Is it ever wise to choose a financial advisor who is not a fiduciary? If you find a financial advisor who you feel comfortable with and who has been recommended to you but is not a fiduciary, is it okay to work with them? That’s what we’ll go over in this post.
By Mike Rogers, AIF®, Founder and President of 360 Financial
Mike Rogers is a fiduciary financial advisor with over 30 years of experience in the financial services industry as an investment advisor and financial planner. He founded 360 Financial in 1995 and holds series 7 and 63 security registrations with LPL Financial.
6 Key Considerations When Choosing a Financial Advisor
Ultimately, you’ll have to decide whether to work with a fiduciary or a regular financial advisor based on what you think is best for you. However, here are some guidelines that may help you decide if an advisor is the right fit for you.
Some of these key considerations are also relevant when evaluating fiduciary financial advisors as well.
1 – Compensation Structure
How does the advisor earn their money? through commissions, fees, or a combination? This knowledge can reveal potential biases in the products they recommend.
2 – Conflict of Interest Disclosures
Does the advisor provide clear disclosures about potential conflicts of interest? Full transparency is key to trusting their guidance.
3 – Product Specializations
What are the advisor’s areas of expertise or product specializations? Sometimes, non-fiduciaries might offer more extensive options in specific areas like insurance.
4 – Regulatory Standing
Is the advisor in good standing with regulatory bodies? Check FINRA’s BrokerCheck for any past disciplinary actions or conflicts.
5 – References and Reviews
Can the advisor provide references from satisfied clients, or are there positive reviews available publicly? Past clients’ experiences can offer valuable insights.
6 – Investment Philosophy Alignment
Does the advisor’s investment philosophy align with your financial goals and risk tolerance? Even if they’re not a fiduciary, it’s vital that their strategy resonates with your objectives.
Common Questions About Choosing a Financial Advisor
Is it ever wise to choose a financial advisor who is not a fiduciary?
There are times when it might make sense to work with someone who isn’t a fiduciary. It’s not a black and white decision. Review these questions and then make a judgement based on your preferences and priorities.
When might it make sense to choose a non-fiduciary financial advisor?
Opting for a non-fiduciary advisor can be practical for product-specific advice or transactions, such as purchasing insurance or investments with upfront commissions, especially if you are confident in your ability to assess the recommendations yourself.
What are the benefits of working with a non-fiduciary advisor?
The benefits of a non-fiduciary advisor include potentially broader product offerings and lower initial costs, as they often work on commission and may have access to a wide array of insurance or investment products.
What are the potential risks of selecting a non-fiduciary advisor?
Risks involve conflicts of interest since non-fiduciary advisors aren’t obligated to place client interests above their own, leading to recommendations that might be profitable for them but not necessarily optimal for you.
How can I ensure a non-fiduciary advisor is acting in my best interest?
Ensuring a non-fiduciary advisor acts in your best interest involves proactive steps like consistently asking about and evaluating the reasoning behind their recommendations and understanding how they’re compensated.
Are there standards that non-fiduciary advisors must follow?
Non-fiduciary advisors are bound by the suitability standard, meaning they must provide recommendations that are appropriate for your situation, but not necessarily the best possible option available.
What questions should I ask a non-fiduciary advisor before hiring them?
Inquire about their compensation structure, experience, how they handle conflicts of interest, their typical client, and request examples of how they’ve helped clients in similar situations to yours.
When might it be a good idea to use both fiduciary and non-fiduciary advisors for different financial needs?
Utilizing both fiduciary and non-fiduciary advisors can be wise when different segments of your financial portfolio require distinct expertise, allowing for comprehensive coverage of both general and specific financial areas.
Connect with a Fiduciary Financial Advisor
If you need a wealth management team to help you achieve your big-picture goals, we recommend scheduling a call or video chat with a financial advisor at 360 Financial. 360 Financial is one of Minnesota’s best independent wealth management firms. We work with clients online and in person serving clients in Minnesota and across the US. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch.
About the Author
Mike Rogers
Mike Rogers is the founder and president of Minnesota-based financial advisory firm 360 Financial. As the founder, Mike’s priority is that 360 Financial always serves the clients with empathy, integrity, and honesty. This customized, client-centric approach allows the firm to help clients decipher between the things they can control and what truly matters.
In other words, Mike understands that money is not the end-all-be-all; instead, it’s the “how” that fuels the “why” to the question: “What’s important to you?”
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This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
