A Second Opinion

Dave Hutchison, CFA |

When I hear the term “Second Opinion” I tend to think of medicine.  None other than the Mayo Clinic, a place where a second opinion seems like it might be a little less necessary, advocates for them in the following article.  I think second opinions have broader applications, including in the world of investment management.  With the qualification that you ask a fiduciary-only advisor, I would recommend them here too.

I believe it’s worth giving serious consideration to the fiduciary-only model where everything the advisor does for you is required to be in your best interest.  In fact, if you are considering working with a new financial advisor, it would be a good idea to ask them to confirm this in writing.

Something that disturbs me are combination structures where a financial advisor has part of their business that provides fiduciary advice on money management and another part where they are a sales representative for an insurance company.  A way to tell when this is happening is when the financial advisor’s business card says they are a “registered representative of XXX.”

In their capacity as a sales representative, these advisors are not required to adhere to a fiduciary standard.  They also earn more when they recommend insurance (which can be confusingly described in investment terms).  It makes no sense to me that one advisor can act as a fiduciary in one respect but as a salesperson in another.