There are different kinds of financial planners and advisors that operate in California. While some of these advisors are not required to take extra steps to ensure that they always act in the best interests of their clients, others are. Those in this second group are known as fiduciaries.
1. There’s always a test or license to prove they are a fiduciary
In California, one doesn’t need to take any test or have a fiduciary license to act on behalf of another person or group. The only time someone would need some sort of certification is if they want to become a professional fiduciary, which requires passing an examination administered by the California Professional Fiduciaries Bureau.
2. They must always get the other person’s permission
While it’s always best for the fiduciary to communicate with the person they’re acting on behalf of, there are times when they may need to make a decision without their permission. For example, if they’re incapacitated or unavailable.
3. One can’t be a fiduciary if you’re getting paid
It is possible to be paid for fiduciary duties in California. In fact, many professional fiduciaries are compensated for their services. The key is that the compensation must be reasonable and disclosed upfront.
4. A fiduciary guarantees a profit or protection from losses
Fiduciaries don’t have a crystal ball and can’t guarantee that there will be no losses. Even if they act in the best way possible to ensure appreciation in your assets, there’s always the potential for market downturns or other unforeseen circumstances that could lead to losses.
5. Fiduciaries are always honest and adhere to their duties to a tee
While most fiduciaries are honest and do their best to adhere to their duties, there are always a few bad apples that give the rest of them a bad name. If you suspect that your fiduciary is not being honest or is not adhering to their duties, there are steps you can take to hold them accountable.
There are many benefits to hiring a fiduciary, despite the misconceptions. But, it’s important to research to find someone experienced and trustworthy.