Understanding Fiduciary Duty

Fee-Only vs. Fee-Based: A World Apart 

The word "FIDUCIARY" is now a marketing hot button in finance

Anyone can call themselves a fiduciary, but what makes an advisor a fiduciary? By definition, fiduciary duty is an obligation of loyalty and good faith of the highest duty known to the law. However, the restrictions in the industry can be incredibly nuanced because the "scope" of a fiduciary role can be very holistic and wide or extremely narrow and limited by time.

Advisors that work for broker-dealers and insurance firms are generally not legally held to the fiduciary standard, while registered investment advisors (RIA) are. Since a lot of advisors are registered as BOTH an RIA and a broker with broker-dealer firms, like Merrill, Morgan Stanley, Ameriprise, LPL, etc., they may not always act as a fiduciary in your best interest 100% of the time. 

Different types of fiduciary advisors include:

  • Fee-only fiduciaries.
  • Certified financial planner fiduciaries.
  • Registered investment advisor fiduciaries.
  • Retirement advisor fiduciaries.
  • Voluntary fiduciaries.

Registered investment advisors are always fiduciaries in accordance with the Securities and Exchange Commission's Investment Advisers Act of 1940. The Act requires "advisors to be clear and transparent with clients on what they are doing, charging, and (disclose) any potential conflicts of interest as it relates to investment advice,". While the act does not explicitly say RIAs are fiduciaries, the U.S. Supreme Court ruled that this effectively means RIAs are fiduciaries.

As a independent fee-only Registered Investment Advisor and NAPFA member, our first priority is helping you to take care of yourself and your family. 

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