How can I find an investment “fiduciary”?


A reader, VS, emailed me a few days ago saying, “I would like to know where to get financial advice. I know I have to look for a trustee; however, everyone tells me they are one.

As someone who started her career on Wall Street as a lawyer, I have an answer on how to find out who is – and who isn’t – a fiduciary.

I also have an insider’s perspective on the investment advisory industry as the manager of a fiduciary investment advisory boutique. i should have one easy answer for VS on where to get financial advice.

But I don’t.

VS, who is in his 50s, added: “I don’t really know where to start. … I think I will never be able to fully retire. … I’m a bit afraid to take risks with my money because I’m afraid of losing it.”

I understand perfectly. Even if you were to ignore the downdraft that the broad market is currently experiencing, ignore geopolitical unrest and the Russian invasion of Ukraine, as well as inflation in the United States rising to levels not seen since 1982 (tinyurl .com/yp52m5e4), who could I recommend someone to the VS job interview?

There is a wide field of trust companies to access. To give you some background, there are 13,880 investment advisory firms regulated by the United States Securities and Exchange Commission, according to the 2021 Investment Adviser Industry Snapshot (tinyurl.com/mpsnskxh). There are thousands more that do not meet the SEC’s size registration requirements; these companies are regulated by individual states. This is the fiduciary playground.

Nearly 6 of 10 SEC-registered investment advisers managed retail funds in 2020 for nearly 61 million clients. Hundreds of thousands of financial professionals wear two hats: one hat when acting as “representatives of investment advisers” and another when acting as securities dealers (registered representatives of brokerage firms ). The fiduciary hat applies when acting as an investment advisor representative.

And, of course, thanks to the new disclosure rules, we now have the CRS form to guide us on how to compare one company to another, as well as a list of “conversation starters” to ask the financial professional. (If you didn’t see my column last week on the CRS form, email me; I’ll send you a copy.)

Then there’s BrokerCheck (tinyurl.com/5b8edfsv). Operated by FINRA, the Financial Industry Regulatory Authority, which regulates the brokerage industry, it can be used to find more details about companies and their individual representatives. BrokerCheck provides information on investment advisers and brokers.

The SEC’s Investor.gov (tinyurl.com/2p82nmzb) and FINRA’s Learn to Invest (tinyurl.com/56hdrd9w) also offer useful information.

This is the homework needed to, again, compare and contrast one company with another. This is the normal process one would follow to understand the differences between the services.

But, where to start the search?

The bottom line is this: the big companies that serve the vast retail market that you can easily find – they advertise. Niche trust companies specializing in the more complex needs of high net worth individuals are not visible in the same way. (Full disclosure: By way of example, my firm’s clients are introduced to us by their accountants, lawyers or other clients.)

To follow this example, wealthy individuals could ask their accountants or lawyers for a few names to interview. (But be sure to do your due diligence using the CRS form before choosing a company.)

At the other extreme, someone with limited resources might turn to a nonprofit organization for help. For example, the Foundation for Financial Planning (ffpprobono.org/) is a nonprofit organization “dedicated to expanding access to pro bono financial planning for those in crisis or in need.” The foundation offers a manual “Navigating Your Financial Roadmap” (tinyurl.com/yvr6yhrm) to help you assess your financial situation.

Someone between these two extremes might do an internet search. Blogs and matchmaking services exist. Just be sure to check if the advisor pays a fee to be listed with a referral service. It would be a divulgable conflict of interest. Be sure to check Part 2A of Form ADV and Form CRS.

Julie Jason, JD, LLM, personal fund manager (Jackson, Grant of Stamford) and author, welcomes your questions/comments ([email protected]). His awards include the 2021 Clarion Award, symbolizing excellence in clear and concise communications. Her latest book, a curated collection of Julie’s columns, is “Retire Securely: Insights on Money Management From an Award-Winning Financial Columnist.” To hear Julie speak, visit juliejason.com/events.

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