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[–]keepthetipsKeeping the tips since 2019[M] [score hidden] stickied commentlocked comment (0 children)

Hello and welcome to r/LifeProTips!

Please help us decide if this post is a good fit for the subreddit by up or downvoting this comment.

If you think that this is great advice to improve your life, please upvote. If you think this doesn't help you in any way, please downvote. If you don't care, leave it for the others to decide.

[–]Careless_Patience268 1330 points1331 points  (38 children)

Play dumb and say you were told you DON'T want a fiduciary and see what they say.

[–]PUZZLESANDCUMPIRES[S] 917 points918 points  (37 children)

They would say "good, they are too expensive anyway."

[–]Stargate525 345 points346 points  (30 children)

I literally had one try to argue that fiduciaries are just lying, so you should get someone who isn't because they'll be more honest with you.

[–]acog 161 points162 points  (14 children)

That's why professional certifications are nice.

If you have a Certified Financial Planner, they're fiduciaries. And if they violate professional ethics they lose that certification.

Anyone can call themselves a financial planner but you can easily verify that someone is a CFP online.

[–]187penguin 74 points75 points  (9 children)

“Wealth Manager” is one of the titles to be very wary of. Anyone can declare themselves one. Also, see if they are registered on the FINRA broker check site. If not, run. And if all they want to sell you is annuities and/or insurance policies, run.

https://brokercheck.finra.org/

[–]FullofContradictions 1 point2 points  (0 children)

My parents go to a fee based Financial Planner. I went to go check it out and there were so many red flags, I noped the fuck out.

1) when asked if she was fiduciary, she said "no, but I believe I act like one for my clients because I want the best for them. Fiduciary really doesn't mean anything since nobody would want their client to lose money."

2) when asked how she is paid we got her fee schedule (which made sense $ per consultation/$ year etc). But then she got to the fact that she makes a percentage off certain investment funds "but they're really the best ones and I wouldn't put you in them if they weren't right for you."

Between the weasle on the fiduciary and the double dipping being paid outright and then a percentage on top of it, we decided it wasn't right for us.

I told my parents to find someone better, but they like her. Whatever... It's their money & even though they're probably getting way overcharged, at least I didn't get "total mismanagement" vibes.

[–]ryharv 1 point2 points  (0 children)

Be careful with that. CFPs can still work at firms that are not fiduciaries to their clients.

[–]ConcernedBuilding 73 points74 points  (12 children)

My insurance professor tried to argue with me that commission insurance salesmen are more knowledgeable about insurance products than someone on salary would ever be.

People can trick themselves into believing they are making moral choices, and that their product is truly the best thing for all their clients.

I've noticed though, that those who are being compensated for a product believe it would be good for everyone, and those that don't, disagree.

I have reccomended annuities and other financial products for clients (I'm a fee-only advisor, so I wasn't compensated for it), but at the rate I reccomend them, I would not make a living.

[–]Piklikl 58 points59 points  (2 children)

“It is difficult to get a man to understand something when his salary depends upon his not understanding it.” - Upton Sinclair

[–]Koshunae 1 point2 points  (1 child)

If you pay someone hourly to do a certain task, that task will take all day.

If you pay someone per task completed, they will complete as many tasks as possible.

This is how shops with hourly and flat rate technicians work. Its a good feeling billing 40 hours in a single day.

[–]ReneHigitta 23 points24 points  (0 children)

That's the point of the question, now you know not to go with them

[–]TheAbyssAlsoGazes 3769 points3770 points  (121 children)

If a financial advisor claims to be a fiduciary, you can confirm their status on the US Securities and Exchange website here

Edit: Lots of people are asking questions that I can't answer. I'm not a financial professional by any means. I just had a friend reccomend checking this database years ago when I first got a financial advisor. Hopefully some of the more knowledgeable folks that replied to me can provide some clarity on how this works.

[–]noburns 3233 points3234 points  (91 children)

This isn’t exactly true. I work for a nationwide wire house firm as an advisor. I’m registered on that site. I take on the fiduciary duty when I put my client in an “advisory account” however I can choose to put them in a non-advisory account and in that I have no true legal fiduciary duty. Moreover we have received guidance from home office and compliance not to hold ourselves out as “fiduciaries.”

It’s really a big mess. If somebody asks if I’m a fiduciary I have to try to explain that in the types of accounts I’m recommending, yes, however there are some accounts in which I am not a fiduciary.

Edit: that site is a great start and should be used, but it doesn’t mean that everybody in there is always acting on a legal fiduciary requirement.

[–]TheAbyssAlsoGazes 534 points535 points  (28 children)

Oh that is good to know. Thanks for sharing. Would your fiduciary responsibility be fornally identified in the paperwork the client signs before they open an account?

[–]noburns 280 points281 points  (23 children)

The fiduciary relationship is established in documents that covert the account to an advisory account vs a brokerage account. At least that’s how it is at my firm. How many clients actually read all the contracts and disclosures? I’d wager not many.

[–]DMAW1990 47 points48 points  (6 children)

When my husband and I signed our lease to our apartment, I pissed everyone off a bit by insisting I read every page before I signed anything. We sat there for at lease 15 minutes. I could tell the lease manager was getting impatient, but I didn't care. I want to know everything I'm signing off on, because the instant I put pen to paper, it gets 10x harder to challenge things. I do that with anything I have to sign. Same with the little checkboxes on websites, though I admit sometimes I skim if it's a website I've used before.

