A vast number of people have financial advisors handling their investments and it makes sense. If you are not well versed in something than you hire someone with expertise to handle it for you.
However, like anything else you should be aware of what you are paying for and if you are unwittingly over paying.
https://i.imgsafe.org/297de1659c.png
That's where this word comes into play.....
# Fiduciary
Fiduciary means that one party has a legal obligation to act in the best interest of another party.
So, theoretically anyone who is managing your money for a fee should have a fiduciary duty.
But is this always the ask?
Well - yes and no.
## Financial Advisors
There are two types of financial advisors out there:
+ Fee Only
+ Fee Based
Fee only advisors earn fees soley from their clients and nowhere else. An example is they earn X percentage of total assets under management, like you see with mutual funds.
Fee based advisors are a bit different. They not only earn fees for handling their clients investments, but they can also earn commissions from third parties like an investment brokerage
Essentially, the commissions incentivize the advisors to sell you that third parties investment as opposed one that is the best deal for you.
### Example -
Your financial advisor recommends getting into a mutual fund that provides exposure to the bond market.
There is Bond Fund A offered by company XYZ that carries an annual expense fee of 1.5 percent.
Then there is Bond Fund B from company ABC which carries an annual expense fee of 2 percent.
However, Bond B offers a commission or a better commission to your financial advisor.
Which one do you think will be recommended?
If you have a fee based adviser you very well could be donating a half percent of your money away!
https://i.imgsafe.org/297986bcc4.jpg
### What To Do
Choose a fee only financial advisor in order to help avoid scenarios like the above or if you already have a fee based advisor than be sure to ask about the costs of any recommended investment.
### Half The Work Is Done For You Now
The good news is in April 2016 the government implemented new rules regarding retirement planning. These rules require financial advisors to act as a fiduciary 100% of the time when it comes to retirement investing.
However - Investments outside of retirement planning, it is still on us to ask and know what to look for when receiving advice.
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Regards,
Mitchell J
<a target='_BLANK' href='https://steemit.com/@scaredycatguide'><img src='https://ipfs.pics/ipfs/QmRvEUK6f2zQxecstRREmtnZBM5s8WJaaFpJkxuUitM3Xi'/></a>
Thanks [pixabay](https://pixabay.com/) for the photos.
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