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All investment advisors registered with the U.S. Securities and Exchange Commission (SEC) or a state securities regulator must act as fiduciaries. Broker-dealers, stockbrokers and insurance agents are only required to fulfill a suitability obligation. This means that while they must provide suitable recommendations to their clients, they don’t have to put their clients’ interest before their own.
Becca Stanek, CEPF® Becca Stanek is a graduate of DePauw University. Becca is an experienced writer/editor who serves as a retirement expert for SmartAsset. She's passionate about helping people understand the sometimes daunting ins and outs of personal finance. Becca is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society for Advancing Business Editing and Writing. Her work has also appeared at Time, The Week, Mic and The Washington Monthly. Becca grew up in the Midwest and now lives in New York City.
It may sound crazy to give someone 1% of your annual assets to manage them, but you get a buffet of advice about almost anything related to personal finance. The price becomes sensible when you consider that you’re paying to establish a comfortable retirement, save for your child’s college or choose the right mortgage when borrowing hundreds of thousands of dollars.
It’s best to go with a certified financial planner (CFP), which is an instant signal of credibility – but not a guarantee of same. To start, ask people like you if they can recommend a planner. If you have kids, ask a colleague who also has children. If you’re single and just out of college, check with a friend in the same boat. If possible, you want to find a planner with successful experience advising clients in the same stage of life as you.
First, no computer model or customer service department is going to be able to match the level of service that can be provided by an on-site financial professional. Computer models often require a certain level of expertise to correctly interpret financials, and retirement plan customer service representatives are generally limited in the scope of advice they can provide to employees. Therefore, having a fiduciary advisor on staff will meet the employer's fiduciary requirements in a way that cannot be duplicated.
Fiduciary duty is important for guiding the actions of the professionals who deal with clients’ money. It’s also important because, when violated, it provides an avenue for legal action. If a financial professional who isn’t a fiduciary has been knowingly selling you low-performing, high-fee investments, you don’t have the legal standing that you would have if the professional were a fiduciary.
The most commonly held professional designation is the certified financial planner (CFP®), which is owned and issued by the Certified Financial Planner Board of Standards, Inc., a nonprofit certifying and standards-setting organization that administers the CFP exam. Certified financial planner is a formal credential of expertise in the areas of financial planning, taxes, insurance, estate planning, and retirement. The designation is awarded to individuals who successfully complete the CFP® Board’s initial exams, then engage in ongoing annual education programs to maintain their skills and certification.