5 Things to Do Before You Choose an Independent Fiduciary

Today, most financially conscious individuals are hiring professional, independent fiduciaries, as opposed to family members or friends, to take care of their finances and funds. While this is a wise decision, it is important to understand that not every independent fiduciary is created equally.

There are several things to do before choosing a fiduciary in order to ensure that you’ll receive the best services available.

1. Ensure that your potential independent fiduciary is licensed in the state in which you live. Proper licensure will ensure that your fiduciary is held to fiduciary standards and policies designed to protect your finances and assets from misappropriation and mishandling. Many states offer regulated fiduciary licensing, and most states maintain directories of licensed fiduciaries. If your potential independent fiduciary does not appear on one of these lists, look elsewhere.

2. Test your independent fiduciary’s technical knowledge of laws and regulations regarding their services. For example, if you are seeking fiduciary services for your child’s special needs trust, ask the fiduciary what types of distributions are allowed without risking the public benefits received.   Even if you don’t know the answer to the question yourself, you can gauge the fiduciary’s comfort level with the question to measure their understanding.

3. Get to know the leaders of a potential independent fiduciary company on a deeper level. Do some research on the backgrounds of these leaders to get an idea of their successes and failures as fiduciaries. How many other families or individuals has the potential independent fiduciary provided services to in the past? Will you be able to contact the fiduciary at all times? If the fiduciary doesn’t frequently interact with their clients or is uninterested in getting to know you on a personal level, it might be wise to look elsewhere.

4. Create an understanding between yourself and the fiduciary that you may eventually want to entrust your finances to a different fiduciary. Although it may be awkward to do this at the start of the relation, it can be even more awkward (and have negative legal and financial repercussions) if you wait to do it later, when you actually need to switch to a new fiduciary. There are a number of reasons why you might want to switch to a different fiduciary, such as lower fees. Your fiduciary should be understanding of this and should not take it personally.

5. Shop around to find the independent fiduciary that has reasonable fees and good references. Remember, fiduciary services can be costly. However, this doesn’t mean that you should automatically assume that the first fiduciary service you investigate will give you the best rates or have top references. As with any industry, fiduciaries compete with one another to provide the best services at the lowest prices. Take advantage of this by finding a reputable, knowledgeable fiduciary with reasonable rates who comes highly recommended.

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