What Is a Fiduciary Financial Advisor? A Breakdown to Get You Started

4 MIN. READ

There is a growing trend in the financial world that urges people to manage their own finances. While it may be possible for people with the experience, know-how and time, at the very least, they should have a financial professional provide some help. The truth is the average person doesn’t have access to the product knowledge or the ability to put together a financial plan that covers all of the contingencies life may throw at them.

What would you do if you were under investigation for a crime? Would you handle it yourself or would you hire an attorney? If you required surgery, would perform the surgery yourself or go to a surgeon? The answer is, of course, you would seek the help of a skilled and experienced professional. Are these examples different from managing the money you need to retire or maintain your standard of living in retirement? The impact on your life is no less significant if you miss manage your finances.

You need to seek professional who can offer solutions for your financial health. There are simply some situations where you need a financial expert or fulltime retirement planner. What you really need is a fiduciary financial advisor, like [COMPANY NAME] .

What is a fiduciary?

A fiduciary is a person or entity who owes a legal obligation to another person (the “beneficiary”). There are a numerous laws and defined ethical standards that describe the obligation owed the beneficiary. There are many examples of fiduciary relationships, for example the trustee of a trust or the personal representative of an estate. In the world of finance, a financial fiduciary owes its clients a legal requirement to put the needs of the client before their own.

In other words, a fiduciary has a legal duty to act in the best interest of their client. The nature of the relationship between the fiduciary and the client may arise by the nature of the relationship, contractual or by law or regulation.

What does the law require a fiduciary to do for the beneficiary?

A fiduciary duty is one of complete trust and utmost good faith. Fiduciaries owe two primary duties to their clients and a third duty for those who manage another’s money. Those duties are:

  • Duty of care. The duty of care requires that fiduciaries perform their function with a high level of competence and thoroughness in accordance with industry standards.
  • Duty of loyalty. The duty of loyalty requires that fiduciaries act solely in the best interest of their client, rather than their own interest. Fiduciaries must avoid potential conflicts of interest. If a conflict of interest exists, it must be disclosed to the client.
  • Duty of obedience. The duty of obedience requires fiduciaries to manage the assets of the client according to their wishes.

What happens if they don’t maintain the required standard of behavior?

A “breach of fiduciary duty” occurs when a fiduciary fails to meet the requirements of any of the duties described above. When that happens, the beneficiary may seek damages for that breach. The beneficiary must meet four items to make a case for a breach:

  • A fiduciary duty existed.
  • The fiduciary did not meet that duty.
  • The client suffered financial damages.
  • The failure to meet the duty caused the damages.

All four of these items must have happened in order to claim a breach of fiduciary duty. The beneficiary is responsible for determining the dollar amount of the damages they incurred.

Putting your financial health in the hands of a fiduciary financial advisor is an act of trust. You want to know you’re signing on with a firm you can count on. At [COMPANY NAME] , we have the expertise and experience to give you the level of service you deserve. Contact us today to learn more about how we can help you or to schedule a call. Let us show you that to us, you are the priority.