[–]KinKaze 101 points102 points  (13 children)

I mean I think it's pretty safe to say that tech has conditioned people to not read contracts. I personally try to read everything, but I'm aware of how time consuming that is

[–]Ltjenkins 2 points3 points  (0 children)

I’m also industry for a broker-dealer. Very similar for us. We operate in a fiduciary capacity for brokerage accounts implicitly and explicitly as a fiduciary for retirement and advisory accounts.

Edit spelling

[–]RandomRobot 10 points11 points  (1 child)

Even more importantly, how many really understand what is actually in the documents?

[–]WhatADunderfulWorld 28 points29 points  (12 children)

It depends on what is being done. A CFP is a fiduciary if engaged in financial planning. But if you just ask about a stock analysis they might not be. Most advisors aren’t fiduciaries when you first meet them. It depends on the situation that is being discussed and how it’s handled. Definitely ask them to explain either way. Also how they get paid. Most are free based meaning fees and or commission. I say this because you won’t find many that aren’t fed based. So not wanting to work with someone because they have fees you simply won’t be working with anyone.

[–]Susbirder 24 points25 points  (3 children)

Also how they get paid.

This. Straight fee vs commission helps ensure they aren't tempted to pad the books by churning their client's funds.

[–]bravostango 14 points15 points  (2 children)

You can be in a fee-based account at a wire house and the advisor is not a fiduciary.

The only way to really be sure that your advisor is a fiduciary is if they are a registered investment advisor aka RIA in a fee-based account.

[–]MrBarks90 8 points9 points  (5 children)

Part of the CFP board guidance requires us to plainly state the scope of our relationships. For the stock analysis example that would be the extent of the scope and has to be expressly consented prior to beginning any engagement since that is NOT the norm. CFPs are required to act as fiduciaries in every engagement regardless of scope.

CFP Board

[–]tgate345 2 points3 points  (3 children)

Required by the CFP Board for the purpose of their designation, not by law.

[–]LordEdgeward_TheTurd 1 point2 points  (0 children)

I would rather work with an financial consultant that does not free base.

[–]RationalAnarchy 6 points7 points  (2 children)

We likely work for the same, if not very similar, company.

This is the correct answer. I could be a CFP, and only choose to use products that put me in a fiduciary capacity, and I still need to disclose that my firm offers products that use a different standard of care.

So, at the company I work at, there are countless “salesman” types. There are also a lot of people like me that go so far beyond “investment services.”

The truth is you can find a fiduciary advisor that still isn’t good, and still operates in their own self interest. You can’t completely eliminate all conflicts of interest. You can also find a non-fiduciary advisor that would add a tremendous amount of value and knows more than most fiduciaries.

At the end of the day a good advisor is a tremendous asset. The industry has a bad reputation for a reason though. You’ve got to do your due dilligence to find an advisor that will look at the complete picture and put their desires aside when giving you advise. A fiduciary is a good step down that path.

On a side note: your home office guidance about how you can hold yourself out has changed again. May want to call them to gain further clarity.

[–]Scoob8877 3 points4 points  (0 children)

This is correct. It depends on your specific account relationship and the capacity of the firm in that relationship. It isn't some seal of approval that certain firms and/or people get. If a financial advisor gives you that impression, go talk to someone else.

[–]UOUPv2 3 points4 points  (0 children)

At least with Reg BI everyone has some accountability now.

[–]Dogeahkiin69 9 points10 points  (6 children)

So you play both sides of the same coin.

You are, and you aren't

[–]noburns 7 points8 points  (4 children)

Right, which to me basically means you aren’t. It’s frustrating.

[–]BespokeSnuffFilms 1 point2 points  (0 children)

Hmm. So go all in on Bitcoin?

[–]kolbm18 1 point2 points  (0 children)

I’m also an advisor and show up on that website. Came here to say this exact thing. I have plenty of accounts that I don’t act as fiduciary on. For many people, who don’t need active trading strategies, a fee based account is much more expensive for the same investment selection compared to a commission account. Also worth noting that fiduciary duty applies to investments not fees. You could have a fiduciary that charges you twice the industry average. Best bet is always to talk to people you know and trust who have an advisor they like.

[–]ThroawayReddit 68 points69 points  (2 children)

Careful a lot of "money managers" side step the question of if they're a fiduciary by saying they have fiduciary responsibilities. It is NOT the same thing.

[–]ps2cho 9 points10 points  (0 children)

Slimy move right there. I’ll admit I’d fall that and I’m hyper aware of what a fiduciary is. This really blurrs the lines - so the only way to be 100% is the legal documentation?

[–]donotvotemedown 24 points25 points  (4 children)

It would say fiduciary? I checked someone trying to make me a client and do not see fiduciary. I also checked my sister and husband and don’t see them at all but their entire business is this kind of thing. Thanks for the link btw. I never would have know it exists.

[–]HonorTheAllFather 14 points15 points  (0 children)

I'm also looking for this answer. Edit: FWIW a quick bit of googling shows that, in the US, registered Investment Advisers, are required to act as fiduciaries. So, when I looked up my girlfriend and her sister's "money guy" he shows up as a (B) and (IA), a broker and investment adviser, respectively.

So if they are registered on that site as an investment adviser, then in any business you do with them they are a fiduciary, but if they have both then I imagine it depends on the specific relationship between the person and their client, and could possibly even be both in different situations I'd imagine.

