How do you know if you are getting financial advice from a real fiduciary? The following five steps are recommended by the Zero Alpha Group and its members:

1) Ask the financial professional outright if he or she is a fiduciary. Don’t assume … ask questions! There is so much confusion now among investors about the term “investment adviser” (and vaguer titles such as “investment consultant” and “financial adviser”) that you very well may think you are dealing with a fiduciary when you are not.

2) Look for a “clean” ADV report. Under the Investment Advisers Act, registered investment advisers regulated by the SEC are required to deliver a written disclosure statement detailing the adviser’s business practices, education and business background. Read this document carefully. Look at how the adviser is paid, any commission relationships and other indications of conflicts of interest that could put you in second place.

3) Beware the tell-tale disclosure of a commissioned financial professional. Even if you don’t normally read marketing materials, you should look at the ads and brochures of your current or prospective financial professional. New SEC rules require stockbrokers and other financial professionals who are not considered true fiduciaries to make the disclosure: “Your account is a brokerage account and not an advisory account. Our interests may not always be the same as yours. Please ask us questions to make sure you understand your rights and our obligations to you, including the extent of our obligations to disclose conflicts of interest and to act in your best interest. We are paid both by you and, sometimes, by people who compensate us based on what you buy. Therefore, our profits, and our salespersons’ compensation, may vary by product and over time.” If you see this in the fine print of ads and brochures, you know that—by definition—you are NOT dealing with a fiduciary!

4) Test willingness to seek out a “second opinion.” A fiduciary may make a strong case for you to use his or her services but will understand if you want another perspective. Keep in mind that a non-fiduciary who fears losing a commission has a built-in incentive to pressure you into investments that may conflict with your best interests.

5) Expect a high level of personal handling. A salesperson who wants a sale may only be in touch with you again when he or she can generate more commission income. By contrast, a fiduciary will give you a high degree of customized information and data. A fiduciary also will regularly update your retirement plan to reflect any changing circumstances.

Source: The Zero Alpha Group, an international network of independent investment advisory firms; www.zeroalphagroup.com.