Is Your Advisor Really a Fiduciary?
Is Your Advisor Really a Fiduciary?
When it comes to choosing a financial advisor, one question should rise above the rest:
Are they truly acting in your best interest?
This is the essence of fiduciary duty—a legal and ethical obligation to put your financial well-being ahead of their own compensation or firm incentives. But not every advisor is held to this standard. The difference between Registered Investment Advisors (RIAs) and brokers (or broker-dealer representatives) often comes down to this very principle.
The Fiduciary Standard vs. the Suitability Standard
Registered Investment Advisors (RIAs) are legally bound by the fiduciary standard. That means they must:
- Act in your best interest at all times
- Disclose any conflicts of interest
- Provide full transparency on fees and compensation
Brokers, on the other hand, are generally held to a suitability standard or Regulation Best Interest (Reg BI)—a lower bar. They are only required to recommend products that are “suitable” based on your risk tolerance and goals, even if better or lower-cost options exist.
The majority of U.S.-based financial advisors are affiliated with broker-dealers. According to FINRA's 2023 Industry Snapshot, as of the end of 2022, approximately 88% of registered individuals were associated with broker-dealers, either exclusively or as dual registrants. This includes professionals at well-known firms such as Merrill Lynch, Morgan Stanley, UBS, Wells Fargo, Ameriprise, and LPL.
Why It Matters to You
Let’s say two similar investment products exist—one pays the advisor a higher commission, the other doesn’t. A broker may legally recommend the higher-cost option, while a fiduciary advisor cannot—unless it is demonstrably in your best interest.
When you're trusting someone with your life savings, that difference isn't trivial—it’s foundational.
How to Check Your Advisor’s Background
Before you commit to working with any financial professional, it’s worth taking five minutes to check their credentials and regulatory history:
- FINRA’s BrokerCheck – Use this to research brokers and dual-registered advisors
- SEC’s Investment Adviser Public Disclosure (IAPD) – This is where to find information on Registered Investment Advisors (RIAs)
Key Insight:
If an advisor shows up as an active broker on BrokerCheck, that means they are registered with a broker-dealer—and are not required to act in a fiduciary capacity 100% of the time.
In many cases, they may switch between fiduciary and non-fiduciary roles depending on the product or service they're offering. This dual registration creates potential conflicts of interest—and should be a major consideration before you engage with that individual.
For full fiduciary commitment, look for someone registered as an RIA on the IAPD site—ideally without a concurrent broker registration.
Final Thought
Not all advisors are created equal—and titles like “wealth manager,” “financial planner,” or “financial consultant” don’t guarantee fiduciary responsibility. If you’re unsure, ask the question directly:
"Are you a fiduciary 100% of the time?"
If the answer isn’t a clear “yes,” it might be time to look elsewhere.
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