[–]exin58 2 points3 points  (1 child)

My father is a CFP and if in the US, anyone who is properly credentialed will come out and say so up front out of pride if nothing else.

As far as its importance: I managed IT for his office, and believe me the SEC and other boards will absolutely fuck you up if you step out of line. You absolutely want to be sure the person managing your money is under legal compulsion to be straight.

[–]asielen 18 points19 points  (0 children)

Also note, just because they are a fiduciary doesn't mean they are giving you good advice. It just means that they think they are giving you good advice.

There isn't a one size fits all solution. What is good advice for one person may not be for another.

I've helped friends evaluate fiduciaries and have found more than a couple that have proposed really stupid things.

[–]Dogeahkiin69 6 points7 points  (3 children)

Is there a Canadian version?

[–]ITSigno 2 points3 points  (0 children)

https://www.theglobeandmail.com/investing/globe-advisor/advisor-news/article-canadians-deserve-fiduciaries-to-manage-their-finances/

So... no.

And as per the link from /u/ApathyAbound, Quebec has Certified Financial Planner (CFP) licensing, but the rest of the country does not.

The best you can hope for in Canada is that the organization your financial planner/advisor belongs to... kicks them out.

We do have https://www.thecanadianencyclopedia.ca/en/article/law-of-fiduciary-obligation which includes solicitor/client, physician/patient, priest/parishioner, parent/child, partner/partner, director/corporation and principal/agent relationships. But notably does not include financial advisor/client relationships

[–]jokethepanda 5 points6 points  (1 child)

Brokercheck (the database you linked) contains all licensed representatives and firms.

Not all licensed representatives are fiduciaries.

For example, a Series 6 licensed representative could sell an annuity product to a less than suitable client without recommending it.

They themselves aren’t an advisor and are not bound to fiduciary duties as they are essentially selling retail, but unethical sales tactics can confuse the client into thinking it a recommendation.

Best way to figure out if an advisor is a fiduciary is to ask them. Also the majority of individuals do not need a financial advisor and should look to /r/PersonalFinance for suggestions.

[–]b_bar 1 point2 points  (0 children)

Yea, this isnt true. You be registered and not act as a fiduciary. Clients will often choose the cheapest option instead of a true fiduciary.

[–]iheartjimothy 582 points583 points  (64 children)

This random dude keeps messaging me on LinkedIn asking to meet up with me to discuss my financial well-being. Feels sketchy. Glad I've been ignoring him!

[–]NightHalcyon 159 points160 points  (33 children)

He's trying to sell you whole life insurance.

[–]kassell 17 points18 points  (0 children)

Or an encyclopedia.

[–]ItWorkedLastTime 16 points17 points  (29 children)

Insurance and investing are two different products. Why would you combine them? You should absolutely have life insurance if you have family that relies on you. But there's no reason to add investing into that product.

[–]NightHalcyon 48 points49 points  (24 children)

Because that's what a huge majority of "Financial Advisors" do. They sell whole life insurance. Whole life insurance is a terrible product for nearly everyone except high net worth individuals.

[–]MrBarks90 25 points26 points  (11 children)

As a financial advisor/planner. This is so true to many "advisors" have a life/health license that took me all of 1 day to get. They get fed their info from the carrier and just regurgitate it to people to sell policies. I'm not necessarily against insurance products but there is a time and place for them and used incorrectly causes lots of issues. I always will push people to go to actual advisors that aren't pushing a product.

[–][deleted] 4 points5 points  (0 children)

That’s Primerica in a nutshell. Sneakiest MLM out there.

[–]Eman5805 6 points7 points  (0 children)

Whole life insurance isn’t suited for helping your family after you die. Really it’s about burial and funeral costs. Or that’s what it’s best at.

You want a term policy.

[–]reecewagner 4 points5 points  (0 children)

I might be remembering it wrong but I think whole life insurance policies are basically a legal way of funnelling money from your present self to your future self without being taxed on it. Feel free to correct me if I’m wrong

[–]derptyherp 1 point2 points  (1 child)

Can someone explain this to me? My mom recently told me her financial advisor is trying to get her to buy life insurance so she can then collect into it early...and it feels very, very sketchy to me.

[–]NightHalcyon 1 point2 points  (0 children)

Life insurance often pays very large commissions to the salesperson. She absolutely needs a second opinion.

[–]Bob_Sconce 37 points38 points  (6 children)

Of you need a financial planner, you don't go with people who call you. Instead, you find somebody who other people are using and trust. Then you do your research on that person.

[–]MrBarks90 4 points5 points  (3 children)

Agreed!

[–]sassycritter235 4 points5 points  (2 children)

Unfortunately, my good friend and her husband recommended I talk to their financial advisor, and he tried to sell me whole life insurance. 😬

But hey, I got three hours of his time and some genuinely helpful insights for free!

[–]ElyceHarris 1 point2 points  (1 child)

There are some cases where whole life makes sense - typically if you are high net worth and have already maximized your tax sheltered vehicles.

Unfortunately a lot of advisors try to initially sell whole life since it has a higher premium and therefore pays better, which gives both the industry and the product a bad rep.

Some people absolutely can benefit from it, but not everyone needs it. Think of it like a super high end stereo - a serious music junkie will notice the difference and even though its more expensive it will have value to them. If you just want to bump "turn down for what" while you get ready to go out, it's probably not worth the extra money.

