Building Your Financial Team: Who Should Make the Cut?

Ask The CFP® Practitioner

Darcie Guerin

darcie.guerin@raymondjames.com

“If you have knowledge, let others light their candles at it.”

 ~Margaret Fuller (1810-1850)

Question: How do I find out if my financial advisor is a fiduciary, and why is that important?

Answer: Your question has become more prevalent and relevant recently because the Department of Labor’s (DOL) new rule governing retirement investment accounts is in the news. It’s likely that you’ll continue to hear more about financial advisors as fiduciaries going forward. The DOL rule offers government defined standards of care to financial advisors and investors.

The rule’s fiduciary standard formally requires that an advisor who acts as a fiduciary (anyone who receives compensation for providing actionable advice to investors) to those participating in certain types of retirement plans must act in the best interest of the client whose assets they’re managing. This sounds like common sense and we shouldn’t need a special DOL ruling, but unfortunately that’s not always the case.

Most Americans are responsible for their own retirement funding and depend on financial professionals to help them with important decisions. The client-advisor relationship is a very special connection based on trust and honesty with both parties taking their responsibilities seriously. Because of the sacred nature of retirement assets, the DOL saw fit to formalize standards and expectations between clients and financial advisors specifically for retirement assets.

It’s in your best interest to fully understand the investment and financial planning process. This includes recognizing and appreciating the risks, rewards and implications of various investment choices. Simply stated, know what you own and why you own it. As an aside, CERTIFIED FINANCIAL PLANNER™ professionals are already held to higher standards and have always provided fiduciary-level services. Client-first service is a guiding principle at my firm. For this reason, our management team was one of the first in the industry to develop a Client Bill of Rights.

Going forward we’re not sure what the new administration may decide about the DOL rule governing retirement investment accounts. The rule may be revised, delayed or even overturned. At the time this article is being submitted for publication no changes have been announced. What you can expect is to receive standard disclosures with information about the fiduciary role played by your advisor and their firm, the best interest standard, and an outline of products and services provided.

The fiduciary rule is designed to standardize, organize and make client experiences and expectations for the entire investment industry uniform. Specifically, as you work with your advisor, he or she will consider the suitability of a particular investment given your goals, the time you have to reach them, as well as your net worth, ability to tolerate risk and other pertinent factors. Open and honest communication is the key ingredient in establishing rapport with an advisor.

Ideally, this relationship is thoughtful, thoughtful and provides unbiased advice. The goal is to provide you with a long-term approach in selecting appropriate investments, do what’s best for you and your financial security, and help you select investments that the advisor believes will give you the best chance of meeting your goals.

Here are three concepts to keep in mind going forward: 

1. You have the right to select and work with a trustworthy, independent financial advisor who is professionally competent, personally dedicated, and who communicates with you on a regular basis about your portfolio. You may request information about your advisor’s work history and background, and you may contact your state or provincial securities agency for verification. Visit the Financial Industry Regulatory Authority (FINRA) Broker Check at www.finra.org to review the background of an investment professional.
2. You have the right to expect financial and investment recommendations based solely upon your unique needs and goals, consistent with the objective of enhancing your financial wellbeing. While the performance of investments may not meet your expectations and markets can underperform their historical averages, recommendations should be based upon the goal of attaining superior performance in light of the facts known at the time of investment.
3. You have the right to open, consistent communication and to have information presented in clear and understandable terms.

As we wait for updates on the first phase of the DOL rule’s implementation regarding the fiduciary nature of investment professionals, consider these to-dos:

• Ask your advisor about what to expect in the wake of the DOL rule’s implementation.
• Ask about a Client Bill of Rights, which is intended to help set the stage for a mutually beneficial relationship between you and your advisor. Visit raymondjames.com/billofrights for an example.
• Be an active participant in your financial future and be engaged in the process. Knowledge is power. When hiring a financial advisor, expect service and integrity. Stay focused and invest accordingly.

The opinions expressed are those of the writer, but not necessarily those of Raymond James and Associates, and subject to change at any time. 

“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.” 

This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc., Member New York Stock Exchange/SIPC 606 Bald Eagle Dr., Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email darcie.guerin@raymondjames.com. Website: www.raymondjames.com/Darcie.