You may have heard it before—you need to take care of yourself so you can take care of others. In finance, people tell you to pay yourself first and if you’re on a plane you’re advised to put your own mask first. But for many of us it is not easy to put ourselves before others, even when we know that this is the best way for us to be of use to them. When it comes to financial planning, Washington Post columnist Barry Ritholz advises readers to put themselves first by finding a financial advisor who put them first. Don’t just go for someone you’ve heard is ‘the best.’ Look for a financial planning professional who is interested in helping you work towards better financial health.
For those who are unaware, Ritholz describes two different standards for financial advisors—“suitability” and “fiduciary,” explaining that those who operate by the fiduciary standard “have a much stricter duty and legal obligation than do those who operate under suitability rules.” He notes that when the SEC suggested a fiduciary standard for all financial advisors in 2011, Wall Street balked and lobbied hard to prevent this and he explains why:
“The fiduciary legally obligates the registered investment advisor to act at all times for the sole benefit and interest of the client. That straightforward, cut-and-dried standard has enormous ramifications.”
Ritholz does not completely condemn advisors that operate under the suitability standard and outlines times when this standard works fine but cautions readers to investigate whether or not an advisor is going to consider their needs:
“When seeking out advice, do yourself this favor: Find an advisor who is legally obligated to put your interests first. When you are retired and living comfortably off of your investments, you will thank me.”