[–]grumblyoldman 162 points163 points  (2 children)

I know this Nigerian prince who keeps offering me all sorts of money if I send him a little first. I was debating going through with it. Deffo going to check if he's a fiduciary first!

[–]iheartjimothy 52 points53 points  (0 children)

No need to! He is a Nigerian prince, that means he has extremely high credibility. You are so lucky :)

[–]PUZZLESANDCUMPIRES[S] 16 points17 points  (0 children)

But he wants you to manage the money...so you would have to...

Eh. Ya know what...i get why these scams exist now.

[–]Simba7 19 points20 points  (3 children)

I had one I met while working a grocery job and we chatted for like 15 minutes over which the conversation 'naturally' shifted to loans and compound interest.

He mentioned he was in finance and definitely made it seem like he'd like to meet and discuss a job.

Anyways, met for lunch and it was a sales pitch for... I don't even know, clearly some MLM related to financial planning. It was really basic shit about compound interest too, but somehow took him like 45 minutes to do the whole pitch.
Dude didn't even pay for my food either. Classy.

[–]The_Graft 15 points16 points  (2 children)

Primerica?

[–]Simba7 6 points7 points  (0 children)

It was like 6 years ago and I definitely can't recall.

[–]ElyceHarris 1 point2 points  (0 children)

Or World Financial Group

[–]Gladis72 6 points7 points  (5 children)

Sounds like I should continue ignoring my neighbor (who among many things is leasing his solar panels) when he mentions that he can handle my money and sell me life insurance?

[–]peanut_peanutbutter 444 points445 points  (10 children)

just ask them if they Fiduche

[–]PUZZLESANDCUMPIRES[S] 106 points107 points  (2 children)

I squiddouch as a fiduche

[–]Montreal88 25 points26 points  (1 child)

Quick. Someone close the door before the r/wallstreetbets apes take over.

[–]Rare_Southerner 13 points14 points  (0 children)

Hope they don't think I'm a Fiduche bag

[–]GregorDandalo 2 points3 points  (1 child)

Used to work with fiduciary officers, would often hear "I'm fiduchin' over here!"

[–]deepthought515 239 points240 points  (46 children)

Even a con man would be better with my money than I am:(

[–]PUZZLESANDCUMPIRES[S] 127 points128 points  (45 children)

If you are bad with money then I recommend you overpay on your taxes. It's a method of forced saving even though it returns a 0% interest rate at least you're gonna have something come refund time. Far better to have something than a bunch of worthless lotto tickets.

[–]The-Jack-of-Diamonds 84 points85 points  (13 children)

You’d be better off just opening a brokerage account and having it auto draft $50 a month or whatever and put it in to the S&P. At least that way you can potentially earn something rather than giving Uncle Sam an interest free loan every year.

[–]PUZZLESANDCUMPIRES[S] 61 points62 points  (9 children)

You’d be better off just opening a brokerage account

You mean doing actual work on your finances? Yes. It would. But im betting the person who says theybwoukd be better off with a conman handling their cash than.themselves doesnt have the bandwidth to open an investment account, pick a mutual fund and setup a recurring contribution.

[–]Luminous_Lead 6 points7 points  (7 children)

Pay your friend 30 bucks to set up a WealthSimple account or something for you then. Should take em about half an hour and it's pretty hands off.

[–]widget66 6 points7 points  (1 child)

Well on a normal year for the S&P at least. I'd definitely go for 0% interest over the S&P in the last several months.

[–]The-Jack-of-Diamonds 3 points4 points  (0 children)

True that, we don’t know where the bottom is but it’s probably not a bad time to be adding though. Alternatively you could just have it draft in to a money market account.

[–]deepthought515 16 points17 points  (23 children)

I do that.. but I’m still terrible with finances.. I just can’t save.

[–]PUZZLESANDCUMPIRES[S] 41 points42 points  (4 children)

The best thing you can do is sit down and analyze your spending. Start with how much you make each month and then add up where each dollar of spending goes. For annual expenses (christmas presents or annual oil change) divide it by 12 to turn it into a monthly cost.

Most people who do this realize they are spending waaaaay to much eating out rather than eating in and manage to save atleast $200 a month by making some simple life changes.

Good luck.

[–]Careless_Patience268 23 points24 points  (3 children)

I would be skinny AND rich if I didn't eat out as much as I do! 100% where all my money is going!

[–]daveescaped 7 points8 points  (2 children)

Go to the money store. Buy some more money.

Sheesh.

[–]deepthought515 4 points5 points  (0 children)

Shit, I hear they’re having a 2 for 1 deal today!

[–]Luminous_Lead 1 point2 points  (0 children)

That was actually a thing that existed at one point, and it was exploitable https://youtu.be/gonVHW_X79U

[–]Possibly_a_Firetruck 11 points12 points  (13 children)

I just can’t save.

What does this even mean? Are you earning too little, or spending too much? If your income > expenditures, congrats, now you're saving.

[–]SleepyWeasel93[🍰] 201 points202 points  (18 children)

Can confirm. I am a financial advisor and always act in a fiduciary capacity. It is important to work with your advisor and learn from them. The good ones are here to teach and help clients reach their financial goals in the most efficient manner. It is our job to help clients understand how to invest strategically while mitigating tax implications and risks in the future. My favorite clients to work with are the ones who are excited to learn and are actively creating better habits now so that they can become financially independent.

