How to Find a Wealth Advisor You Can Trust, Part 2

Fiduciaries and getting advisor recommendations

Figuring out how to find a wealth advisor you can trust is a major step in setting yourself up for long-term financial success and creating peace of mind. Trust and value go hand in hand. With a trustworthy personal wealth advisor on your side, you should be better prepared to make well-informed decisions and manage your wealth successfully throughout every stage of life.

A recent CFA Institute survey revealed that the more a wealth advisor is able to recommend products that align with a client’s values, the more likely the client is to trust their advisor.¹ This makes sense because humans inherently tend to fear what they don’t know. While trust is earned over time, you still need to find a wealth advisor you can trust today.

In this second blog post of a two-part series, we consider whether a fiduciary might be right for your circumstances, plus we discuss effective ways of obtaining advisor referrals.

Consider choosing a fiduciary

You want to choose a wealth advisor who puts your interests first. That sounds obvious, but unfortunately, it isn’t always the case. Avoid any potential conflicts of interest by understanding an advisor’s motivations and incentives. Finding out how they get paid and why they recommend certain investments is a great starting point when selecting the right advisor for you.

One way to be sure your advisor avoids conflicts of interest is to limit your search to wealthadvisors who are held to a fiduciary standard rather than those held only to a suitability standard. A fiduciary has a legal obligation to put your interests ahead of their own and to reduce any conflicts of interest.² In contrast, a suitability standard simply ensures that a recommended product is suitable based on the information you provided about your financial situation and goals.³

To be clear, a registered investment advisor is a fiduciary, whereas a broker or insurance agent is not.⁴ There are a few unique requirements that come along with the fiduciary standard, and we think they could make a big difference in what to expect from your wealth advisor, including:

• Disclosure: When there is a conflict of interest or an incentive to recommend a particular product, a fiduciary must provide disclosure.⁵
• Duty of care: There is both an ethical and legal duty to the client, which requires advisors to make decisions in good faith and a reasonably prudent manner.⁶
• Duty of loyalty: This requires an advisor to be completely loyal to the client at all times and imposes the responsibility to avoid possible conflicts of interest.⁷

Where to find advisor recommendations

If you’re starting from scratch or coming from an unsatisfactory experience with a wealth advisor at another firm, you may be wondering where to find an advisor you can trust. Many people naturally reach out to their network of family and friends to solicit recommendations. This can be a good starting point since you can get direct feedback on an advisor’s track record and client service. Plus, you may share similar values and preferences as family members and those within your social circle.

However, keep in mind that your financial needs might not mirror those of your family and friends. For instance, you may need to look for a wealth advisor with proven experience in managing private wealth or more complicated business or financial structures.

Another potential source of recommendations is other trusted financial professionals. Your CPA, for example, likely has a strong understanding of your financials and may be able to match you with an advisor from their network of contacts who is appropriately experienced in the areas you need.

Also, remember to vet potential advisors using client referrals. While it’s not the only thing you should care about, speaking to existing clients can give you an idea of what to expect. You can ask a potential wealth advisor for client referrals to get an idea of their strengths. Talking to clients with similar financial circumstances as yours is often valuable. It may also help to conduct an online search of prospective advisors to see what qualitative comments you might find. Just remember to take any comments with a grain of salt since they can be overly biased—positively or negatively.

Bottom line

Choosing a fiduciary wealth advisor whom you can trust takes some research and considerable legwork, but in our view, it’s worth the time and effort. Not only might you enjoy greater peace of mind that your investments are well looked after, but conducting due diligence and finding the right advisor for your particular needs might also help you gain more confidence in your financial plan—and in your ability to reach your long-term financial goals.

Read Part 1 of this series now: Getting to know prospective advisors

¹ https://www.cfainstitute.org/en/about/press-releases/2022/levels-of-trust-in-financial-services-reaches-all-time-high
² https://www.investopedia.com/terms/f/fiduciary.asp
³ https://www.ribo.com/product-suitability/
⁴ https://money.usnews.com/financial-advisors/articles/brokers-vs-advisors-whats-the-difference-and-do-you-need-both
⁵ https://www.sec.gov/tm/iabd-staff-bulletin-conflicts-interest
⁶ https://www.sec.gov/tm/iabd-staff-bulletin-conflicts-interest
⁷ https://www.sec.gov/news/statement/crenshaw-private-fund-20220209#:~:text=In%20other%20words%2C%20the%20investment,at%20all%20times.%E2%80%9D%20Sec

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