Not all financial advisors are created equal. This is a faulty assumption, one which you must unlearn if you wish to make the most rewarding financial investment possible. In a research conducted by Personal Capital, a digital wealth manager, results showed that approximately half of the American population rely on financial advisors to have their best interests in mind. But this is not always the case.
For starters, these professionals are now divided into two camps: fiduciary investment advisors and non-fiduciary financial advisors. If you are not exactly familiar with these terminologies, do not fret. After all, they have only been introduced lately, in April 2016 to be exact.
Fiduciary Financial Advisors
The difference between these two types of financial advisors can be succinctly explained by the term “fiduciary”. A fiduciary is an organization or a person legally liable to act in their client’s best interests. This ethical and legal responsibility must be adhered to at all times. Failure to do so is enough ground for litigation, especially if a client deems such recourse to be necessary. Fiduciary advisors like Shoreline Financial Advisors are registered with the SEC or a state securities regulator.
Non-Fiduciary Financial Advisors
Non-fiduciary advisors are regulated by the Financial Industry Regulatory Authority (FINRA) or a state insurance regulator. These professionals are guided by a standard of conduct different from their aforementioned counterparts, one that is less bound by strict ethical conditions. The non-fiduciary cluster is composed of stockbrokers, insurance agents, and broker-dealers.
Now that we have covered the basics of what differentiates a fiduciary and non-fiduciary financial advisor, it is now your prerogative to choose one over the other. Each of these clusters may be suited better to specific types of investments. Hence, you must ascertain well what kind of financial strategy to which you hope to subscribe. Either way, regardless of which type of advisor they fall into, you must always work with one whom you can trust and rely upon.