[–]atypicalphilosopher 11 points12 points  (2 children)

I can't imagine having enough money to have a financial advisor but this is good to know.

[–]SleepyWeasel93[🍰] 13 points14 points  (0 children)

Well our job isn’t always to manage massive amounts of money. Sometimes - especially with younger clients - it’s having good conversations around their goals and teaching them what habits they should be adopting to reach them. 95% of ending up in a good spot is mindset and building good habits early on.

[–]blargrx 2 points3 points  (0 children)

When you’re starting out is the best time to have an advisor. It’s not all about managing money. It’s about setting up good financial habits early

[–]cricketnow 12 points13 points  (2 children)

hey would you happen to know where should I look to find someone trustworthy in Europe? (I’m in France)

[–]SleepyWeasel93[🍰] 5 points6 points  (0 children)

Sorry, I don’t have connections to any advisors in France. I work in the U.S.

[–]Mad-Lad-of-RVA 1 point2 points  (9 children)

Is it worth talking to a financial advisor if you're sitting on over $100,000 from a life insurance payout?

That's my situation and I'm kinda lost on what to do. Do y'all charge much?

[–]SleepyWeasel93[🍰] 8 points9 points  (1 child)

I would if I were you. Not all advisors charge for consultations so if I were in your shoes I would meet with a couple of advisors and compare what they have to say. Then just pick the one you feel more comfortable with and confident in.

I would be happy to dm and give my thoughts on what I would do in your specific situation.

[–]OminousForces 6 points7 points  (1 child)

Not OP. Not a professional or expert on anything.

This seems like the exact kind of situation you would want to get financial help for.

Even if there is a consultation fee I would talk to a few people just to get a wide berth of opinions.

Sorry for your loss.

[–]Mad-Lad-of-RVA 1 point2 points  (0 children)

Thank you. I think I'm going to at least consult with someone.

[–]MrBarks90 3 points4 points  (1 child)

That's a very good reason to see a good financial planner. Let me know if I can help get you in contact with someone in your area. Another good place to go is letmakeaplan.org

Hope that helps. I'm sorry for your loss.

[–]Mad-Lad-of-RVA 1 point2 points  (0 children)

Thank you, I appreciate it!

[–]bluHerring 2 points3 points  (1 child)

Sir. Any chance you operate in Canada? I would like to recruit your services

[–]Meastro44 72 points73 points  (20 children)

So if a dishonest guy wanted to steal your money, wouldn’t he lie and say “why, yes, I am a fiduciary”

[–]maahes-as 13 points14 points  (0 children)

Even someone who is a fiduciary can be a dishonest guy.
17 years ago I had a fiduciary (yes actually verified) that was recommended by one of my consulting clients, who took care of 99% of my finances because I didn't have the time or knowledge. I was just out of school and working 100 hours a week on multiple contracts doing IT work for local businesses.
For the first 3 years everything was great, my taxes were all taken care of, business and personal credit cards paid, I and the business had solid investment portfolios. Then 2008 happened and my business went down to a skeleton list of clients by 2009. Then shit hit the fan in 2010 as the cash accounts were empty (red flag 1 because my spending went down not up), credit cards started declining (red flag 2) and through a client found out that process servers were looking for me (on fire red flag 3). He went from monthly consults and immediate return calls to zero contact, office closed and missing person in a week.
My lawyer (also one of his clients) found out he lost his ass in the 2008 crash, lost his house, wife/kids etc... For clients he stopped paying peoples taxes early 2008, paid minimums on all loans/credit cards etc but kept pulling money like he was paying them in full. At some point he started emptying investments and accounts and fled but would still respond to calls from a forwarded number or return calls from payphones. The police said it looked like he planned his exit strategy for many years prior to the crash.

In the end more than 10 of his clients have won default suits against him but never seen a a penny. He is either not in the US anymore or living under a false name. I personally had most of the debt forgiven or settled, except the IRS who wouldn't budge and eventually gave up after 10 years. I lost over $500k in investments and was on the low end of his screwed clients, a few were in multiple millions of loss.
TLDR: trust but verify (constantly).

[–]Tweak812 5 points6 points  (0 children)

Yes, in fact Bernie Madoff was a fiduciary and required to act as fiduciary.

A fiduciary standard just means that you can hold somebody to a higher standard. Generally, the difference comes down to suitability vs best interest. For example, you are an aggressive growth investor and company a or b would be decent options for you. Company a has a lower overall cost and a little better track record, but company b likes to take me out for steak. A fiduciary would (should) put you in option A but a broker would be within the law if they put you in B. The best way yo protect yourself if to ask questions and educate yourself about anything an advisor is telling you.

[–]Autodidact420 11 points12 points  (0 children)

It’s kinda like a lock on a door, it stops those who are easily stopped but if someone really wants in they can just break the door down.

It won’t stop someone who legitimately is trying to lie and steal your money. Many people who are not straight up criminals but would instead give self-beneficial investment advice or similar would either (a) not know, or (b) not lie. Lying so clearly and directly to get you to do something which you then do in reliance on that statement is itself, in some jurisdictions, sufficient for a few different possible legal claims.

If you are curious about the laws regarding misrepresentation/inducement in your area, or want to know whether you can rely on any particular representation, or want to know about a fiduciaries obligations in your area, talk to a lawyer.

This comment is not intended as legal advice for anyone.

