What is a Fiduciary and Why is it so Important?

You’ve probably heard the term, “fiduciary,” tossed around a bit. But what is a fiduciary, and why is it beneficial to work with one? As part of our ongoing commitment to client education, we’ve decided to create this quick guide to answer some of the questions you might have about hiring a financial advisor with a fiduciary obligation.

The Suitability Standard Vs. The Fiduciary Standard

Suppose you went to a furniture store looking for a new chair. When you tell the salesperson that you need a chair, you give them a vast target. They might lead you to an overstuffed recliner, or they could take you to look at a plastic stool. Technically, because you can sit on it, they could show you a bail of hay. All of these examples could be considered suitable examples of a chair. However, when you tell a fiduciary that you’re looking for a new chair, they’re likely to ask a few follow-up questions. How often will you sit in the chair? Will the primary function of the chair be relaxation? Dining? Work? What color should it be? You see, each of these questions leads to a greater understanding of what is the best chair for you.

That’s the difference between a financial advisor who works for suitability vs. a practicing fiduciary. An advisor provides you with a selection of investments, products, and services for you to choose from, that could be deemed suitable. On the other hand, an advisor with a fiduciary obligation is required to always act in your best interest. Even when it means they won’t be as highly compensated, fiduciaries advise you based on what will benefit you, and your unique needs, the most. So, what is a fiduciary?

“an advisor with a fiduciary obligation is required to always act in your best interest”

A fiduciary is an advisor who has often registered with government agencies such as the Securities and Exchange Commission (SEC) and is required to remain compliant with their rules and regulations. But what does this mean for you?

The Benefits of Working with a Fiduciary

When working with a fiduciary, you can expect a few things. To begin with, your fiduciary advisor should provide you with any information that could be deemed relevant to an investment. This should include a detailed outline of the risks involved with a specific investment class, as well as how they could fit into your investment strategy. Similarly, fiduciaries are required to disclose any potential conflicts of interest to their clients. This is good because knowing that a particular company compensates your advisor for selling stocks and annuities is something you should know before deciding to invest. 

At Heritage Investors, we take our fiduciary responsibilities very seriously. We take the time to really get to know each client on an individual basis to provide the best advice for their unique goals. This makes it possible to help clients potentially maximize their savings and adjust plans to accommodate various life events, as they arise. Another benefit of this type of relationship is that we are keenly aware of each client’s risk tolerance. As fiduciaries, we can reconcile a client’s risk tolerance with their investment goals to make investments that align with their overall investment strategy on their behalf.

The Heritage team will always work to ensure that our clients’ needs are taken care of. That’s why we place such a value on client education. We want you to feel confident and secure in every decision you make. 

If you have further questions about what a fiduciary is or what they do, reach out to us. We would be happy to speak with you and show you what working with Heritage Investors’ fiduciary team looks like!