What Is a Fiduciary
A fiduciary is legally obligated to act in your best interest. This is the highest standard of care in financial advice. Not all advisors meet this standard—many only need to recommend “suitable” products, which is a lower bar.
Fiduciary vs Suitability
The suitability standard only requires recommendations that fit your general situation. An advisor could recommend a higher-cost product if it’s technically suitable, even if cheaper options exist. Fiduciaries must recommend the best option for you.
Who Acts as a Fiduciary
Registered Investment Advisors (RIAs) are required fiduciaries. Fee-only advisors typically operate as RIAs. Broker-dealers and their representatives generally follow the suitability standard, though regulations continue evolving.
Verifying Fiduciary Status
Ask directly: “Do you act as a fiduciary at all times?” Get this commitment in writing. Some advisors wear both hats, acting as fiduciaries for some services but not others. Clarify exactly when the fiduciary duty applies.
Why Fiduciary Matters
Fiduciary advisors must disclose conflicts of interest and put your needs first. They can’t steer you toward products that benefit them more than you. This protection becomes especially important for major financial decisions.
Red Flags
Be wary of advisors who avoid discussing their fiduciary status, push proprietary products aggressively, or earn significant commissions. High-pressure sales tactics rarely accompany genuine fiduciary relationships.
