Beware of fee-based fiduciary advisors


Just when you thought it was safe to trust a fiduciary advisor who is legally supposed to work for you and your best interests, you'd better take a closer look. Understand that there's two types of fiduciaries: fee-based and fee-only. You might think that because both have a legal duty to work in the best interests of their clients, that by default either one can be trusted. Wrong!


Fee-based fiduciary advisers are sometimes just as dangerous as non-fiduciaries! Call these fee-based guys "the loophole advisers" -- as in legal loophole. Fee-based means that they are compensated for their work by you and they have a legal duty to work in your best interests, but they may also be allowed to earn commissions when they sell you investment product. So what good are they? By default, "fee-based" advisers might as well be regarded as commission-based salesmen. The potential is always there that they might gouge you twice by charging you a fee and then turning around and selling you commission-based products that earn them more money (at your indirect expense). You can never be certain if they are 100% on your side. Would you pay a fee to speak to a car salesman about buying a car?


It is shocking how often you will encounter fee-based fiduciary advisers who cannot resist the urge to aggressively push annuities. The scary part is that it's not even illegal. These advisers simply go the extra mile to protect themselves by asking you "leading questions" (that will elicit a desired answer) such as "Is preservation of capital important to you?" They aren't searching for the best investments for you. They are merely looking to legally protect themselves when they sell you that annuity or other high commission insurance product.


The way to legally eliminate this conflict of interest is by working with a fee-only adviser, preferably on a one-time or one task basis! By default, fee-based advisers should not be trusted.



DISCLAIMER: Nothing on this consumer advocate website shall constitute personalized tax, legal or investing advice, including but not limited to advice to buy, hold or sell securities. None of its owners, affiliates, agents or contributors are investment advisers, financial planners or broker / dealers. Always hire and consult with a fee-only fiduciary before making any such decisions. The accuracy and completeness of information presented on this site cannot be guaranteed.