The One Question You Must Ask A Financial Advisor

Aug 12, 2013 | Independent fiduciary

There are many financial advisors and firms out there, and on paper they can start to sound very similar. How do you know what to look for?

  • Find a Fiduciary. 

One of the first critical considerations is finding an independent fiduciary advisor. Unlike brokers, fiduciaries are legally required to act in their clients’ best interests. Brokers are held to a much lower “suitability” standard, which affects the advice they give and how they are compensated (hint: brokers accept commissions, typically pushing products based on what’s best for their own bottom line instead of what’s best for you).

Many people mistakenly believe that banks and brokers will act in the clients’ best interest. Unless you are working with a Fiduciary, that’s a dangerous assumption to make. When I was building LexION Capital, it would have been much faster and simplerto structure the firm as a broker. Yet we are a completely independent, fiduciary wealth-management firm. Why? I knew that anything less than Fiduciary status could not do justice to our rigorously client-centric standards.

  • Come prepared with this essential question: Do you have a Series 7?

Investors must be aware that ironically, most money managers call themselves fiduciaries yet are legally brokers. No matter what an advisor tells you about their approach, and no matter what fancy title they may hold, there is a surefire question that will tell you whether they are truly a Fiduciary.

If someone holds a Series 7 license, they are a broker, not a fiduciary. That means that they are compensated, in part, by making commission on the investment products they place in client portfolios. To become a Fiduciary, an advisor must give up their Series 7 license (if they previously held one) and are held to an entirely different standard.


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