Aug 5, 2020
Suze Orman says most Americans have the "wrong, wrong, wrong" idea when they choose a financial adviser.
In her latest blog post, the personal finance guru cites a 2017 survey that found 53% of Americans believe financial advisers are required by law to put their clients' best interests ahead of everything else when they give retirement advice.
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But that’s not the case.
"Only advisers who operate as fiduciaries are promising to always put the client’s interest first," Orman explains.
Retirement planning is complicated, and getting help is a smart decision. But you want help you can trust. So when you pick a financial adviser, you’d better find a fiduciary, she says, meaning an adviser who's looking out for you.
Why finding a fiduciary is key
A rule proposed in Washington a few years ago would have required all advisers to meet the fiduciary standard and avoid conflicts of interest, like pushing high-risk investments that might earn them commissions. But the proposal eventually died.
And now, many advisers don’t act as fiduciaries, though Americans typically take them at their word that they always put their clients first.
Orman saw firsthand how it often doesn’t happen.
Before she was offering financial tips to millions of Americans on TV and through books, Suze Orman was a financial adviser herself for 17 years. The firm where she worked often pushed certain stocks.
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“The advice your sales manager gave you to sell (a product) to clients was many times not in the best interest of the client — it was in the best interest of the firm," Orman said, in a 2019 Q&A with ThinkAdvisor.
Today, her advice for consumers is to ask advisers "if they are a fiduciary and if they will put that in writing if you work with them," she says in the blog. A handshake and a promise simply isn’t enough.
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Ask the right follow-up questions
When shopping around and vetting advisers who can help you build a solid retirement plan, you’ll want to be clear about how they do business.
"Get confirmation that they are a fiduciary or move on to interviewing someone else," Orman says.
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Ask questions like these to make sure you’re dealing with a fiduciary:
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Will you receive commission in addition to what I pay you? When advisers let you know that they don't receive commission for steering clients toward certain products, you can feel confident they'll provide unbiased advice and not simply peddle options that will earn them more money.
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Are you registered as both an adviser and as a broker? Some certified advisers may also be acting as brokers, meaning they’re working as salespeople while managing your money.
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Have you ever been disciplined by a professional or regulatory body? If an adviser's services have drawn complaints, it’s best to steer clear.
Get the right adviser in your corner
At the end of the day, the best person who can manage your finances is you.
“How your money is invested, spent and saved impacts you more than anyone else,” Orman says. “With so much on the line, it makes no sense to not be engaged and on top of your finances.”
But that doesn’t mean handling your retirement completely on your own. Financial planning services are more convenient than ever, available online and by phone.
Choose an adviser carefully, and always choose a fiduciary.
“If there’s something you don’t understand, an adviser is the perfect person to explain or teach," says Orman. "That knowledge is what will give you the confidence that you are making the right decisions for your future."
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Daniel was formerly a staff writer for MoneyWise.
Life • Aug 12
