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What Is A Fiduciary And Why Is It Important?

| September 25, 2018
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With the sheer magnitude of information right at our fingertips, you can quickly and easily find yourself in information overload, feeling uncertain of what is actually important, much less what is true. And when it comes to financial matters, this seems to be the case more often than not. Is what you are reading fact or just someone’s strong conviction being presented as fact? Is this advice predictable or just someone’s incidental experience being promised without reliable support? And who can you trust when every expert says they have your best interest in mind?

You want a professional who will give you trustworthy advice, someone you can depend on to keep your best possible financial outcome as their number-one priority. And that is where the term “fiduciary” comes in.

Many people believe that all advisors, whether they are stockbrokers or financial planners, are required to act in their client’s best interest. Unfortunately, that is just not the reality. Therefore, it is crucial to understand the different types of advisors, their distinct roles, and to discern what doing business with them means for you and your finances.

What Is A Fiduciary?

A fiduciary advisor is one who is bound to a standard that was established as part of the Investment Advisors Act of 1940, which clearly stipulates that an advisor must place his or her interests below that of the client and is ethically bound to act in the other's best interest. (1)Fiduciary duty is considered the highest legal duty of one party to another.

In other words, a fiduciary advisor accepts the role of a trustee, someone who is given and accepts the responsibility of managing assets for you, with a primary responsibility to put your needs first by providing objective guidance and advice that is most beneficial to you. For example, fiduciary duty prevents an advisor from making an investment with your money solely for a kickback on commission.

On the other hand, those advisors who don’t adhere to a fiduciary standard are only required to offer “suitable” recommendations to their clients. This means that these advisors can sell high-fee products, even if a lower-priced option is just as suitable or available, in order to receive a higher commission, without repercussion, whereas a fiduciary could be subject to regulation by the SEC or state securities regulators.

And as if the assurance that your advisor is always acting in your best interest isn’t enough, the fiduciary standard also requires that all fees are presented clearly and up front, assuring you that your hard-earned money is in good hands.

Who Is A Fiduciary Advisor And Who Isn’t?

As unjust as it may seem, not all advisors are fiduciaries. Brokers, insurance agents, and real estate agents acting on another party's behalf are not required to serve in a fiduciary manner. As they represent themselves or their company, they are only required to provide you with “suitable” products.

Wall Street brokerage firms can sell proprietary products, so there is a good chance that their advice may still be biased. One example of this would be the selling of annuities and other high-fee investments into your retirement account. With those options being high-fee, they may not be the best option for you. However, your broker may still choose them because the commission is higher. And while brokers are required to inform their clients that they are choosing to be paid a commission, if for one reason or another the client overlooks that email notification, then they could remain unaware of the unfavorable inclination of their broker’s interests and decisions.

At Haydel, Biel & Associates (HBA Wealth), one of our top priorities is getting to know you. We believe that by working together to uncover your true motivations, we can create a financial plan that will truly benefit you. Our job is not about our pockets, but rather to help coach you toward your own vision of success and accomplish your long-term dreams. Our approach to investing is founded upon the highest fiduciary standards.

And because we are an independent financial advisory firm, we have the freedom to create a genuinely personalized investment strategy tailored to meet your financial goals in the most beneficial manner. It is our ongoing goal to maintain the highest ethical standards, always placing the interest of our clients first. We are dedicated to providing you with the best advice we can give, and we have the freedom to do so without any pressure to promote a certain product. We provide complete transparency and disclosure when it comes to our investment approach and compensation, confirming our dedicated loyalty to you.

Why Should I Work With A Fiduciary?

There are several significant benefits to working with an advisor who serves in a fiduciary capacity. One main  benefit is that they are completely honest and transparent. Not telling the whole truth is basically the same as lying. You wouldn’t want the person responsible for your financial future lying to you, nor would you want them withholding information. You want complete, open honesty.

By working with an advisor who holds to fiduciary standards, you can feel more empowered to make the best decisions for your finances, confidently knowing that your best interests are always the top priority. As the client, you have the authority to ask questions and to expect the highest standard of service from your advisor. As a firm in the financial world, we understand the reservations or even negative connotations many people have toward the hidden motives of some advisors. We want to assure you that our relationship with you is built on honesty, integrity, and trust.

How Do I Find A Fiduciary?

It’s important to do your research and explore your options as you make a decision to work with an advisor. You want an advisor who is open to sharing with you their business philosophy, how they choose investments, what their process looks like, any potential conflicts of interest they face, and how they’re paid.

We take pride in our transparency and objectivity. We work to build a relationship that allows you to feel relaxed and at home with us. We care about your passions and dreams, not just your wealth. If you’re unsure about your current financial strategies, haven’t reevaluated your investments in several years, or are just interested in learning more about what it means to work with a fiduciary, we are happy to offer a complimentary review of your financial plan. Or if your strategies are currently undeveloped and you’d like to discuss getting your plan started, we would love to meet with you. Contact Ricky at (626) 529-8347 or email him directly at ricky@hbawealth.com today!

About Haydel, Biel & Associates

Haydel, Biel & Associates is an independent financial advisory firm serving individuals and families near Pasadena, California. The firm was founded in 2004 by Chris Haydel and Ricky Biel with a desire to provide unbiased, client-centered, community-based financial advice. Together, they have built a practice that has grown into a family of caring, smart professionals committed to blending proven investment methodologies with creative financial technologies that make it easier than ever to accomplish your goals. They strive to keep things simple and fun to give their clients peace of mind and alleviate financial stress. HBA Wealth takes care of their clients’ needs first and foremost and goes the extra mile to make their clients’ finances grow. To meet and see how the HBA Wealth team may be able to help, contact them today at (626) 529-8347 or email Ricky directly at ricky@hbawealth.com.

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(1) https://www.investopedia.com/articles/professionaleducation/11/suitability-fiduciary-standards.asp

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