What is a Fiduciary Financial Advisor?

 

A fiduciary duty is a legal requirement to act in a client’s best interest. This is the highest standard of care under the law. A registered investment advisor is the only type of financial advisory firm required to act as a full-time fiduciary.

 

Not all advisors are fiduciaries. Stockbrokers, registered representatives, dual registered advisors, insurance agents, and other types of advisor-sales roles don’t always have to act in your best interest depending on the situation.

 

Non-fiduciary financial advisors can operate under the suitability standard, which allows the advisor to make recommendations they deem ‘suitable’ for the client’s personal financial situation. In other words, the hurdle is that the recommendation is merely suitable, even if it’s not in the client’s best interest.

 

Hybrid firms can switch between their status as registered investment advisors and brokerage, which can be problematic for individuals seeking financial advice; wearing multiple hats makes it difficult to know when your advisor is acting as a fiduciary if the circumstance requires it.