Why You Need a Fiduciary to Help You Plan Your Retirement

Be sure to check a financial professional's credentials before you take his or her advice.

Planning for retirement can be one of life's most stressful events. Retirees will face changes and challenges that will impact their finances, including the death of a spouse, long-term care needs, prescription costs, inflation and other problems.

Navigating risks and knowing who to turn to for good advice can help with those challenges. Managing these hazards is increasingly important, especially as people are living longer and need more income. Many retirees think they can handle their retirement planning by themselves, but the truth is they often don't have the experience or the knowledge to manage the bigger picture of their finances.

Take Social Security, for example. Retirees have questions about when they should take Social Security and what their options are. When retirees have these kinds of questions, it's helpful to have a seasoned financial adviser in their corner who can provide them with information regarding claiming strategies.

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Retirees would be well served if they could find a fiduciary to help craft the decisions that impact their retirement. However, too many retirees overlook the backgrounds and professional credentials of their advisers. They find, often too late, that there are major differences between fiduciaries and non-fiduciaries when it comes to the advice they can offer and how they are paid.

What Is a Fiduciary?

Retirees should ask potential advisers about their licenses and whether they are registered with the SEC Investment Adviser Public Disclosure site and with a Registered Investment Adviser firm. If an adviser has a Series 65, 66 or is a Certified Financial Planner (CFP) and is registered with the SEC Investment Adviser Public Disclosure site and a Registered Investment Adviser firm, then he or she has a fiduciary responsibility.

A fiduciary, who is either an Investment Adviser Representative or a Registered Investment Adviser, can give advice and charge a fee instead of a commission. Fiduciaries have a "duty of care" role, which requires them to give advice in the best interest of their clients and to monitor their investments, weighing risks and being open about any conflicts of interest. Fiduciaries also present all their fees upfront. Investors can look advisers up, see if they are fiduciaries and verify their registrations at www.adviserinfo.sec.gov.

Some fiduciaries focus solely on investment consulting, helping their clients find the right stocks, bonds and mutual funds and monitoring their portfolios. Many investors prefer to have a wealth manager serving as a fiduciary, consulting on investments and incorporating advanced planning such as wealth preservation, wealth transfer, wealth distribution, Social Security, Medicare and handling legal documents prepared by an attorney. With a more comprehensive approach, wealth managers generally utilize advanced planning techniques with customized plans. They look at the entire estate instead of just investments.

What Is a Non-Fiduciary Broker/Agent?

Non-fiduciary brokers or agents are limited on the guidance they can offer based on the licenses they have. For example, insurance agents are licensed to sell insurance products, but not securities such as stocks, bonds or mutual funds. Brokers with Series 7 licenses are able to sell stocks and bonds but not insurance products. Series 6 or 63 licenses allow the sale of mutual funds and variable annuities, and Medicare agents can sell insurance supplement plans—all of which are paid on commission. These brokers and agents are not required to disclose all of their fees or their conflicts of interest. That being the case, I believe it's certainly possible that they may not be acting in the absolute best interest of their clients.

Non-fiduciary brokers and agents work with clients on a suitability standard. While the product may be suitable, it still may not be in the client's best interest. Sales charges may be undisclosed, except in a prospectus hidden in the legalese. Non-fiduciary brokers and agents also have little further obligation to monitor a client's investments.

Still, there are some safeguards. The U.S. Labor Department, beginning April of 2017, will require financial advisers to act in a fiduciary capacity and in the best interest of their clients in regards to any qualified plans such as 401(k)s, IRAs, 403(b)s and Roth IRAs.

It's important for investors to realize that both fiduciaries and non-fiduciaries have a role to play in retirement planning, even if they're considerably different. Investors, especially those at or near retirement, should never make assumptions. Ask good questions and make sure any adviser is required to act in your best interest.

Mark Pruitt is the founder, president and CEO of Strategic Estate Planning Services, Inc., in Dallas, Texas. He is an Investment Adviser Representative and insurance professional.

Kevin Derby contributed to this article.

Investment Advisory services offered through Global Financial Private Capital, LLC an SEC Registered Investment Advisor. SEC registration does not imply any certain level of skill or training.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Mark Pruitt, Investment Adviser Representative
President and CEO, Strategic Estate Planning Services, Inc.

Mark Pruitt is the president and CEO of Strategic Estate Planning Services, Inc. Based out of Dallas, Texas, he serves on the National Summit Advisory Board and is a speaker for the National Association of Insurance and Financial Advisors (NAIFA). Mark was selected as National Advisor of the Year by Senior Market Advisor in 2012. He is an Investment Adviser Representative and insurance professional.