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Do You Know the Definition of “Fiduciary”?

Posted on Friday, April 19, 2024
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by RoseMark Advisors
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fiduciary duty and gavel

“Fiduciary” and “fiduciary duty” are key terms widely used within legal and personal finance realms. If you’ve considered the benefit of enlisting professional help for managing your finances or property, chances are you’ve been advised to choose a fiduciary advisor.

 You may find yourself asking, what defines a fiduciary advisor and what are their responsibilities? Is a fiduciary the right fit for me?

Here’s a closer look at fiduciaries:

A fiduciary is an individual or organization ethically and legally obliged to act in someone else’s best interest, prioritizing their needs over their own. This relationship is designed to prevent conflicts of interest, ensuring the fiduciary acts solely for the benefit of those they represent. Common fiduciary examples include relationships between doctors and patients, attorneys and clients, and fiduciary financial advisors and their clients.

Understanding Fiduciary Advisors:

Financial advisors in the U.S. are governed by different regulations, with some following a suitability standard overseen by the Financial Industry Regulatory Authority (FINRA). These advisors must ensure their investment recommendations fit the client’s specific situation and disclose any potential conflicts of interest. On the other hand, Registered Investment Advisors (RIAs), like RoseMark Advisors, are always expected to act as fiduciaries, placing their clients’ interests above their own. 

The Importance of Fiduciary Duty:

Fiduciary duty entails a legal obligation to act in the best interest of another party, whether an individual, a corporation, or a group, like a workplace savings plan and it’s participants. For financial advisors, especially RIAs, this means prioritizing clients’ financial interests, including recommending lower-cost investment options when possible.

Fiduciary Roles and Responsibilities:

Not all fiduciaries are financial advisors. Fiduciary duties extend across various relationships, including trustees and beneficiaries, board members and shareholders, executors and legatees, guardians and wards, attorneys and clients, and principals and agents.

The Value of Working with a Fiduciary Financial Advisor:

Engaging with a fiduciary financial advisor ensures your financial well-being is always the top priority. This peace of mind comes from knowing your advisor is committed to acting in your best interest across all aspects of your financial picture and holistic financial plan.

Fiduciary Advisor Compensation:

Fiduciary advisors typically earn through client fees, avoiding commissions or financial incentives from third-party firms. These fees might be asset-based, hourly, project-specific, or based on a subscription model.

Cost of a Fiduciary Financial Advisor:

Fees for registered investment advisors usually hover around 1.00% of managed assets. This varies per firm, but the transparency of expected fees is a vital component to a trusting relationship between you and your fiduciary.

Opting for a fiduciary financial advisor can significantly impact your financial strategy, ensuring your investments and financial planning align with your best interests to provide you with confidence, simplicity, and success in your financial future.

To speak with one of our dedicated advisors, call 888-550-2622 or click the button below for a call back.

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Kurt
Kurt
1 month ago

So beyond an oath of office… a public servant, such as an elected official or an appointed representative could and should be bound by Fiduciary Duties.

David Millikan
David Millikan
1 month ago

Excellent information.

Susan
Susan
1 month ago

Agree – Excellent Article! One needs to understand the UNEP Fiduciary Responsibilities applied to ESG, and make sure your Fiduciary DOES NOT manage your money per the UN PRI. The following is from the UNEP “Show Me The Money” handout. Link at the end.
The first – and arguably for investors the most important – reason to integrate ESG issues is, simply, to make more money. There is a hypothesis, which we support, that a more thoroughgoing and systematic approach to integrating ESG issues in portfolios will, over time and in general, result in better financial performance. Some mainstream institutional investors and many practitioners of socially responsible investment apply this hypothesis in their investment strategy.
A second reason is to apply to a portfolio the ethical values that are paramount to the investor, regardless whether such application results in marginally positive or negative impacts to financial performance. Leading government and private sector funds, such as the Norwegian Government Pension Fund, the French Fonds de Réserve pour les Retraites, Storebrand Life Insurance, and US and UK ethical funds subscribe to this view.
The third reason is to seek to channel investment flows in a manner that is more consistent with the goals of sustainable development than is generally the case. That is, to act on the understanding that if capital does not align with goals such as those expressed in Agenda 21 or the Millennium Development Goals, then such aims are likely to remain unrealised ideals. Major Dutch pension funds and a number of European sustainable development funds exemplify this approach

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