What is a Fee-Only Fiduciary and why is it important you choose one as your wealth manager?
Why should working with a Fiduciary it be important to you?
- “A fiduciary is a person or organization that acts on behalf of another person(s), putting their clients’ interest ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other’s best interests.” Investopedia
- “A broker-dealer follows the suitability standard: Investment choices must be suitable for the client, but can still be more beneficial to the broker than the very best option; the broker’s primary responsibility is to their firm, not their client.” Investopedia
- Registered Investment Advisors, like Winthrop Partners have a fiduciary duty to clients.
- A fiduciary is legally bound to put their client’s best interests ahead of their own.
- Working with a fiduciary should minimize any conflicts of interest and give you peace of mind that your advisor is working in only your best interest.
How is a fee-Only fiduciary different?
- A Fee-Only Fiduciary takes the Fiduciary commitment further by agreeing to only be compensated by clients and refusing compensation from other sources that could influence their decisions.
- Fee Only Fiduciaries, like Winthrop Partners are additionally Bound by stringent covenants including the non-acceptance of third-party compensation as set forth by the National Association of Personal Financial Advisors.
- Less than 1% of the approximately 800,000 individuals that hold themselves out as Wealth Mangers meet the stringent their Fee-Only Fiduciary Standard.
- Brokers, bankers & insurance salesmen are not held to the same standards as Fee-Only Fiduciaries. Generally, they represent another firms’ products and are compensated for selling you those products such as annuities, life insurance, and mutual funds.
- Dealing with bankers, brokers, and insurance salesmen can expose you to conflicts of interest like high commissions, sales loads, and detrimental covenants that are buried in the fine print of products like annuities and structured notes.
Remember, when selecting a wealth manger, if you want to be sure that they are legally and ethically bound to work in only your best interest. Ask if your wealth manager is a Fee-Only Fiduciary.
Thomas Saunders is the Managing Partner of Winthrop Partners. Prior to founding Winthrop Partners, Tom was Senior Vice President at what is now JP Morgan. His career includes senior and executive roles at Brown Brothers Harriman and First Niagara Bank, a top 25 Bank. Click here to contact Thomas Saunders about your investment and planning requirements.