How well do you know your financial adviser?


Share This
This story is brought to you by Onyx Financial Advisors, an Idaho Falls-based, fee-only investment adviser, which means it does not receive any commissions for the investment recommendations it makes to you. This ensures Onyx represents you with no conflicts of interest.

Joe’s morning routine has been the same for years. He gets up before the sun with a cup of coffee and checks the news prior to heading to work at Idaho National Laboratory.

He’s set to retire in a year or two.

He’s recently noticed the U.S. Department of Labor Fiduciary Rule is making headlines. He knows it is legislation that’s more than 1,000 pages long and is set to go into effect this month if not delayed by the Trump administration. But Joe doesn’t quite understand what it means for him and his financial investments.

He decides to schedule an appointment with Helen, his estate planning attorney.

The meeting with Helen was very informative.

She tells him the new law affects how he will be treated by his financial advisers. At the moment there are three types of financial advisers.

You may have a financial adviser — but which kind?

The first is a fiduciary adviser — these are Registered Investment advisers and are required legally and ethically to work in their client’s best interest and disclose any conflicts of interest. This is the standard that attorneys, CPAs and doctors practice under.

The second type are brokers who typically sell you things that pay the highest commission, regardless of whether it’s in your best interest. They may call themselves something other than brokers like advisers or financial planners, but if they receive a commission, they are brokers.

Lastly there are hybrid advisers who are dually registered as fiduciary agents and brokers. They may or may not be making decisions in your best interest and you may not know when they are switching hats.

Helen said that if the Labor Fiduciary Rule goes into effect, every financial adviser providing advice on retirement accounts like 401k and IRA accounts, will have to act as a fiduciary adviser, and have the best interests of their clients at heart. The problem is they can switch hats and act as a broker on non-retirement accounts. This makes it very confusing to the general public.

Regardless of whether the new rule kicks in, Helen stresses that if an adviser takes a commission, they are acting as a broker and may not be 100 percent in your court.

She tells Joe to meet with his current financial adviser and make sure they are acting as a fiduciary on all accounts and at all times. If they aren’t, he may want to find someone who is, so there is no question that they are working in Joe’s best interest.

Helen explains many people do not know there are options when they go shopping for a financial adviser. Joe had no clue about these different kinds of advisers when he hired his first adviser a few years ago.

Now that Joe is armed with more information about what he’s been reading in the news, he decides he will make an appointment with his adviser to ask four simple questions:

  1. Will you commit in writing to act as a fiduciary at all times? The answer to this question should be yes, and include an explanation of how they will do it.
  2. Are you going to tell me how much you are paid to manage my money or for the products and services you sell me? The reply to this question should be yes, as well.
  3. What are the different products and services that you provide? A financial adviser’s services will vary, but should meet the demands of whatever your goals may be.
  4. What credentials and experience do you have? Look for a CFP, PFS, or CPA certifications.

Keep in mind that depending on the political outcome this month, financial advisers may not have to tell Joe anything because President Trump signed a memorandum in February that could put a halt on this legislation. There are also several lawsuits seeking to do the same.

But regardless of the outcome of these lawsuits and the president’s memo on this rule, Helen says it’s always best to do your research and work with an independent financial adviser who puts your best interest first at all times.

Respond to this story