Some Important-to-Know Facts about Investment Fiduciary Advisors in Arizona

The Pension Protection Act of 2006 (PPA) came with great taxing and retirement planning benefits for both enterprises and individuals. Among the major inclusions in this act, there was a new category of finance professionals termed as “Fiduciary Advisor”. So let’s discuss some important facts about how investment fiduciary advisors work in Arizona.

What is a Fiduciary Advisor?

A fiduciary advisor can be defined as a professional who is hired by an employer to provide quality advises to his/her employees regarding their retirement planning investments. The advisor is expected to offer related financial products and services as well. However, these advisors are not bound to provide company-wide retirement planning consultancy, but are only responsible to offer their services for selected employees he/she has been hired for.

How to Become a Fiduciary Advisor?

The PPA has laid done the requirements in order for finance professionals to become a legal fiduciary advisor in the industry. Employers should select applicable candidates on the basis of the following criteria.

1. Disciplinary and/or regulatory history

Has the to-be advisor involved in any kind of legal disputes, arbitration settlements, or are there any complaints filed against him/her?

2. Experience and client reviews

Does the interested advisor has an established business with satisfied clients on board? How long has the advisor been operating in this industry? Has he able to produce favorable results for both himself and clients?

3. Level or range of expertise

Does the advisor possess the ability to confidently and professionally handle different types of clients? Is the advisor having any particular specialization in any field of real estate that would specifically help employees? For instance, if the employer is a publicly traded company, then an advisor able to competently advice on stock options would work well.

4. Any personal or professional affiliations?

If the advisor is working with some other firm at the same time, then it could result in a serious conflict of interest as his/her commitment to the client could get diverted. In this case, the information should be clearly disclosed beforehand.

5. Compensation

Another important consideration for the employer comes of compensation type. Compensations come in the form of charging on hourly basis, annual retainer fees, commissions, or other combinations. Further all the services given will have the same compensation type? For example, the advisor may charge a flat fee amount for providing a retirement plan advice while taking commission after selling a long-term insurance care to the same employee.

6. What services will the advisor offer?

Will the fiduciary advisor offer a general retirement plan advice or shall also include a comprehensive financial plan in the package? Will it be appropriate for the advisor to offer advises in other fields of finance including income tax planning and preparation, mortgage transactions, estate planning, etc.? If yes, how will these products and services be presented and charged? Will the employer bear the total costs for all the services? Or will some services be called as ancillary benefits and occur as an additional cost to the employee?

Once the advisor has successfully screened all the considerations and gets selected, an independent third party will conduct his/her annual performance audit. Employers will also conduct the advisor’s periodic reviews within the company to ensure he/she has stuck to the exact criteria which was initially decided at the time of hiring.

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