Is your financial advisor working in your best interests at all times? Or his own? It's a very big deal and you must find out. Fortunately, it's easy to do. Just ask!
Financial advisors in the US come in all shapes and sizes but they generally can be put in one of three categories .. a broker - think any kind of bank or credit union or Merrill Lynch, Morgan Stanley etc., an insurance agent - think Northwestern Mutual, Guardian, Axa, Prudential etc.) or a Registered Investment Advisor (RIA) - think Anglia Advisors and others.
Sponsors of recent proposed changes have claimed that they bring the roles closer together by providing a “best interest requirement” for brokers starting on June 30th 2020. Until then, they have no obligation to even consider your best interests, let alone act in them and they will continue to primarily act in their own interests when you hire them. This requirement imposes a best interest requirement on brokers only at the time that they make a recommendation of a specific investment. All other communications (general market information, discussion of a retirement plan - workplace or otherwise, asset allocation discussions and advice etc - in other words about 90% of client/advisor communication) is not covered and the broker has no obligation to consider the interests of the client at these times and is perfectly entitled to work in favor of their own interests and against those of their client. There is no mention of the fiduciary standard in the “best interest” rule.
A CERTIFIED FINANCIAL PLANNER™ who works for a RIA has a second level of fiduciary duty, this time imposed him by the CFP® designation.
Anglia Advisors operates as a fiduciary at all times. You can see this commitment in writing here
So, whether you engage with Anglia Advisors or not, please do NOT hire a financial advisor who will not commit in writing to act as a fiduciary to you at all times for all of their services.
Think of it this way .. there are qualified doctors out there and there are pharmaceutical sales reps selling products. Both very valid professions in their own right. But if you are sick, you’d better hope you are talking to a doctor, not a pharmaceutical sales rep.
Beware of titles. There is no regulation which covers what anyone calls themselves. Being called a financial planner, financial advisor, financial coach, money coach, investment advisor, wealth manager or any other seductive name is meaningless. Anyone can give themselves these titles and it requires no qualifications to do so. They are breaking the law if they are unregistered and offer financial advice for compensation, but that doesn’t stop many unqualified charlatans from doing so.
Actual designations such as CERTIFIED FINANCIAL PLANNER™ (CFP®) professional or Certified Divorce Financial Analyst (CDFA®), however, are at the very least indicative of a very significant course of study, the passing of a highly challenging exam and adequate, appropriate experience in financial planning and the CFP® one, in particular, gives an additional layer of fiduciary responsibility since, as mentioned earlier, maintenance of the designation depends on acting in a fiduciary manner.
WANT TO KNOW FOR SURE? IT'S SIMPLE. JUST ASK YOUR ADVISOR THIS ONE QUESTION:
Download and print this form.
Bring a copy with you to every initial consultation or discovery meeting that you have with any kind of financial advisor (including any insurance company offering "financial planning", as they like to call insurance sales).
Right away ask, “Are you a fiduciary at all times?” Be sure to include the phrase “at all times”, since failing to do so can give an advisor an out to feed you misleading information. If they give you any answer apart from an immediate, unqualified “Yes, I am”, then politely end the consultation and leave. It is a binary yes or no question that you have asked, you can’t be “a bit fiduciary at all times”! You either are a fiduciary at all times or you are not and the advisor knows very well what the answer is. So any response that is hedged, incomplete or in any way vague can be taken to mean that no, that person and firm is not fiduciary at all times and therefore no longer worthy of your consideration as the responsible and un-conflicted steward of any part of your finances.
If they say yes, then ..
1) Ask them to sign the downloaded form right then and there in front of you on behalf of both themselves and their firm (FYI: we sign this form for all our clients, see above) and can provide you with a copy on the spot.
If the advisor is unwilling or unable to quickly sign this form or says he needs to "discuss it with his manager", then the advisor and the firm are clearly not a fiduciary at all times and are not required to act in your best interests at all times - you should quickly walk away and only consider working with an advisor who is willing to sign it right away with no reservations.
2) Ask them for a copy of their “Form ADV”. This is the form that confirms the fiduciary responsibility of the advisor. If they are a fiduciary they will be able to provide you with a copy right then and there or email you a copy while you wait.
Any failure or even any hesitation to be able to produce a Form ADV means that the advisor and the advisor’s firm are not fully covered by the fiduciary standard and are to be avoided as they are simply not going to work in your best interests at all times. Again, simply walk away.
3) If you already work with a financial professional, ask him/her to sign the printed fiduciary oath and provide you with their Form ADV if they have not already done so. If they fail to provide the Form ADV or are unwilling or unable to sign the fiduciary oath, then it's our view that it is definitely in your interests to immediately start looking for a new advisor.