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What Is A Fiduciary And Why Is It Important?

Christopher B. Moore, CFP®

Have you ever read a financial article or blog post and put it down after reading the first paragraph because the terminology didn’t make sense? If so, you’re not alone. And while there is plenty of financial jargon that you don’t need to know to succeed financially, one term that is critical to how your money is handled is the word fiduciary.

The concept of a fiduciary can seem confusing to many, as most people assume that all advisors, whether they’re brokers or financial planners, are required to act in their client’s best interest. But that’s not the reality. It’s important to understand the distinction between different types of advisors’ roles and what it means for you and your money.

Fiduciary, Defined

The primary duty of a fiduciary is to put your needs first and to provide advice and recommendations that will benefit you ahead of themselves. Think of a fiduciary as a trustee, someone who is given and accepts the responsibility of managing assets for someone else. This duty is essential for providing you transparency to potential conflicts of interest.

For example, fiduciary duty prevents an advisor from making an investment with your money solely for a kickback commission. For those who don’t adhere to a fiduciary standard, a recommendation made by advisors only has to be “suitable.” The problem with this is that some advisors could then sell high-fee products, even if a lower-priced option was just as suitable, in order to receive a higher commission.

The fiduciary standard includes providing guidance that is objective and beneficial to you and charging fees that are transparent. The fiduciary standard can give you added confidence beyond the suitability standard that your hard-earned money is in good hands.

How Can I Know Who Acts As A Fiduciary?

While some advisors may toss the term around lightly, not all advisors are fiduciaries. Generally speaking, brokers, insurance agents, and real estate agents acting on the other party's behalf are not required to serve in a fiduciary manner. As they represent themselves or their company, they are held to a suitability standard regarding the financial products they recommend, rather than those recommended based on what is in your best interest.

Wall Street brokerage firms can sell proprietary products, so their advice may be biased. For example, annuities and other investments that are products of the same firms and provide brokers a higher commission can be recommended for your portfolio. Additionally, while brokers must inform clients that they’re choosing to be paid commissions, if the investor neglects to read the fine print, they may not know all the detail around the fees they are charged or potential conflicts of interest.

At Massey Quick Simon, we are an independent firm committed to helping you reach your goals. Our approach to investing follows the highest fiduciary standards we set for ourselves. Our independence serves as a basis to create a specific investment strategy tailored to pursue your financial goals. Our advice is driven by our unwavering efforts to act in the best interest of our clients.

We are dedicated to providing you with the best advice we can give while being as objective as possible when analyzing your unique situation. We provide complete transparency and disclosure when it comes to our compensation or investment approach.

Why Should I Work With A Fiduciary?

There are several benefits to working with an advisor who serves in a fiduciary capacity. For one, they are open and transparent. Aside from the obvious goal of maximizing value for your money, working with a fiduciary will give you confidence that your advisor is working in your best interests in mind rather than their own.

By working with an advisor who holds to fiduciary standards, you can feel empowered to make the best decisions for yourself and your finances. Clients have the power to ask questions and to demand the highest value for the service that advisors are providing. As a firm in the financial world, we understand people’s reservations or even negative connotations toward the underlying motivations of some advisors. We want to assure you that you can trust in the fact that our relationship with you is built on integrity.

Your Next Steps

It’s important to thoroughly research an advisor before choosing to work with him or her. An advisor should be open to sharing their business philosophy, how they choose investments, what their process looks like, any potential conflicts of interest they face, and how they’re paid.

At Massey Quick Simon, we take pride in our transparency and objectivity. 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, I am happy to offer you a complimentary consultation. Call us at 973-525-1000 or email Info@mqsadvisors.com today!

About Christopher

Christopher Moore is the Chief Investment Officer and Managing Partner at Massey Quick Simon with more than 15 years of industry experience. Christopher is responsible for overseeing the firm’s asset allocation and portfolio construction process and works closely with the client advisors to structure client portfolios. He also oversees the investment research team and due diligence process across equity, fixed income, hedge fund, private equity, real estate, and venture capital investments. Christopher graduated from College of the Holy Cross with a bachelor’s degree in mathematics and earned his MBA from Columbia Business School. He holds the CERTIFIED FINANCIAL PLANNER™ (CFP®) designation and acts as an advisory board member for Bow River Capital Partners, a private equity firm based out of Denver, CO. Learn more about Christopher by connecting with him on LinkedIn.