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3 Reasons to Choose a Fiduciary Financial Advisor - YouTube
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- Are you thinking about
getting a financial advisor?
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In this video, I'm gonna tell you
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why you may want to look specifically
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for a fiduciary financial advisor.
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And I have a bonus tip at
the end where I will share
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one of the best places that you can go to
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to find a good fiduciary
financial advisor.
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(upbeat music)
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You're probably asking what
in the world is a fiduciary?
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And what has that got
to do with your search
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for a financial advisor?
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Well, I used to play a lot of basketball,
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it's one of my favorite sports,
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and one time I was playing a
pickup game, I took a shot,
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landed on someone else's foot
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and twisted my ankle really bad.
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And I went to the doctor
and the doctor said,
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"Alvin you need to get an x-ray."
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And I needed to get some
crutches afterwards.
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And she told me you need to go
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to a physical therapy session Alvin
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for it to completely heal.
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So, when I was hearing
that advice from my doctor
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I wasn't sitting there wondering,
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is she recommending me to get
an x-ray and the PT sessions
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because she's gonna get a
kickback from those sessions
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or is she going to sell me crutches
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where she's gonna get a commission?
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No, I'm not thinking about that
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because I trust that my doctor
is giving me those advice
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because she wants me to get well,
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she wants my ankle to
heal so I can walk again.
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My doctor is a fiduciary and I know
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that she is acting in my best interest.
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So that's what a fiduciary is.
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Someone who has sworn oath
to act in your best interest.
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You're looking for an advisor
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because you want to maximize your money.
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You wanna make smart financial decisions
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and you wanna just achieve
financial freedom, right?
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So let me share you the three reasons why
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you should choose a
fiduciary financial advisor.
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First reason is, a fiduciary
financial advisor will act
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in your best interest,
just like your doctor.
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So a fiduciary financial advisor
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will want to help you maximize your money,
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will want to help you make
smart financial decisions,
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will want you to achieve
financial freedom.
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Your goals become the advisor's goals
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as long as they're good for you.
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Second reason, a fiduciary
financial advisor
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avoids conflicts of interest.
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So let me give you an example.
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So let's say your advisor tells you,
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"I think based on your situation,
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you should probably
refinance your student loan."
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So most likely if you're working
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with a fiduciary financial advisor,
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it's probably because
your student loan interest
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is maybe high interest rate
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and maybe you're not eligible
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for Public Service Loan Forgiveness
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and maybe your advisor thinks
you can get a lower rate
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if you refinance your student loan
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and thus lower your monthly payment,
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or maybe pay it off faster.
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So your fiduciary financial advisor
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is not giving you that advice
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because he or she is gonna
get some kind of commission
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from that student loan refinance deal.
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'Lemme give you another example.
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So let's say your advisor tells you,
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"Based on your three goals
of wanting to buy a house,
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wanting to travel frequently,
domestic or abroad,
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and you would also like to start saving
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for your child's college,"
your advisors tells you
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let's say you can afford
to buy a $700,000 house
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without derailing your other two goals.
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So most likely for working for
a fiduciary financial advisor
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she's telling you that because
she's crunching numbers
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and this is gonna be what's best for you.
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And you can be sure that the advisor
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is not gonna get a commission
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from that $700,000 house purchase.
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Third reason why
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you may want to choose a
fiduciary financial advisor
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is because a fiduciary financial advisor
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is not tied to a specific company.
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What does that mean?
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Well, she or he can look
at the entire marketplace
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and choose what are the
best financial products
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out there for you?
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So let's say your advisor might say,
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"I think we should probably open your IRA
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at this financial institution
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because you can get access
to zero fee funds there.
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And while we're doing that
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you should probably open a
high yield savings account
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in this other financial institution
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because they give consistently high rates.
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And you should probably open a 529 account
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in this place because you
can get a state tax deduction
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if you contribute and you have access
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to good low-fee funds in that 529 plan."
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So it just gives you,
allows you the opportunity
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to work with someone who has
a wide area of solutions.
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They're not tied to a specific company
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and can choose the best financial
product out there for you.
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And this is the last thing
I'd like to give you a sense
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of what a non-fiduciary
financial advisors look like
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which by the way is a huge majority
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of financial planners out there
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so you really need to be careful.
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So simply put, a non-fiduciary advisor
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is not required to act
in your best interest.
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So think about that for a moment,
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a non-fiduciary advisor
is not required to act
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in your best interest.
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How crazy is that?
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So let's say your advisor
works for a big box firm
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and he tells you, "Hey,
I think you should invest
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in this mutual fund.
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It did really well last year."
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And what if you knew
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that he actually gets a
bonus for recommending you
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or once you actually invest in that fund?
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That's that's so not cool.
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And in fact many large brokerage
firms give an incentive
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to their advisor for steering clients
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into their own proprietary
funds or products.
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If you're really into
statistics and numbers,
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there is actually a 2014
report that was produced
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by the White House Council
of Economic Advisors.
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And the report revealed
that this conflicted advice,
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all these hidden kickbacks and
fees is costing middle-class
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and working families $17 billion
a year, $17 billion a year.
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That's money going from
your neighbor, your friend,
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your coworker, all going to main street.
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So, which would you rather work with,
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a non-fiduciary advisor
who is not required to act
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in your best interest or,
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and who may be getting
some type of incentive
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for steering you towards
a particular product,
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or a fiduciary financial advisor
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who is out there looking out for you,
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acting in your best interest.
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I promise to give you a
bonus tip, so here it is.
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If I've convinced you
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to look for a fiduciary financial advisor,
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where is the best place to look for one?
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My recommendation is you go to napfa.org.
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Look nowhere else, just go to napfa.org.
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It stands for the National Association
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of Personal Financial Advisors.
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And once you go to the website,
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you just type in your zip
code and several firms
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in your area, several fiduciary
financial advisor companies
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are gonna pop up.
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District Capital Management
is a proud member
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of NAPFA and we'll be
happy to help you out
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if you so choose to work with
a fiduciary financial advisor.
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Now, if you've managed to find
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a couple of prospective advisors
and you have a Zoom call
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with them sometime the next few weeks,
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what do you think are the questions
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that you will want to
ask to find the best fit,
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the best fiduciary
financial advisor out there?
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Check out our video on four questions
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to ask a potential financial advisor.
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