Californians use a variety of financial advisors in an effort to leverage their money and limit their liabilities. Resources range from online and print publications to accountants and estate planning attorneys.
However, not all financial advisors are looking out for your best interest. There is a world of difference between a fiduciary and a fraud who’s posing as a financial advisor.
What is a fiduciary?
In short, fiduciaries are individuals who are placed in a position of trust. Although this term is usually used the context of a financial advisor or legal professional, it can apply to other professions as well.
For example, a doctor incurs a fiduciary duty when they take the Hippocrates’ Oath to preserve life and health. An accountant is legally bound to record and report your financial transactions in a lawful manner.
But, not all advisors act in a manner that’s in their clients’ interest. When it comes to estate planning matters, you need someone who has a fiduciary duty to give you solid legal and financial information.
How do you know if the person advising you is legit?
Common myths and misconceptions about fiduciaries
- Fiduciaries are licensed. Although some professionals, such as CPAs or Realtors, must continue their education to earn their accreditation, a fiduciary doesn’t necessary need a license or even have to pass a test in order to qualify.
They do, however, pledge to act in the best interest and act in a lawful manner when advising clients ion financial matters.
- Anybody can be a fiduciary. Licensing requirements aside, not everyone who acts in an advisory capacity can call themselves a fiduciary. They must first qualify under standards of suitability and within the bounds of a legal designation.
For example, a person can be appointed by a probate judge as an executor, but the appointee must meet certain standards as set by the court.
- It’s easy to hold a fiduciary accountable. This isn’t always the case. Fiduciary law in California is quite complex, and many persons who act in such a capacity are able to maneuver around laws that are meant to protect you.
In many cases, it would take an act of incompetence or fraud that is blatant and egregious in the extreme in order to find them culpable.
- Fiduciaries guarantee that you’ll earn a profit. Whether you get your financial advice from a financial advisor, your lawyer, or your dad, no one can guarantee that an investment will earn a profit or cause you to lose money.No matter the size or complexity of your estate, getting advice about your finances is important for maximizing your money. Choosing a qualified fiduciary provides an extra layer of protection that can help you avoid fraud and mismanagement.