The Benefits of Choosing a Professional Fiduciary Over a Friend or Family Member

A fiduciary is a person or company that is entrusted to manage your finances, including liquid cash in bank accounts, investment portfolios, estate assets and retirement funds.

Many individuals select a friend or family member to act as their fiduciary. While this may work for some individuals, there are many benefits to choosing a professional fiduciary over a friend or family member. By choosing a professional, independent fiduciary, your finances will be in good hands for generations to come.

1. Professional fiduciaries are heavily regulated and held to certain fiduciary standards in order to ensure that your finances are as secure and protected as possible. A professional fiduciary is required to adhere to policies that prevent your funds from being misappropriated or poorly managed. When you trust your finances to a professional fiduciary, your funds will not be mixed with the fiduciary’s capital or the funds of other clients. Further, professional fiduciaries must maintain an insurance policy to prevent losses resulting from negligence. None of these policies and standards are required of friends or family members that act as fiduciaries.

2. Professional fiduciaries are focused on a single goal: correctly handling your finances in accordance with sensible policies and standards. Your friends and family members, on the other hand, probably have many other priorities and concerns in their lives. A professional fiduciary will never use your funds for their own purposes, nor will they loan themselves money against your finances.

3. Professional fiduciaries will represent your interests and serve their fiduciary duties regardless of any and all personal circumstances. Too often, individuals trust their finances to a family member or friend only to experience an unfortunate falling out in the future. By mixing your finances with your personal life, you run the risk of creating complications when you have a disagreement with your friend or family member that is entrusted with your funds.

4. Professional fiduciaries have both the knowledge and the means to work cooperatively with your accountant, attorney, and all other professionals you rely on for assistance with legal and financial matters. A professional fiduciary has trusted advisors that they routinely work with, but are willing to work with your trusted┬áprofessionals if you’d prefer.

5. Professional fiduciaries have a full understanding of both federal and state laws governing their work and services as fiduciaries. While friends and family members can conceivably learn about these stipulations, they typically don’t have the knowledge and experience required to make appropriate, timely decisions based on laws and regulations.

6. Professional fiduciaries will never make a decision regarding your finances from a place of self interest or greed. Although we like to think that the same is true of our family members and friends, the lack of regulations regarding non-professional fiduciaries can result in serious financial and personal problems.

7. Professional fiduciaries understand that you may eventually wish to entrust your finances to a different fiduciary, and they will not jeopardize your funds if you choose to do so. A friend or family member may take such a choice personally, resulting in hurt feelings at best and misappropriated funds at worst. Overall, the benefits of choosing a professional fiduciary over a friend or family member are the same as the benefits of choosing a professional attorney to represent you in court over a friend or family member.

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