories available that anyone looking for a fiduciary financial advisor can access.

You can also check it yourself with the Securities and Exchange Commission investment advisor search tool. This is because the legal requirement for an adviser to act as a fiduciary depends on whether they are registered as an investment adviser representing a registered investment counseling firm (as opposed to a registered representative of a dealer.)

What is a Fiduciary Financial Advisor?

A fiduciary advisor is the one who is required to place the interests of the client above his own with regard to the advice and recommendations given to the client. It may seem painfully obvious that this is a baseline standard. The reality, as you seem to know, is that this is simply not the case.

I’m always careful to point out that, in the context of this question and this discussion, “fiduciary” is a legal standard. This means that advisors are required by law to put your interests before theirs.

The story continues

There are two key insights that I think are important to take from this:

1. It is a legal standard.

2. It is not a guarantee.

Let’s dive deeper into these.

Fiduciary legal standard

The fiduciary duty is imposed by the Securities and Exchange Commission (SEC). The fiduciary duty is satisfied by full and fair disclosure of all material facts and conflicts of interest in a manner that enables the consumer to exercise informed consent.

No warranty

The fact remains that financial advisors and planners are still ultimately humans capable of illegal and unethical behavior.

A famous example to illustrate this point is that of Bernie Madoff. At the time of his arrest, he was a trustee. His story is complex, of course, but the simple fact is that if “legally held to a fiduciary standard” is the only metric anyone uses to judge a potential adviser, then Bernie Madoff was a solid choice on December 10, 2008. You should always do your own due diligence.

This is not a criticism of the fiduciary standard. I am a legal trustee.

Nothing in your questions suggests that you are not doing this. But for the sake of others reading this, while it’s great that you’re looking for a fiduciary advisor, I encourage you to narrow your search further. The fiduciary status does not imply any particular expertise. Also find a financial advisor who specializes in your particular needs or background.

It is important to do your own due diligence on any advisor you are considering.

Professional organizations whose members are trustees

There are several professional organizations of registered trustees. Note that membership in one of the following organizations signifies that the organization has verified that the member is a fiduciary. But not all trustees are members of one of the following organizations.

If someone does not appear on any of the membership lists or in a directory below, it does not mean that they are not yet a Trustee. Reference the SEC Advisor search function for definitive authority.

Here are some common organizations whose members are trustees:

The National Association of Personal Financial Advisors (NAPFA). NAPFA members provide comprehensive financial planning and undergo ongoing continuing education.

Paid network. This is a directory of advisors who have been verified as paying trustees.

XY planning network. In addition to fiduciary standards, XYPN encourages members to obtain and hold Certified Financial Planner (CFP) marks. They also have no minimum assets.

Garrett Planning Network. Members of the Garrett Planning Network provide advice on an hourly basis, as needed.

Smart asset. Additionally, at SmartAsset, all advisors on the platform are approved trustees, which means they are legally bound to put your interests above their own. SmartAsset partners with local and national businesses. SmartAsset has an economic incentive to introduce consumer advisors.

Conclusion

Clients have multiple avenues through which they can locate and identify fiduciary financial advisors. In addition to finding a trustee, consider finding an advisor with specific expertise in your area of ​​need.

Brandon Renfro, CFP®, is a SmartAsset financial planning columnist and answers readers’ personal finance and tax questions. Do you have a question you would like answered? Email AskAnAdvisor@smartasset.com and your question might be answered in a future column.

Please note that Brandon does not participate in the SmartAdvisor Match platform and was paid for this article.

Find a financial advisor

• If you have questions specific to your investment and retirement situation, a financial advisor can help. Finding a financial advisor doesn’t have to be difficult. SmartAsset’s free tool connects you with up to three financial advisors who serve your area, and you can interview your matching advisors for free to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.

• Are you planning your retirement? Use SmartAsset’s Social Security Calculator to get an idea of ​​what your retirement benefits might look like.

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