How Should You Work With a Financial Advisor?

An important decision involves choosing either a fiduciary or non-fiduciary relationship.

September 29, 2016


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Whether you’re just starting out or are an experienced investor, you may find that working with a financial advisor can help you better navigate the complex world of investing. When choosing a financial advisor, you’ll want to consider the relationship (fiduciary or non-fiduciary) and the reputation of the advisor and firm. In addition, consider how the advisor will be compensated:

  • Hourly: You pay the advisor for the time he or she spends working with you. Pro: If you want a quick opinion, this may be the most inexpensive route. Con: If you want ongoing financial planning, the charges can quickly add up.

  • Fee-only: Here, the advisor generally charges a percentage of the assets managed each year. Pro: The better your investments perform, the more the advisor will be paid-encouraging the advisor to manage your investments prudently. Con: A typical fee range is 0.75% to 1.25% of assets, which could add up over many years.

  • Commission-based: In this case, advisors are paid a commission based on the products you buy. Pro: You generally pay this only when buying or selling. Con: Advisors may steer you toward an investment that pays them a higher commission when suggesting equally viable options.

    Usually, financial advisors acting as fiduciaries use the fee-based model. Broker/dealers and other financial advisors who sell securities may be more likely to use the commission-based model.

What Is a Fiduciary?

Fiduciaries are legally and ethically required to choose suitable investments and act in your long-term best interests. A new federal rule announced in April 2016 requires financial advisors who give investment advice specifically for retirement to act as fiduciaries, even if it means less revenue for them. However, there is a “best interest contract exemption” available, allowing for certain commission-based transactions (as long as they’re in the client’s best interest at that point in time).

In contrast, non-fiduciaries must also provide suitable advice. However, they’re not forbidden to take their own interests into account.

When to Work With a Fiduciary

You can request a fiduciary arrangement for all your investments, not just retirement. This relationship can be beneficial because your advisor is focused on your long-term goals. You may find a fiduciary relationship best when you approach $50,000 in assets and you’re interested in:

  • a variety of services, including long-term financial planning
  • ongoing account management and annual or more frequent reviews
  • the ability to rebalance and reposition your portfolio without additional fees

When to Work With a Non-Fiduciary

In some cases, you may find that it’s advantageous to work with a professional who isn’t a fiduciary. This type of relationship may work better for you when you:

  • have fewer assets or are working toward short-term goals
  • prefer to make your own investment decisions
  • are a buy-and-hold investor who doesn’t want ongoing account management

We’ll Help Steer You in the Right Direction

Navy Federal Financial Group (NFFG) works with individual investors in many ways, always placing the client’s best interest first. To discuss the best approach for your investment, contact a financial advisor with NFFG at 1-877-221-8108.


Nondeposit investment and insurance products are offered through Navy Federal Financial Group, LLC, (NFFG), and through its subsidiaries, Navy Federal Brokerage Services, LLC (NFBS), a member of FINRA/SIPC, and Navy Federal Asset Management, LLC (NFAM), an SEC Registered Investment Advisory Firm. These products are not NCUA/NCUSIF or otherwise federally insured, are not guaranteed or obligations of the credit union, are not offered, recommended, sanctioned, or encouraged by the Federal Government, and may involve investment risk, including possible loss of principal. Products may be offered by an employee who serves both functions of accepting member deposits and selling nondeposit investment and insurance products. 1-877-221-8108.

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