Do You Understand Fiduciary Management in Scottsdale?

Is your financial advisor a fiduciary? Are you aware of how fiduciary management in Scottsdale works?

Simply put, fiduciary standards require financial advisors to put your needs before their own. Many investors believe all financial advisors have their best interests at heart. But, that may simply not the case. It all depends on what “standard” they follow.

According to the law, brokers, insurance salespersons and advisors may operate under a “suitability standard.” They are required to recommend “suitable” investments for a client, which may not necessarily be the best options. Advisors may recommend investments that pay them the highest commission, as long as they meet a client’s goals and risk tolerance. These investments must meet a lower “suitability” threshold.

According to the President’s Council of Economic Advisers, non-fiduciary advice costs Americans one percentage point of their return annually. The total amount is estimated at $17 billion each year.

On the flip side, a “fiduciary standard” involves Registered Investment Advisors (RIAs) who legally must avoid all conflicts of interest. They must operate with full transparency and always do what is best for the client. If any conflicts exist, they must be fully disclosed. Fiduciary advisors must monitor a clients’ investments, but also changing circumstances in their lives.

To ensure proper fiduciary management in Scottsdale, ask your financial advisor some simple questions:

  • How do you monitor investments? You may assume a financial advisor with an impressive resume will pay careful attention to your investments and financial life. After all, you hired the advisor to pay attention to the stuff you don’t have time for, right? Your financial advisor must be analyzing your portfolio on a quarterly basis – at a minimum. If you are paying an annual fee for services, be sure you are receiving frequent and active monitoring of your investments.
  • What is your approach to investment management? The best approach will be tailored to a client’s specific situation. The advisor should be able to communicate a formal, disciplined process he or she follows to manage your investments. You want to know how the advisor will manage changes in the market, in your investments and in your life circumstances. Learning about fee structures, past performance and client satisfaction is also an important component of your analysis.
  • How much are you getting paid? You want to learn about what you will pay, including all hidden fees. To ensure fiduciary care, make sure to understand if your advisor is getting paid commissions on any product he or she sells. Ask for full disclosure of the advisor’s compensation.

A fee-based financial advisor will usually charge based on the account size. What you will be expected to pay will be fully disclosed in your agreement. You also want to compare the fee to the benefits and services you receive.

For proper fiduciary management in Scottsdale, always ask which standard your advisor follows. By asking the three questions above, you should have a clear understanding of whether your advisor adheres to a fiduciary standard.

Operating in a fiduciary role, WealthTrust Arizona is committed to its core values of integrity, trust and service. The mission of the company’s financial planners is to build a lasting partnership with clients. WealthTrust Arizona carefully integrates estate planning and financial planning to protect and grow clients’ assets and preserve their legacy.

To learn more about wealth management services in Scottsdale, call for a free consultation at (480) 483-7300 or you can contact us online today for more information.