What is a Fiduciary?

When you’re looking into financial planners, investment advisors, securities brokers, or other financial professionals, it can be hard to know where to begin. Many asset managers, investment advisers and broker dealers claim to have wise strategies and recommendations for your financial future, but how do you know which professional is the right choice for you?

Before you begin a professional relationship with any financial advisor, give them a call or search their website to find out if they are a fiduciary. Having an obligation to act in your best interest is an important piece of information you can identify in your search.

What is Fiduciary Duty?

Fiduciaries have a legal and ethical obligation to provide a certain level of care that places the financial interest of the client ahead of their own.

Placing the client’s interest first.

Financial professionals that provide services as a fiduciary are obligated to work with you in a way that places your interest ahead of their own.  If there are circumstances where a financial professional has a conflict of interest, they have an obligation to disclose the conflict to the client.  For example, compensation to a financial professional is a conflict of interest.  To address this conflict, a financial professional will disclose their compensation to a client. When a financial professional is unable to remove a conflict in placing a client’s interest first, as a fiduciary, they are obligated to either remove or disclose the conflict to the client.

Making a suitable recommendation

Financial professionals acting as a fiduciary to their clients must make recommendations that are suitable.  In determining a suitable recommendation, a financial professional will exercise reasonable diligence, care and skill.  This would include understanding a client’s financial situation and objectives as well as the reasonably available investment options appropriate for the client.   

Maintaining confidentiality.

Financial professionals acting as fiduciaries have an obligation to maintain the client’s information in confidence.  Safeguarding the financial assets and information from potential harm.

Types of Fiduciaries

There are many types of fiduciary relationships in the world. The most common include:

  • Boards of directors and companies
  • Trustees and beneficiaries
  • Controlling stockholders and companies
  • Guardians and wards
  • Attorneys and clients
  • Doctors and patients
  • Real estate agents and buyers/sellers
  • Insurance agents and policyholders
  • Registered investment advisers

Regardless of the specific situation, all fiduciaries are bound to act in good faith, disclose all relevant information, and act in their recipient’s best interest. These are good qualities to look for in any financial professional.

Why Should I Choose a Fiduciary Financial Professional?

Registered investment advisers under federal law are fiduciaries to their clients. Broker dealers registered under FINRA rules have a best interest obligation to their clients. Financial planners that hold the Certified Financial Planner, or CFP®, designation have a code of ethics based on fiduciary standards.  Each of these types of financial professionals has an obligation to act in a client’s best interest.  In choosing one, it is important for clients to have an understanding of their legal obligations and service motivations.

As you research potential financial professionals, consider asking the following questions:

What is the right type of financial professional for me?

This is the first question you should ask, because it will identify if they are registered and the general service offerings they provide.  For example, a broker dealer registered with FINRA, or investment adviser registered with the SEC, or a financial planner holding a CFP® designation.

How will they choose what recommendations to make?

This will help you identify the process the financial professional will utilize in understanding your needs, evaluating options, and providing solutions.

How is the financial professional paid?

Is the compensation based on commissions for specific recommendation, a fee based on the overall value of investments, and/or some other incentive-based payment.  Does the financial professional disclose conflicts of interest related to the services provided.

What is the relevant experience and qualifications of the financial professional?

This will help you determine if the financial professional has the level of experience, proper licenses, and appropriate qualifications for the services you are desiring.

Who will make the investment decisions?

Some financial professionals outsource decisions to a third party or a manager. If you want your financial advisor to be the one acting on your behalf, this is a good question to ask.

Choosing A Financial Professional with Your Best Interest in Mind

At Marietta Wealth, we work in our client’s best interest. We are a fee-only registered investment adviser, and we offer financial planning, investment management, and retirement planning for individuals across many ages, income levels, and backgrounds.

No matter where you are in your financial journey, we’d be honored to serve you, helping pursue your financial goals.

Reach out to us at Marietta Wealth today to get started.

Marietta Wealth is a registered investment adviser.  Registration of an investment adviser does not imply any level of skill or training.  For additional information about Marietta Wealth’s financial planning and advisory services, please see the Marietta Wealth Disclosure Brochure or ADV Part 2A for full details, which is available upon request or by visiting our website. 

Certain of our representatives are Certified Public Accountants with the accounting firm Ben H. Crowe, C.P.A., LLC which is affiliated with Marietta Wealth Management. To the extent that these representatives provide accounting services, which may include tax advice, to any clients, including our advisory clients, all such services shall be performed by those representatives, in their individual professional capacities, independent of our advisory firm, for which services we shall not receive any portion of the fees charged by the representative, referral or otherwise. It is expected that these representatives, solely incidental to their practices as accountants, recommend our advisory services to certain of their clients. No client of Marietta Wealth Management is under any obligation to use the accounting services of these representatives. Our Chief Compliance Officer remains available to address any questions that a client or prospective client may have regarding this potential conflict of interest.