Investing is one of the best ways to grow your savings and plan for the future. However, the finical market is complex, and for an inexperienced investor, it can be hard knowing where to start and what investments to make. A financial advisor can help you manage your money and provide the expertise and experience you need.
Advisor Standards Explained
What do I need to know about a fiduciary standard and a suitable standard? This is an important question when selecting a finical advisor as different advisors are held to different standards regarding their clients and how they manage their money. As an investor, the two standards you’ll encounter are the suitability standard and the fiduciary standard.
Suitability Standard Explained
The suitability standard means that an advisor has to advise on investments that are considered suitable. Oversight is still there, and an advisor still has to provide relevant information and advise on any conflicts of interest. In addition, they protect you from excessive fees and costs. However, they are not required to prevent trades that could be inconsistent with your goals, strategy, or future plans.
Fiduciary Standard Explained
The fiduciary standard is a standard that means your financial advisor has to place their interests below that of their clients. The information they provide you must be as precise and as detailed as realistically possible. Any conflicts of interest must be noted, and this standard is stricter for the fiduciary standard versus the suitability standard. With the fiduciary standard, there is a level of care that is expected in terms of helping you meet your finical goals.
Is a Fiduciary Standard Better Than a Suitable Standard?
When comparing the two standards for an investor, you want to keep your wellbeing in mind. An advisor that has to follow fiduciary standards is legally bound to act in a way that helps you meet your goals. Having an advisor who follows this standard means there is an extra level of protection for your investment requests, and this can help protect you from errors or investment choices that put your future plans at risk. Also, a financial advisor who does not meet the high standards of the fiduciary standard can be sued for breach of contract.
Final Thoughts
An advisor is an important part of planning for your future. Finical advisors can help you plan for retirement, grow your savings, save for your children’s college tuition, and meet other important life and finical goals. When discussing an agreement with a financial advisor, be sure to ask them if they are a fiduciary, so you know what standards they must adhere to.