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WCI #380: Michael Kitces on the State of Financial Planning
White Coat Investor Podcast
Identifying Genuine Financial Advisors for Novices
To identify a genuine financial advisor, novices should look for someone subject to a fiduciary standard, indicating accountability for providing good advice. This usually means choosing an advisor who works solely at a registered investment advisor (RIA), as opposed to a dual registrant who may represent both an RIA and a brokerage firm. This distinction is crucial because brokerage firms focus on product sales rather than client interests. To verify if an advisor is an RIA, novices can check the firm’s website footer for references to the Form ADV, a regulatory document for RIAs. Additionally, it's important to confirm that the advisor is solely compensated by fees rather than commissions. This can be done by directly asking the advisor about their compensation structure, as they are legally required to provide truthful answers. The Form ADV also contains details about compensation and potential conflicts of interest, allowing clients to understand how their advisor is paid and revealing the advisor's commitment to transparency.
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