The Importance of the F-Word in Financial Planning

Do you know how important the F- word is to a successful and secure financial future? The F -word can be the difference between a happy financial experience, and possibly a disastrous one.

Don’t worry, this article is not R-rated…I’m talking about the word “Fiduciary.” This is the F -word that holds a lot of power in the finance world. So, what does it mean?

A Fiduciary (noun) is a person or an organization that acts on the behalf of another to manage assets. This person must act in a way that is the most beneficial to the person they represent, and not for their own profit.

Why is this term such an important concept in finance? This concept was created to protect you. When you select a professional such as a Financial Advisor, this advisor is acting as your fiduciary. In simpler terms, you are placing your trust in him or her to help manage your money. What makes the word “fiduciary” so unique and important however, are the responsibilities that exist when you take on this role. A fiduciary is required to act in the best interest of the party they are representing. Their actions must be solely for the benefit of whom they represent and not to gain a personal advantage.

If an individual playing the role of a fiduciary fails to uphold the standards set on him or her, there are regulations in place by the government to help protect you and reprimand the individual who neglected to adhere to their responsibilities. Discipline actions can range from penalties to personal liability and even go as far as sanctions.

Although there are ways that the fiduciary responsibility is regulated, you can take actions to help yourself feel confident and protected that your advisor is going to maintain their pledge to you.

When you meet with your financial advisor, ask them if they are acting under the fiduciary standard. Then ask them if they are willing to put it in writing for your records. You can also ask them if they are a registered advisor, and ask to see their credentials.

These few questions can be a reassurance to you that they are going to uphold their end of the deal when it comes to managing your money. Remember, if you have questions, ask them! Don’t let the F-word scare you; it’s in place for your protection.


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