When stepping into the world of Elder Law, attorneys should quickly discover that financial advisors are key players in their clients’ lives. From retirement planning to managing long-term care expenses, these professionals often have long-standing relationships with the very clients we are now guiding through complex legal decisions.
However, not all financial advisors are created equal—and understanding the distinctions between their roles, compensation models, and fiduciary duties is crucial for effective collaboration and optimal client outcomes.
Why It Matters to You as an Elder Law Attorney
As attorneys, we are ethically bound to act in our clients’ best interests. We assume that the professionals they already work with—particularly their financial advisors—do the same. Unfortunately, that’s not always the case.
Some financial advisors operate under a suitability standard, meaning they must only suggest products that are “suitable” for a client’s profile. Others operate under a fiduciary standard, which legally binds them to act in the client's best financial interest—even if it means recommending lower-cost or lower-commission options.
For Elder Law attorneys, this distinction is more than academic. It has real implications for:
- Medicaid eligibility and asset protection.
- Long-term care insurance planning.
- Trust and estate strategies.
Types of Financial Advisors: Know the Difference
Here are the three primary types of financial professionals you’re likely to encounter:
1. Broker-Dealers
These advisors are often tied to specific companies or products. They typically earn commissions from selling financial products such as annuities, mutual funds, or insurance. Their standard is suitability—not fiduciary—which means they may recommend higher-fee products that still meet basic client criteria.
Red Flag for Attorneys: Some Medicaid-inappropriate annuities or overly aggressive investment products can be sold under the guise of suitability. If you’re working with a broker-dealer, due diligence is critical.
2. Registered Investment Advisors (RIAs)
RIAs are fiduciaries by law. They usually charge a fee for managing assets (typically a percentage of the assets under management) and are held to a higher standard of care. Their advice tends to be more comprehensive and transparent.
Why Attorneys Like Them: RIAs are often more willing to collaborate on long-term strategies and less focused on product sales, which aligns better with Elder Law goals like Medicaid planning and protecting a client’s life savings.
3. Hybrid Advisors
Some advisors function in both capacities—acting as fiduciaries in certain situations and brokers in others. While many are honest professionals, this model can create confusion about when they are legally obligated to act in the client’s best interest.
Important Tip: Ask them directly when they are wearing which “hat” and how they disclose this to clients.
Building Better Referrals and Client Outcomes
You don’t need to become a financial expert to work well with advisors. But you do need to understand:
- How they are compensated.
- Whether they operate under fiduciary or suitability standards.
- How their recommendations affect your legal strategies.
When choosing financial professionals to partner with—or evaluating your client’s current advisor—consider asking:
- “Are you a fiduciary at all times?”
- “Do you earn commissions on the products you recommend?”
- “What is your process for long-term care and Medicaid planning?”
Protecting Clients and Yourself
In Episode 32 of The Elder Law Coach podcast, we highlighted a case where a financial advisor sold an annuity that disqualified the client from Medicaid—after legal documents had been carefully crafted to preserve eligibility. That’s not just frustrating—it’s harmful.
By asking the right questions and aligning with trustworthy financial partners, you can:
- Avoid undermining your planning work.
- Build reciprocal referral relationships.
- Offer clients truly integrated advice.
Final Thought: Choose Collaboration, Not Conflict
The financial advisor landscape can be confusing—even to clients. By equipping yourself with a basic understanding of the advisor types and their obligations, you can guide clients to make informed decisions and create a team approach that enhances everyone’s service.
Take the time to vet the advisors in your network. The ones who value your expertise, understand Medicaid, and put the client first will become invaluable allies in your practice—and powerful contributors to your success.
I and my team would love to work with you. If you don't have a great relationship with an advisor, we can work with you and show you directly how this relationship can work. Give us a call at 479-601-4119.