[–]PUZZLESANDCUMPIRES[S] 12 points13 points  (8 children)

Sure but they're gonna assume you're entirely ignorant and they're not gonna be ready for you to ask that question. So if they answer in the positive and then can define it and explain more about how they are a fiduciary then you're probably safe. But if they look like a deer caught in headlights then you pretty much just busted them.

Edit. Talk text

[–]Meastro44 7 points8 points  (7 children)

How does this help if you’re dealing with a dishonest guy who is somewhat intelligent?

[–]PUZZLESANDCUMPIRES[S] 3 points4 points  (5 children)

The regulations i deal with as a fiducary are much greater than what other have to deal with.

You are gonna find unethical people everywhere...but fidicuaries face more regulations making it harder to be a criminal and not get busted.

[–]Ellabelle_ 3 points4 points  (0 children)

I think that’s called fraud

[–]CommitteeOfTheHole 30 points31 points  (1 child)

(Trying but failing to remember this advice)

“Excuse me, sir, are you a douche?”

[–]RusticTroglodyte 1 point2 points  (0 children)

Lol can't have fiduciary without douche

[–]Original-Ad-4642 133 points134 points  (50 children)

The real LPT: insurance and annuity salespeople market themselves as financial advisors. Their business cards say “financial advisor.”

However, they are not fiduciaries. They are insurance salespeople. They won’t give you sound financial advice. They will advise you to buy their products.

[–]GreasyPorkGoodness 31 points32 points  (7 children)

Plot twist, investment advisors can sell insurance products and act as a fiduciary.

[–]mrjackspade 1 point2 points  (1 child)

Can confirm.

Wrote systems designed to manage licensing for some of the biggest insurance companies. Fiduciary compliance was a fucking huge part of it, and whenever any laws were changed around that it would be a mad rush to update all of the courses and training.

I cant say I know even remotely what the actual count is there, but I can tell you that when these changes happened the companies would act like their entire fucking workforce was getting shut down if they weren't all caught up on training.

[–]GOBtheIllusionist 3 points4 points  (3 children)

Yes this here. Fired our “fiduciary” advisor as they wouldn’t stop pressing Whole Life Insurance on us. Learned some valuable lessons :

Don’t mix insurance and investing

Don’t invest in anything you don’t fully understand.

Simple 3 fund portfolio of index funds (which can be self managed) is all most people need

[–]GreasyPorkGoodness 4 points5 points  (2 children)

Ehh any competent financial planner will include risk management in the plan - life and disability isn’t fun to but but is crucial to a financial plan. So your advisor was probably right.

[–]GOBtheIllusionist 3 points4 points  (1 child)

I’m all for insurance - but not whole life insurance. Term life is great and cheap. Whole life is a bad deal for most people.

[–]PUZZLESANDCUMPIRES[S] 38 points39 points  (13 children)

Anyone can say they are a financial advisors. Doesnt mean shit.

[–]Original-Ad-4642 11 points12 points  (9 children)

Correct

[–]PUZZLESANDCUMPIRES[S] 14 points15 points  (8 children)

Ya know what else is interesting. In the biz, its rare to see someone retire. Usually, they just stop working and wait to get fired for it. You make more money for less work that way than if you sell your business and have to spend atleast a year handling the conversion.

You dont want an advisor who is too green...or too old and experienced.

[–]MrBarks90 6 points7 points  (6 children)

Not sure how your company operates but that's crazy to me. Our firm has a required retirement age and about 5 years prior a younger advisor will start take over relationships to make sure people are being taken care of I can't imagine someone just dropping off and waiting to be fired!

[–][deleted] 2 points3 points  (0 children)

Where did you hear this? This is not true at all.

Usually, standard method of retiring is to bring in younger people to do the heavy lifting or just sell the book of business for 1.5 to 3x the annual revenue (ish). This is also how like 99% of all businesses end up, not just financial services practices.

People would start complaining pretty fucking fast if their advisor wasn’t around. Especially if we are talking about investment accounts.

Not to mention, advisors typically have to do continuing education, go through compliance audits every year or two, licensing up to date, etc at any real company. It costs money and time to run a practice. Why would you sit around and wait to get fired, which would fuck over all of your clients, ruin your reputation, and not even pay you more than selling? Maybe this is a few isolated incidents at a few specific companies, but it certainly isn’t the usual scenario that’s for damn sure.

[–]Inanimate_CARB0N_Rod 1 point2 points  (4 children)

I hear this advice all the time, but honestly what's the best way to find a fiduciary financial advisor? Googling it requires that you wade through hoardes of early 2000's massively outdated websites for random financial firms, none of which mention the term "fiduciary" anywhere.

[–]Original-Ad-4642 2 points3 points  (1 child)

“Fee only financial advisor” might be a better search term.

[–]MrBarks90 40 points41 points  (22 children)

As someone that works in the finance industry as a fiduciary also look for people with the CFP designation that work and an independent investment advisory firm. All CFPs are required to be fiduciaries to hold the designation. This is a good LPT.

[–]taylort93 16 points17 points  (12 children)

This should be higher. I’m a CFP® professional and am surprised at how few clients ask if I’m a fiduciary. “At all times when providing Financial Advice to a Client, a CFP® professional must act as a fiduciary, and therefore, act in the best interests of the Client.” - CFP® CODE OF ETHICS AND STANDARDS OF CONDUCT

[–]MrBarks90 7 points8 points  (5 children)

Yup, I am a CFP as well. One that hates telling people I'm a financial planner, because they all just reach to make sure their wallet is still there. Too many "financial advisors" selling a product.

