Fiduciaries, Compensation, and Fatal Mistakes, Ep #60 

<p>What is a fiduciary? How are financial advisors compensated? What is a fatal mistake I see people make with investing? In this episode of retirement made easy, I answer these listener questions so that you can be well-educated about your advisor—and your investments.</p> <h2>You will want to hear this episode if you are interested in...</h2> <ul> <li>[1:30] What’s covered in this episode</li> <li>[4:45] The role of a fiduciary</li> <li>[9:41] The 3 ways financial advisors get compensated</li> <li>[18:30] The fatal mistake people make </li> </ul> <h2>The role of a fiduciary</h2> <p>What is a fiduciary? Why would you need one? Do I recommend working with a fiduciary? A fiduciary is someone that acts on the behalf of another person/people and puts their best interests ahead of his or her own. A fiduciary is both ethically AND legally responsible for their actions. Because of this, a fiduciary can be sued if they’re found to be negligent in their duties. The legal aspect holds them accountable. </p> <p>A simple example of a fiduciary is the legal guardian of a child. They make financial decisions on the child’s behalf and they’re responsible for their well-being. Fiduciaries can be financial advisors as well. <strong><em>I wouldn’t work with a financial advisor that wasn’t a fiduciary</em></strong>. I am a fiduciary and make sure prospective clients know that I have their best interests in mind. If I won’t put my money in something, I wouldn’t put yours in it either.</p> <h2>Three ways financial advisors get compensated</h2> <p>There are three ways financial advisors can charge for their services:</p> <ol> <li><strong>A flat hourly fee/amount</strong>: This is similar to how an attorney charges for their time. On some occasions, I will charge $200 an hour for my services and you’d pay me after the service is completed. Not all advisors can charge hourly or fixed fees for planning services. It depends on the certifications and licenses that they have.</li> <li><strong>Commission-based compensation</strong>: The adv