The world of finance can be confusing. That’s why many people seek expert advice before making major decisions. Whether you’re putting money into the stock market, planning for retirement, or purchasing a life insurance policy, finding the right help can give you peace of mind.
Two common professionals in the finance/insurance world are fiduciaries and brokers. They each serve a unique purpose within their sector and can assist you in different ways. To help you understand their services, we’ve put together an infographic that outlines the four major differences between fiduciaries and brokers. Weigh these characteristics against your needs to determine which professional is right for you.
Infographic
How They Differ
Now that you can see all the differences between fiduciary vs. broker, let’s break them down a bit more. It’s important to consider the purpose of their position and how their role affects you.
A fiduciary is a fee-based financial steward who helps to guide you toward your goals. They are legally and ethically obligated to act in your best interest at all times. With every decision they help you consider your options and choose the right fit. Fiduciaries stick with you through every stage of life, so it’s important to choose someone you trust.
Brokers are different from fiduciaries both in their role and how they operate. Brokers are typically commission-based, and their position is designed to facilitate product sales. Where your relationship with a fiduciary is ongoing, your relationship with a broker is transactional. They exist to help you buy or sell products, which is an important function if you’re looking for something specific.
When brokers are focused on helping you purchase a specific product, they aren’t looking at the rest of your financial profile. Fiduciaries can help you choose products that fit with your overall goals and are part of a comprehensive, integrated solution.
Aside from their roles, the licensing requirements for each role is also different. Brokers only need to be licensed in the line of products they’re selling. For example, if a broker is selling life insurance policies, they will need to be licensed by the state in which they are selling. Fiduciaries, however, are held to higher legal and professional standards.
Which Is Right For You?
Even if you understand the basics of fiduciary vs. broker, it can still be difficult to decide which professional is best for you. In that case, consider your situation.
When should you work with a broker?
Brokers are a good choice if you want to implement a specific product (such as life insurance or an annuity) into your portfolio. Brokers often work for national companies and can sometimes negotiate better rates than local agents. So if you already know what policy you want or which company you want to work with, a broker will be able to help you get started.
When should you work with a fiduciary?
Fiduciaries are a good fit if you’re looking for a financial advisor who can provide ongoing advice. They’re the professionals you can form a relationship with and are there to answer questions, provide advice, and research options. Look to these people for long-term investing and financial planning. They have a stake in your success.
Because fiduciaries are so involved in your personal financial process, it’s wise to choose one carefully. We recommend creating a list of criteria your fiduciary should meet.
As Dave Ramsey says, “you want someone with the heart of a teacher”. Look for a person who is asking lots of questions. They should want to get to know you and genuinely care about your success. Other qualifications to look for include:
- Advanced certification or degree (CFP®, CFA, CPA, or MBA ideally)
- A significant amount of experience (10 years minimally)
- An established client base (speak to references)
- Other clients in similar financial situations to yours
There are plenty of places to search for a fiduciary in your area. The CFP website allows you to perform national searches for professionals. There’s also the National Association of Professional Finance Advisors, the XY planning network, the Zoe Financial network, and the Fee Only Network. These websites all offer comprehensive national lists. Search through them to find a financial advisor that fits your needs.
Find Your Match
Before diving into a professional financial relationship, carefully consider what type of assistance you truly need. If you’re looking for a quick, transactional exchange, then a broker is the way to go. But if you want a more comprehensive, long-term relationship, find a fiduciary who’s invested in your success and willing to work hard to keep your finances secure.
At Metanoia Financial, we’re proud to offer various services to fit our clients’ unique needs. We are fee-only, fiduciary professionals who would love to be your partner for investments, retirement planning, or tax planning. Book your free consultation today to see how we can help you succeed.