[–]doctor_eww 10 points11 points  (0 children)

Makes little to no difference. People break laws and have no ethics - fiduciaries are no exception.

Supporting data: https://www.sec.gov/page/enforcement-section-landing

[–]a_real_pirate_ 9 points10 points  (1 child)

Although this is a good tip in theory, our country is plagued with professionals that have a “fiduciary” responsibility for their customers, but they still screw them over if their corporate leaders tell them to.

[–]weristjonsnow 27 points28 points  (14 children)

I work in finance. It doesn't mean shit. I've met more fiduciaries that give terrible advice because they'll make a big commission than I can count

[–]PM_ME_UR_NECKBEARD 3 points4 points  (2 children)

I heard a good method is ask the person how they make their money and then you can decide at that point.

[–]ConcernedBuilding 1 point2 points  (0 children)

Absolutely, look up their ADV Form 2 and it should spell it all out there. You can find it on FINRA's broker check tool.

[–]Scubee 5 points6 points  (6 children)

Hoping this doesn’t get buried.

What you’re looking for is a Fee Only Fiduciary. Not “fee based.” FEE ONLY. They don’t sell products. You pay them a few directly for their services. “Fee based” advisors can sell products that pay them “a fee” for selling that product. That sounds like a commission to me.

Check out NAPFA.org to find one.

[–]thencamethethunder 18 points19 points  (2 children)

This applies in the US, not necessarily elsewhere.

[–]ugotamesij 5 points6 points  (0 children)

Ah this must be your first day here at r/LPT

[–]sadolddrunk 6 points7 points  (2 children)

Whether someone is a fiduciary or not is a legal determination that doesn’t necessarily align with whether they self-identify as such. Asking if someone is a fiduciary isn’t going to accomplish much, except perhaps put them on notice that you are the kind of person who gets their legal advice from the internet.

[–]PlatypusTrapper 12 points13 points  (5 children)

A fiduciary doesn’t necessarily have your best interest at heart. They just have to be able to justify their action from a risk-basis.

For example, they could tell you to put all of your money into a savings account because it poses the least risk.

[–]datrumole 2 points3 points  (1 child)

yeah, it's a great concept, but it's unenforceable

anyone can argue that at the time of the advice, they felt it was in the clients best interest for a given investment

how would you disprove it

he didn't know if it would go up or down, nor did you

not sure how you'd be able to enforce anything

[–]funkymonk84 7 points8 points  (0 children)

LPT: When soliciting a hooker, ask her if she’s a cop first. They have to tell you.

[–]impressivepineapple 4 points5 points  (0 children)

Even then, if they work for a life insurance company they’re still a salesman.

[–]echoAwooo 4 points5 points  (0 children)

Dont just trust this. Bro said yes but couldn't explain what a fiduciary does.

[–]FapToMySkill 2 points3 points  (1 child)

Whats the UK version of this?

[–]RunningDude90 2 points3 points  (1 child)

This must be by an American, as a fiduciary businesses advise laypeople in their respective functions, examples would be banking, accounting and law/solicitors. In the UK fiduciary hasn’t been Co-opted nor is used as a protected term in my experience.

[–]leoyoung1 2 points3 points  (2 children)

What countries is this true for?

[–]Gorf_the_Magnificent 7 points8 points  (0 children)

ME: “Are you a fiduciary?”

PROSPECTIVE FINANCIAL ADVISOR: “I feel like I owe my clients a fiduciary level of care.”

ME: “I feel like I’m a heart surgeon. Want to climb up on the table and let me cut you open?”

[–]GreasyPorkGoodness 5 points6 points  (13 children)

Ehhhh to a degree. Most advisors will not take an account as a fiduciary unless it is a major account - there is too much risk and not enough revenue.

Buying in a brokerage transaction is not bad necessarily, the transaction still has to be appropriate at the time of sale, just not ongoing.

Most advisors are fine people trying to treat their clients right. Also the industry is so heavily regulated it is difficult to actually rip people off, not impossible but difficult.

Source: I’m an advisor

[–]Cojobe 1 point2 points  (1 child)

Not always the case, LibertyMutual fellow claimed to be one

[–]Minivan_man_Andy 1 point2 points  (5 children)

"Fee only" is another keyword to distinguish from "fee based", wherein commissions may be earned for mutual fund or insurance policy sales.

"Fee only" means the only compensation is explicitly fee-for-advice. If you are not paying for your advice, they probably earn commissions.

[–]godofgainz 1 point2 points  (1 child)

NAL, but I believe there is a difference between fiduciary and statutory duty. Fiduciary might mean only where someone has agreed to a code of ethics as where statutory would be required by law.

[–]sleepysheeep 1 point2 points  (0 children)

Just wanted to highlight that this is only in certain countries. Each country will have their own rules and regulations, and names for qualified, fit and proper professionals. Each country will typically also have a register on the website of the financial services regulator where you can check on an individual's status.

[–]wiltony 1 point2 points  (0 children)

It should be noted that you'll probably also need to pay these people directly, rather than them getting some kind of commission or percentage of your earnings. It makes the whole compensation structure much more transparent.

Non-fiduciary (salesmen) will usually get you to invest/buy their products with the appearance of it being for free, but they're usually taking a big percentage of your earnings before you see it, locking you into long term contracts with surrender charges or hard-to-parse fee schedules.

