Editor’s note: This is part one of a two-part series about the importance of working with a fiduciary financial adviser. Part two, 11 Questions to Ask When Choosing a Fiduciary Adviser, will arrive Thursday, December 26.
Choosing the right adviser to prepare you for your financial future is as crucial as selecting the right doctor for your health or the right school to educate your children. As a fiduciary financial planner, my foremost priority is the client's best interest — a key distinction that sets fiduciaries like me apart from insurance-only producers or brokers.
In this article, we'll explore how working with a fiduciary planner can help you manage your money more intentionally and efficiently and how our expertise in estate planning and tax mitigation can instill greater financial confidence.
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1. Intentional money management
One of the primary advantages of working with a fiduciary is the ability to engage in purposeful financial planning. Unlike brokers or insurance-only producers, fiduciaries are legally obligated to act in your best interest. This means all recommendations and strategies are tailored to help you achieve your unique financial goals. Whether you're saving for retirement, funding your children's education or planning a significant purchase, a fiduciary will assist you in developing a comprehensive plan that aligns with your life aspirations. This focused approach helps you avoid common financial pitfalls and ensures that your money is working as diligently as you are.
In 2022, a client came to me after suffering a 25% loss in her portfolio, amounting to $500,000. She had been working with an adviser who wasn’t a fiduciary and who had reassured her that diversification across five investment buckets would protect her. But as the market declined, her retirement goals — set for 2023 — were derailed. The adviser’s response — that she should work several more years and delay major purchases, like a new car and her lifelong dream to travel — was disheartening. She came to us seeking a better strategy.
We assessed her investments, which were primarily mutual funds, and quickly realized they were not aligned with her personal goals. Mutual funds, while useful, often operate with the fund’s objectives in mind, not the individual investor’s. We developed a tailored, three-bucket strategy designed specifically for her needs, including a growth portfolio, a stable income stream and a "now" bucket for liquidity. This new approach enabled her to retire on time with a reliable income while protecting her assets from unnecessary risks.
2. Efficiency in financial planning
Efficiency is another hallmark of fiduciary planning. By offering a holistic approach, fiduciaries streamline your financial management, reducing redundancy and improving overall effectiveness. For instance, at my firm, we integrate investment management, retirement planning, tax strategies and estate planning into a cohesive plan. Our approach ensures that all aspects of your financial life work together harmoniously. It minimizes the risk of conflicting advice and helps you make informed decisions that optimize your financial resources.
Fiduciaries also employ advanced financial tools and technologies to monitor your progress and make adjustments as needed, with the goal to keep your plan on track.
One couple came to us with over $2 million in IRA accounts but were pulling from these accounts to supplement their Social Security, which was pushing them into a higher tax bracket and causing part of their Social Security benefits to be taxed. After reviewing their situation, we recommended that they withdraw from their after-tax brokerage account instead, allowing them to lower their tax bracket and avoid unnecessary taxes on their Social Security.
We also introduced a municipal bond strategy, ensuring they could achieve tax-free income both at the federal and state levels. This small shift made a huge difference, lowering their tax bill and increasing their overall financial efficiency. With this intentional approach, they were able to keep more of their hard-earned money and make their retirement savings work more effectively for them.
3. Disinheriting the IRS and Wall Street
Fiduciaries bring a wealth of expertise in estate planning and tax mitigation. We develop strategies to distribute assets efficiently and minimize estate taxes, with the goal of ensuring that your legacy is preserved for your heirs. One family came to us with over $3 million in investments, including $2 million in IRA accounts. They attended one of our estate planning classes and were concerned about the tax burden their heirs would face. Their previous adviser was focused solely on growing their accounts but lacked a strategic plan for tax efficiency or legacy planning.
Let me be clear: Your money is your money, and we want to help you keep it that way. One of the most impactful strategies we use is disinheriting the IRS and Wall Street from your retirement funds. This doesn't mean avoiding taxes or the stock market altogether, but rather, employing strategies that minimize your tax burden and reduce fees that can erode your investment returns.
I often recommend tax-efficient investment strategies like utilizing Roth IRAs, municipal bonds and other tax-advantaged accounts. We also focus on low-cost investment options and avoid products with high fees and commissions, ensuring that more of your money stays in your pocket.
Ultimately, we helped them understand the importance of intentional investing and created an investment strategy that grows in harmony with their tax goals. By implementing a Roth conversion plan and utilizing tax-efficient strategies like tax loss harvesting, we not only minimized their immediate tax burden but also set them up for future tax savings. This approach was designed to help their estate pass to their heirs without a hefty IRS bill attached.
The bottom line
Working with a fiduciary financial professional ensures that your best interests are always the top priority. From intentional and efficient money management to expert estate planning and tax mitigation, fiduciaries provide comprehensive services that lead to greater financial freedom. By choosing a fiduciary, you can rest assured that your financial future is in capable and trustworthy hands.
The second article in this series will address how to choose the right fiduciary financial planner for you.
Insurance products and services offered by Melton & Company, LLC. Investment advisory services offered through MariPau Wealth Management, LLC an SEC Registered Investment Advisor. Please note that the use of the term “registered” to refer to our firm and/or our associated persons does not imply any particular level of skill or training. Melton & Company, LLC and MariPau Wealth Management, LLC are not affiliated entities. While the processes mentioned in this article have been designed with care, financial outcomes can never be guaranteed as investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. None of the information contained in this article shall constitute an offer to sell or solicit any offer to buy a security or any insurance product. Any references to protection benefits, safety, security or steady and reliable income streams in this article refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by insurance company. Annuities are not FDIC insured. The information and opinions contained in this article are provided by the author and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. They are given for informational purposes only and are not a solicitation to buy or sell any of the products mentioned. This article is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Jon Melton and Melton & Company, LLC do not give tax or legal advice. Tax laws are subject to change and can affect results. The firm is not affiliated with the U.S. government or any governmental agency. Hypothetical examples and client examples have been provided for illustrative purposes only and should not be construed as advice designed to meet the particular needs of an individual’s situation.
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