How To Find A Fiduciary: Three Questions To Ask Financial Professionals

Fall in love with the term Fiduciary. In the Financial Planning realm, a Fiduciary means someone obligated to act in the best interests of his/her clients. For years, the financial industry operated under the Suitability Standard. You might be asking, “what’s the difference?”


The mindset of professionals operating on the Suitability Standard: “if a person represents a certain age and amount of money, then this type of product makes sense.” This person can disregard conflicts-of-interest like sales commissions. As quoted by the 2014 PBS Frontline episode, The Retirement Gamble Facing Us All:


“You’ll get lots of advice, but chances are it won’t be worth much. 85% of all financial advisers and financial planners are really just brokers or salesman. Their incentive is to sell you a product that makes them a higher commission, not necessarily a product that maximizes your chances of saving more. Only 15% of advisers are “fiduciaries” — advisers who by law must operate with your best interests in mind.”

Nowadays, the Fiduciary Standard is gaining momentum. Instead of the Suitability Standard, a Fiduciary needs to give advice which is in the best interest for the client. As the Financial Planning industry’s guru, Michael Kitces, frequently says:


“With the Suitability Standard, a suit salesperson can sell you a suit – sometimes incentivized by the sales commission. With the Fiduciary Standard, the suit salesperson needs to sell you a suit which you actually want to wear.”

In this article, we’ll discuss:

  1. How to identify the Personal Finance industry’s smoke-and-mirrors.
  2. The three questions to ask Financial Professionals.
  3. Where to find Fiduciaries for financial guidance.


Personal Finance Smoke-and-Mirrors

My inner Peter Griffin:


You know what really grinds my gears: the smoke-and-mirrors of the Personal Finance industry.


A 2014 National survey conducted by Rebalance IRA discovered that 46% of baby boomers believe they don’t pay any fees for their retirement accounts. Proven otherwise, the average annual fee is 1.50% and can be up to 3.86% according to the same study.


So why do these survey respondents believe they don’t pay fees? Situation One: an agreed upon fee is deducted from a client’s account and paid to the financial professional. Situation Two: the products within the client’s account pay the financial professional a sales commission at the time of sale and/or an ongoing sales fee.


In these two common situations, it’s easy to see why people are confused by how they pay their financial professionals. Human nature typically views monetary transactions by exchanging physical dollars, cutting a check, receiving a paid invoice, or seeing a charge on your bank statement. Many financial institutions make it difficult to see the paid fees by listing this amount in a multi-page account statement report.


Yet, when describing these fees, many financial institutions embrace jargon to list their fees in a confusing manner. Some financial professionals are even trained to confuse clients so the professionals can appear smart. Sounds like an awful selling strategy to me.


Some examples of the jargon used to confuse clients:

  • A-share mutual funds
    • Sales Broker gets typically an upfront fee (aka ‘load’) of 5% commission along with a 0.25% annual fee (aka ‘12b-1 fee’).
  • C-share mutual funds
    • Sales Broker gets typically a 1.00% annual fee (aka ‘12b-1 fee’).
  • T-share mutual funds
    • Sales Broker gets typically an upfront fee (aka ‘load’) of 2.50% commission along with a 0.25% annual fee (aka ‘12b-1 fee’).
  • Surrender fee
    • Sales Broker gets typically around 8 – 10% commission when selling the product (most often an annuity). This commission is refunded to the insurance company by the paying client if the client wishes to retrieve their money before the official contract end.


Lots of people in the financial services industry operate ethically but be wary of the few who give Wall Street a bad name. Cough… cough… Bernie Madoff. Luckily, members of the public are becoming ‘conscious consumers’ with the help of Tony Robbins, 60 Minutes, and John Oliver (watch John Oliver’s in-depth research in the video below. No political commentary in this analysis. Warning: lots of adult language).


Even the Department of Labor (DOL) stepped into this arena to prevent financial companies and brokers from taking advantage of their clients. Read more about the DOL’s Fiduciary Rule going into law in June 2017.


Questions To Ask Financial Professionals

Think of the famous line shouted by General Akbar from Star Wars whenever exploring paid financial advice, “It’s a trap!” Become empowered in your conversations by knowing what to ask and why. An example of how I train clients:

  • Client: “Well, I’ll just do whatever you recommend.”
  • Dan: “No! Always be ready to make me explain the recommendations. Get in this habit with all your financial professionals.”

If you’re going to take away anything from this article, remember these three questions to ask all financial professionals.


Question One

Are you obligated to act as a fiduciary for all of my accounts?


The recent DOL Fiduciary Rule only applies to retirement accounts. Ensure that your financial professional will act as a Fiduciary for all of his/her advice. If the answer is no – or difficult to understand – then interview other Financial Planners.


Question Two

How much is this going to cost me and how do you get paid?


Are the answers difficult to understand? Sounds like smoke-and-mirrors to me. Make sure your financial professional’s interests are alongside yours to make your money grow. Form a relationship with your professional; don’t be a transaction.


Question Three

Explain the pros-and-cons of your recommendations and the pros-and-cons of the other options out there.

Lots of financial professionals want to sell one specific product because he/she will get a large sales commission. Think about this: if you want to use your hammer, then everything looks like a nail. Make the financial professional explain the pros-and-cons of all his/her recommendations as well as the other options out there – maybe even including their company’s overall services.


Where To Find Fiduciaries

Well-Rounded Success  – a friendly plug for our services

  • We took the Fiduciary Oath and are proud to be a fee-only fiduciary. We strive to be as transparent as possible. For example, the costs of our services are listed on the website. Another example, for our Investment Management Services, we send quarterly paid invoices so our clients understand the amount deducted from their individual accounts.


National Association of Personal Financial Advisors (aka NAPFA)


XY Planning Network


A Modern Day Analysis Of Fiduciaries

Watch John Oliver’s educational segment to learn, get angry, and laugh.


Thanks for reading and if you want guidance on how to navigate your personal finances, please get in touch with me or learn more about Well-Rounded Success’ Services on the website.


DandrewsAbout the Author

Dan Andrews is the Leader & CERTIFIED FINANCIAL PLANNER™ of Well-Rounded Success. Dan enjoys guiding and encouraging millennials through their ‘adulting’ responsibilities. His behavioral-finance style focuses on helping individuals in the Well-Rounded Success community define his/her own definition of success, make good decisions, and to also be philanthropic while along their journeys.

Cover Photo credit: Jonathan Simcoe from Unsplash


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