Is Your Financial Advisor Truly Acting In Your Best Interest?
True Root Financial is a fee-only fiduciary financial advisor and financial planner based in San Francisco, CA. We serve clients across the globe.
Many tech professionals and executives assume that a financial advisor is legally required to act in their client’s best interest. The truth is, that is not always the case, and it can have a major impact on your financial future.
If you are a tech professional interested in learning how we can help you claim your financial independence by investing wisely, minimizing taxes, and maximizing your equity compensation, please book a no-obligation call here.
To understand whether your advisor is truly working in your best interest, it is helpful to know who can act as a fiduciary, the standards of care, and why how your advisor is compensated matters.
Key Takeaways
- “Suitable” advice is not the same as fiduciary advice.
- Fee-only advisors typically act as fiduciaries 100% of the time.
- How your advisor is paid directly affects potential conflicts.
- Always ask when and how your advisor acts as a fiduciary.
Who Can Act As A Fiduciary?
Anytime someone has decision-making authority over another person’s assets, a fiduciary standard can apply. This includes roles like trustees, executors, and, in some cases, financial advisors.
In financial advice, advisors fall into three categories:
- Fiduciaries all the time
- Fiduciaries some of the time
- Not fiduciaries at all
In layman’s terms, this means some advisors are required to act in your best interest always, some only in certain situations, and some not at all. Many investors are surprised to learn this.
The Two Standards You Need to Understand
There are two primary standards governing financial advice:
1. The Fiduciary Standard
This requires advisors to:
- Act in the client’s best interest
- Avoid or disclose conflicts of interest
- Recommend strategies and products that truly benefit the client
2. The Suitability Standard
Under this standard, recommendations only need to be “suitable” and not necessarily the best for the client.
That distinction may sound small, but it is significant. A suitable investment may:
- Cost more than alternatives
- Pay the advisor higher commissions
- Be good enough, but not optimal for your goals
Many brokers and advisors operate under the suitability standard, some or all of the time. Generally, fee-only Registered Investment Advisory (RIA) firms follow the fiduciary standard 100% of the time.
Why Compensation Matters?
One of the biggest differences between fiduciary and non-fiduciary advice is how the advisor is paid.
Fee-only advisors are compensated solely through transparent, agreed-upon fees that appear directly on account statements. There are no commissions or hidden incentives.
Advisors who are not always fiduciaries may receive additional compensation from the investment products themselves. This compensation can be:
- Confusing
- Poorly disclosed
- Potentially misleading
Such conflicts can influence recommendations even if the investment is “suitable” but not the best choice for your goals. Understanding this is especially important for tech executives with complex portfolios, RSUs, ESPPs, or concentrated stock positions.
The Question You Should Ask
The most important question for any investor is:
Is my financial advisor always acting in my best interest, or only sometimes?
The fiduciary rule was intended to remove this uncertainty but unfortunately, it hasn’t fully done so yet. That’s why knowing your advisor’s fiduciary status, compensation model, and standard of care is critical for confident financial decision-making.
Final Thoughts
Your financial advisor can significantly impact your long-term financial outcomes. For tech professionals and executives with complex portfolios and high equity exposure, choosing an advisor who is a fee-only fiduciary helps ensure advice is aligned with your goals, not a sales incentive.
Being informed and asking the right questions is not about distrust; it’s about clarity and control over your financial future.
Your Next Steps
As a next step, ask your advisor if they are a fiduciary 100% of the time and confirm whether they are fee-only or earn commissions. Review your portfolio to ensure it aligns with your financial goals, and consider booking a free consultation to discuss how a fiduciary, fee-only approach can help protect and grow your wealth.
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