Fiduciary Responsibility and working with a financial advisor

Making Smart Decisions with Josh Tirado

Josh Tirado: I'm Josh Tirado. And you're listening to making smart decisions. Today's topic. I want to discuss the fiduciary standard and how that applies to financial advisors in this segment. I'm also going to discuss my personal experience and how this plays into my practice, but please know that this is a very touchy subject.

[00:02:02] The standards for this are influx, constantly changing. I am going to try to be as weary and correct as I can be in doing this. So according to in grant, this is not the end all be all, sure, but according to Wikipedia, a fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties.

[00:02:25] Typically a fiduciary prudently takes care of money. Or assets for another person. Now that fiduciary definition is a little different than Wikipedia. That's a little different in Merriam Webster's dictionary. And right now the sec security exchange commission and, the CFP board certified financial planning board and different entities are working on the wording of what they feel is the appropriate fiduciary.

[00:02:52] Definition and responsibility and standard that they can hold members to. there's a lot of going back and forth with that. But what I want to say is that the core of it is trust. The fiduciary responsibility is that someone is trusting you to help them handle their affairs, their decisions, their money, their assets, the underlying thing is trust.

[00:03:14]And trust can be very subjective. It's hard to define that where it's going to be legally binding, but as far as I'm concerned, whoever you're working with as a financial advisor, the number one thing, the first thing that needs to be there is that level of trust. Whether they're fiduciary or not, whether they're required by law or not, that's a discussion for a different time, but I feel that it's not just a legal responsibility, but that's a moral responsibility that there should be trust there that you're acting in the other person's best interest at all times, because that is why you're being hired as an advisor that you put that person's interest ahead of your own.

[00:03:55] So to me, the fiduciary responsibility is very important. And let me just discuss a little bit of how it fits into my own personal experience. So I've been insurance licensed for over 22 years now. I have been securities investment licensed, over 20 years now. So my practice has span the time when I have seen the tech bubble.

[00:04:18] Burst in 2000, 2001, I have been here through the financial crisis and the corresponding mortgage and housing crisis in Oh eight Oh nine. now I'm around now living through 20, 20 COVID-19 and all the craziness that the market, the job market, interest rates, inflation, everything that everyone is seeing right now.

[00:04:41] So my experience I have been through three major. Downturns and recoveries, and I've helped my clients through them. And each one has been very different. The reasons that caused it have been very different, but the underlying what happens at the end of the day with the money going down, the money going up, and handling someone's emotions, and that trust.

[00:05:02] That's continuous that's dealing with humans and the human condition and trusting and caring for people and guiding them through what has happened in each one of those instances. So to me from day one that trust a fiduciary, that moral responsibility has always been there, but now legally it's becoming more important than ever.

[00:05:24] And you do need to ask your advisor and you're interviewing someone or your current advisor, ask them if they're a fiduciary. Because there's a certain licensing to have. There's a certain title on what they need to have. depending who they're governed by, they might be a fiduciary. They might not be.

[00:05:39] if you've worked with your advisor for 40 years and you trust them and they're awesome. They're probably putting your best interest ahead of their own, and they're doing what they should, whether they're legally responsible or not. But I think that fiduciary and that trust level are extremely important.

[00:05:55] And I do not think that should be overlooked in today's market. That should be question number one. And also the feeling you have for that person, that gut feeling. Do you trust that person? Do you get along with that person? Do you like that person? Because I'll tell you right now. I'm much more proactive in reaching out to my clients, and they are in reaching out to me.

[00:06:16] They hire me for a reason. They know I'm there, I'm working for them. during good times, people are usually happy during the bad times when people grumble and complain. And I'm very fortunate. My clients are educated on our strategies. What we're doing,g when things start to go down or things are happening, geopolitically or things go quote unquote, bad.

[00:06:35] Generally speaking, my clients are not too worried and I'm reaching out to them, but that is when an advisor is most needed, most effective. And that's when the trust and the fiduciary responsibility really kicks in when things are not going perfect. When they're not going smoothly, when they have to help you through things financially, emotionally, and help manage the situation.

[00:06:57] That's when a good advisor is worth their weight in gold. And that trust has to be there.

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