Personal finance: Whom do you trust?
The financial industry is fraught with stories of unassuming individuals being taken advantage of by wolves in sheep’s clothing. There are also numerous professionals doing incredible work to help individuals, families, businesses and organizations navigate their way through the complexities of the monetary maze.
The financial services industry provides “advice” in as many different varieties as a paint stores have colors. With so many shades of guidance, how do you distinguish between professional practitioners and prodigious pretenders?
The Department of Labor recently passed the most significant law in years that will reshape the way financial advisers do business with their clients. For all retirement accounts, either individual or corporate, a financial adviser must demonstrate to the client that they are upholding the fiduciary standard. Someone who is talking to you about your retirement funds must establish that they are acting in your best interest. Integrity, loyalty, objectivity, depth of knowledge, expertise and honesty are all attributes of a true fiduciary.
For those advisers who are product-focused and receive commissions from a sale, suitability standards are no longer enough. Receiving commissions is one type of business model, and there are many decent advisers who serve people properly under this structure. However, there is potential exposure to conflict of interests. Sometimes the advice is biased toward a product sale.
By April 2017, this new law will require full disclosure of how a professional is working with you on your retirement accounts and adhering to the fiduciary standard. Clients will need to read through and sign a Best Interest Client Engagement (BICE) with regards to their retirement accounts when a potential product sale is on the table.
Do your homework in deciding which boat you want to climb into and who you want as a guide on your financial journey. The SEC holds registered investment advisers to a fiduciary standard, and this new regulation by the DOL will add another layer of protection for the public when being served by other types of advisers.
You need to accept personal responsibility for becoming educated and know that you have choices in who you work with for financial advice. Ask yourself and discuss with those close to you what type of experience you want to have when delving into your monetary matters.
What are you looking for in a professional? Are you looking for a product or a process? Are you seeking a transaction or a transformation? Do you want someone to edify and empower you, or simply give you an edict of how your investments compare to the benchmark returns? Do you want someone that gets to know what is important to you, takes an advocacy and accountability role, and helps you strategize on how to build that life? You need to define what will add value to your quest and give you answers to your queries.
Set to task. Look at the prospective adviser’s website. Talk to friends or family about who they trust and why they have chosen to work with them. How does the adviser charge for services? What will you receive in return? What scope of assistance do they provide? It is so much more than “So what rate of return are you getting”! More than ever, with our current economic climate, increasing life expectancies and cultural pulls for our financial attention, the person walking alongside you needs to be your educator, sounding board and trusted ally.
Once you choose whom you are going to work with, you have additional responsibilities. You need to provide all pertinent information about your family financial situation. Like going to the doctor and being asked to disrobe, putting on one of those flimsy gowns, you may feel exposed and vulnerable. In order to get a clear picture of what is important to you, diagnose problem areas, build on your strengths and help you put a strategy in place to move forward, you need to lay it out on the table. Just like your health, your financial life changes over time and you need to make constant course adjustments given what unfolds along the way. As with your physical health, if you just want a pill to take, you may think a product will solve your problems. If you embrace the multi-faceted nature of your physical and financial life, you know you need to take a holistic approach and look at many angles.
On the front of our printed currency and coins we read “In God We Trust.” It is a lofty dream to think that all financial professionals could be held to the same regard when working with clients. It can be a reality though, that with education, awareness and discretion on the part of the public, along with the industry’s pursuit of excellence, integrity and objective advice to clients, the two will converge in a win-win ecosystem, creating true, comprehensive financial health.
Danielle Howard is a Certified Financial Planner practitioner. Her office, Wealth By Design LLC, is in Basalt. Visit her at http://www.wealthbydesign4u.com. Advisory Services offered through Cambridge Investment Research Advisors Inc., a Registered Investment Advisor. Securities offered through Cambridge Investment Research Inc., a broker/dealer, member FINRA/SIPC. Cambridge and WBD are not affiliated.
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