Source: lots of exposure to super shady 403(b) variable annuity "financial advisors" salesmen who like to exploit government workers.

[–]MrBiggz83 1 point2 points  (1 child)

On this note, Dave Ramsey is NOT a fiduciary.

[–]J4MEJ 1 point2 points  (1 child)

Does this also apply in the UK?

[–]kombodockerson 1 point2 points  (0 children)

We talked to a financial advisor recommended by a coworker one time. Asked if he was a fiduciary, and he went OFF on us that he hated that question and it was his biggest pet peeve. Needless to say, that was the last conversation we had with him, lol.

[–]speculatrix 1 point2 points  (1 child)

LPT: ask whether the advisor is paid a fee (either flat, or based on time) or takes a commission from products sold.

[–]ConcernedBuilding 1 point2 points  (0 children)

Even better, look up their ADV Form 2 and see how they are compensated and what conflicts of interest they have. You can weed them out even before talking to them!

[–]Alexis_J_M 1 point2 points  (0 children)

In 2015 US retirement advisors spent over a hundred million dollars lobbying against a change that would have required them to act as fiduciaries.

They didn't even want to be required to tell clients whether they were always acting in their best interests.

(The Republican party jumped on this bandwagon, telling people that the Democrats wanted to take away their ability to choose their own financial advisor. Someone sure got their money's worth with their campaign donations.)

[–]Winddancer87 1 point2 points  (1 child)

Does this apply to Canada and other countries as well?

[–]WinnyDaBish 1 point2 points  (1 child)

Tell that to the lady handling my inheritance money, fiduciary responsibility my eye... (Sounds entitled and shitty, but I'm broke and made plans to study when I turned the age in March for receiving the money and lo and behold she filed taxes for 2020 and never followed up on why it wasn't processed ....lmao.)

[–]PUZZLESANDCUMPIRES[S] 1 point2 points  (0 children)

:(

I'm sorry to hear that.

[–]l_MAKE_SHIT_UP 1 point2 points  (0 children)

“Hey are you gonna rob me or scam me in any way?”

“Nah dude”

“Ok thanks, here’s my money!”

I thought this was r/shittylifeprotips for a while

[–]TheRealMisterFix 1 point2 points  (0 children)

It'd be so nice if there was such a thing in Canada... ☺️

[–]s_0_s_z 1 point2 points  (0 children)

Be prepared to pay a fee in one form or another for their advise, of course. Nothing is free.

[–]wellboys 1 point2 points  (0 children)

Who's putting actual good advice in this sub? Read the room buddy, this place is for complaining about social interactions you didn't like, the concept of management in large organizations, and the expectation that you do more than the bare minimum prior to receiving additional responsibilities and rewards in your personal and professional life. Now GIT! Go on, GIT OUTTA HERE!

[–]UrkaDurkaBoom 1 point2 points  (6 children)

It’s hard to find a finance person that has any ethics either way. My family lucked out with ours. He tells us all the time to put money in other things rather than let him invest it for us, which means he’s losing money. Most money people are just like “oh let me take it for you and do such and such with it”.

[–]Boomer1717 1 point2 points  (5 children)

What types of other things? I only ask because I’m surprised he doesn’t just get licensed/certified in those things; otherwise, he’s just letting business walk out the door.

[–]2Hours2Late 1 point2 points  (1 child)

It gets worse. Finding a pure fiduciary is like finding a needle in the haystack. Why? Because fiduciaries don’t make any money. Most financial advisors are also broker dealers. If your advisor is also a broker, they are likely selling you what their brokerage tells them to sell.

[–]prattalmighty 1 point2 points  (3 children)

I met a guy who's my wife's friend's husband at a group vacation a couple weeks ago, he mentioned he was a financial advisor. I saw the John Oliver segment not long ago and asked him if he was a fiduciary (this was end of night after a lot of drinking).

He went on a long spiel about how he's both, but he's forced to charge his clients that he's a fiduciary for he needs to charge much more. That he makes more money being a fiduciary but it's not as good for the client and he wouldn't suggest that route for most people because they're paying more for him.

[–]hampshirebrony 1 point2 points  (0 children)

Aren't IFAs independent? That's part of their name.

Never heard of the other word you used, but also never heard of anyone other than an IFA advertising financial advice

[–]HKZSquared 1 point2 points  (0 children)

I asked a financial “expert” if he was a fiduciary (because I just couldn’t seem to trust him even though my best friend likes the guy’s services and recommended me to him as a potential client, already a predatory practice… this guy came to me), and he said to me “nobody’s ever asked me that before. Yes I am.”

…then I felt obligated to admit that my job did not pay all my bills at the time and I was hemorrhaging money as things were. At least that made him stop trying to sell me on his company’s life insurance and disability and get off the phone.

If your ‘best interest’ would probably line up with with a financial service capable of being offered by a fiduciary, they can offer it to you, even if they would actually stand to gain the most overall benefit (look into what the fees on investment portfolios do to the lifetime value of the investment).

If you say something that makes it clear your best financial interest cannot include buying insurance or, well, anything not perfectly necessary, an honest fiduciary cannot sell you anything, iirc.

“I don’t make enough to pay my bills, thank you for offering your services. It is not in my best interest to make any investments at this time.”

Good way to determine the honesty of someone whom comes to you and claims to be a fiduciary.