Financial advisors play a valuable role in helping their clients manage their wealth, plan for retirement, and achieve their financial goals. Fiduciary financial advisors take this role one step further with their professional commitment to always act in their client’s best interests.
While fiduciary financial advisors are similar in their obligation to put their clients first, there are notable differences in how they structure their fees. It’s important to understand the types of fees that fiduciary advisors charge, what they’ll cost you, and how they may impact your portfolio so that you can make knowledgeable decisions about your financial future.
A fiduciary financial advisor is legally and ethically bound to work in your best interest. They’re expected to exercise a duty of care and commitment to their client at all times. This means always prioritizing their client’s financial well-being over their own financial gains or the financial interests of their firm. Fiduciary financial advisors are legally required to abide by their fiduciary duty.
This commitment to your best interest also influences how fiduciary advisors approach their fees, as they must structure their fees with your best interest in mind as well.
Commission-based financial advisors receive commissions on investment products they recommend or sell to you, which can create conflicts of interest. They’re required to follow a suitability standard, which means the products they promote have to be suitable for your circumstances. However, there may be better options that meet your needs that they don’t recommend because there’s no direct benefit (commission) to them.
In contrast, fiduciary financial advisors are fee-only advisors , and their compensation structure is designed to align with what’s in your best interest. Fee-only fiduciary advisors are compensated directly by you for their investment management and financial planning services; they can’t make money on commissions. You’re essentially paying for their time, advice, and management of your assets.
The cost of a financial fiduciary advisor depends on the type of fee structure they charge. Understanding the costs and impact of the varying fee structures can help you make an informed choice regarding your financial planning needs. The types of fee structures for fiduciary advisors include:
For fiduciary financial advisors, being straightforward and transparent about their fee structure is a fundamental aspect of their duty to you. They’re required to disclose clear, up-front, and honest information about their fees, and regulatory and industry standards reinforce this commitment to transparency.
The cost of a fiduciary financial advisor can vary based on individual circumstances, such as the complexity of your financial situation, the amount of assets that will be under management, the services provided, or the fiduciary advisor’s experience. However, it’s worthwhile knowing the industry averages for the different types of fee structures. According to a recent industry study , here are the average fees for fiduciary financial advisors:
It’s a good idea to compare the different fee structures and costs of fiduciary financial advisors when you’re researching multiple advisors. By doing so, you can make sure that you’re getting a competitive fee while still receiving high-quality advice and services from a fiduciary advisor.
If you’re looking to build a relationship with a fiduciary financial advisor and receive ongoing advice and management, consider carefully flat-rate fee models versus percentage of assets under management (AUM) fee models. A flat fee structure can end up costing you more or less than an AUM structure, depending on where your assets fall on an advisor’s flat fee bracket. It’s important to carefully review how the flat fee compares to the calculated percentage when considering your assets under management.
The fees you pay for fiduciary financial advisory services should be viewed in the context of the value they provide. A fiduciary financial advisor’s commitment and dedication to acting in your best interest can result in a successful investment strategy or financial plan that’s well worth the cost.
At Five Pine Wealth Management , we serve our clients locally as well as virtually and offer holistic , relationship-centric advice and strategies to help build and manage your financial plan.
We consider all aspects of your individual situation and goals and develop customized solutions tailored to meet your financial and investment needs.
We have a fee-only model to best serve you. It aligns your best interest with our interests and puts us on the same side of the table as you. To find out how we can work with you as a fiduciary financial advisor, please contact us today.
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