Understanding the role and responsibilities of a fiduciary and their importance.
A fiduciary is someone who manages assets on behalf of an individual, family, or company and is required to act in their best interest. Examples of fiduciary professions include financial advisors, board members, attorneys, and trust officers. When named a fiduciary, by law you must uphold a standard code of ethics.
The Importance of Trust in Fiduciary Relationships
An investment fiduciary is any person who has the legal responsibility for managing somebody else’s money. You have this fiduciary responsibility if you volunteer to sit on the investment committee of the board for a local charity or other organization. While holding a position of trust, there may be consequences for the betrayal of that trust. The board member still has an obligation to track the activities of any expert they work with.
When it comes to investing, each individual should do what they feel is best for them. Working with a financial advisor who is a fiduciary is generally a wise decision. At a basic level, why would you want to work with an advisor who does not have an obligation to act in your best interest?
This relationship requires trust, good faith, and honesty. Fiduciaries act as trusted advisors for investors. They have permission to manage your investments. They must make decisions in your best interests. Fiduciaries have the highest legal and ethical standards of care.
Roles and Responsibilities
At Community First Bank and HFG Trust we take the role and responsibilities of a fiduciary to heart. Our Financial & Trust Advisors will always:
1. Put the client’s best interests first,
2. Disclose any and all conflicts of interest, and
3. Provide full disclosure regarding all aspects of your advisory relationship.
A fiduciary is more than a financial or other type of advisor, because of the high duty of care. However, not all financial advisors are fiduciaries.
Registered representatives or brokers work for a broker-dealer who registers with FINRA (Financial Industry Regulatory Authority). They are bound by a suitability standard, not a fiduciary standard, which means they must provide you with products that fit your needs.
So, financial advisors have one of two types of standards when it comes to advising clients: a fiduciary standard or a suitability standard. The differences between the two reveal the differing levels of care that an advisor must show to clients.
Suitability means that a financial product is suitable or may be a good fit for somebody in your general situation. This might be someone who is the same age and marital status as you are, and whose income is roughly like yours. But an investment or financial product that is suitable may not be appropriate for your unique situation.
In contrast, an advisor adhering to their fiduciary duty to a client takes this a step further and does due diligence to help ensure that any investment vehicle or financial product is appropriate for their client’s unique financial situation. This takes their client’s goals, risk tolerance, and other investments into consideration, among other relevant factors.
Another way HFG Trust can provide fiduciary service is through our Trust department. HFG Trust is a State of Washington chartered trust company. An attorney must draft your will or trust documents in which HFG Trust can be named as Personal Representative in your will or trustee in your trust. In that case, HFG Trust is the fiduciary acting on your behalf. We ensure your goals and objectives conveyed in your will or trust are met even when you have passed.
Benefits of an Independent Third Party
Of course, you can choose to name someone else as trustee or personal representative, like a sibling or child. But along with the fiduciary responsibilities comes the burden of keeping peace in the family after the passing of a loved one. It is a challenge if you have three children and name only one as trustee. The other two may begin to question the named child. There is an emotional cost to the Trustee.
This cost is eliminated if you name an independent third party, like HFG Trust, to manage the trust or estate. Many clients have expressed relief that their children or relatives will not need to carry the burden of trying to operate the trust. Having an independent third party can help through an emotional time. Would your three children still get together for Thanksgiving dinner after you are gone and named only one as trustee? Naming a third-party to handle trustee or executor responsibilities can make future Thanksgiving dinners a much more enjoyable experience, rather than a family argument over what should and should not happen.
How Can a Fiduciary Help?
In choosing a financial or trust advisor to handle your unique financial situation, you should decide if someone who gives generalized recommendations that may be appropriate for your broad situation is what you’re looking for, or if you want an advisor who takes their duty of care and tailors their financial advice to your needs.
At Community First Bank and HFG Trust we have a team of Certified Financial Planners™ (CFP®) and Certified Trust Fiduciary Advisor (CTFA) that are trained fiduciaries in developing strategies to fit your needs. As our clients know, our process involves:
1. Getting to know you and discussing goals and objectives
2. Gathering information to familiarize ourselves with your financial situation
3. Developing a financial plan tailored to your unique situation
4. Implementing that plan
5. Monitoring the progress of the plan toward your goals
Are you interested in working with a trusted financial partner and fiduciary who can help you through every stage of your life, including retirement and estate planning? Contact Community First Bank | HFG Trust to learn more about our fiduciary services and how we can help you navigate financial responsibilities with trust and expertise.