If you are comfortable handling your finances on your own, then more power to you. When you look in the mirror, you know that the person staring back at you has your best interests at heart, something you cannot guarantee with just about anyone else.
Unfortunately, not everyone has the time, the inclination or the talent to handle their investment portfolios, and many of those individuals will seek outside help to supplement their own efforts. If you find yourself in this situation, you need to use extreme caution when hiring a financial expert, and that means asking the right questions.
With a few simple questions, you can start to sort out the financial advisors and investment counselors who truly have your best interests at heart. While the vast majority of financial professionals are honest and trustworthy, a small minority operate on less than ethical standards Here are a few questions you should ask when seeking assistance with your finances and investments.
Are You Willing to Act as a Fiduciary?
You may have heard about the so-called fiduciary rule, but knowing what it means is another thing altogether. While the terminology may be confusing, the concept is pretty simple.
A financial professional who is acting as fiduciary promises always to put your best interests first. That means recommending the best investment for your needs, eve if the investment in question pays the advisory a lower commission, or none at all.
Always ask the financial advisor or investment consultant you are considering if they are willing to act as a fiduciary on both investment advice and financial products Some advisors serve as guard ians when giving advice, but not when making investment recommendations. Both sides of the equation as important, so make sure you get the commitment in smiting.
What Are My Options When Paying for Advice?
Everyone has different needs when It comes to financial guidance and investment advice, and a good advisor will offer some payment options. Always ask about these options up front, since your circumstances and your need for financial guidance will probably change overtime.
If you are comfortable handling your finances but need advice from time to time, then working with a professional on an hourly basis makes a lot of sense. You pay for only what you need, and you benefit from an Independent review of your investment portfolio.
Investors setting up a portfolio for the first time, those investing on behalf of a parent or older relative and those dealing with a one-time retirement plan distribution can all benefit from advice on a per project basis. Many financial advisers and wealth management firms offer this project-based assistance, and If you shop around you should be able to find exactly what you need.
The Duties of Your Fiduciary Committee
You probably already know there’s a group of people responsible for managing your investment plan or retirement plan your job makes you eligible for, but what exactly do they do for you?
The people managing these plans are known as fiduciaries, and they actually have to meet tough legal standards of conduct when managing your plan to make sure you and your employer get the best deal out of it. Your employer has probably assigned fiduciary tasks to a committee who share responsibility for the decisions they make, but what are their duties?
Making sure the plan is run according to the law. Fiduciary committees have legal guidelines they have to follow when managing plans, including, but not limited to:
Keeping records of contributions, earnings and losses, distributions, investments, and administrative expenses, with separate accounts for each person participating.
Filing a report with the federal government every year based on the above records.
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