Fiduciary

Before you rely on it

What to check

Ask for the standard in writing, and ask how the adviser is paid.

The common error

Where people go wrong with fiduciary

Assuming the title settles it. The same person can act as a fiduciary on one part of an account and not on another, and the switch is rarely announced.

Worked through

Fiduciary in plain numbers

Two advisers each recommend a fund. Fund A pays the adviser a 1% commission and charges the client 0.9% a year. Fund B pays no commission and charges 0.2% a year, with similar holdings and risk; a fiduciary must put the client's interest first, so must either recommend B or disclose the conflict and be able to justify A. An adviser held to a lesser standard of suitability might recommend A, because it is acceptable for the client, though not the best available; the gap in cost is 0.7% a year, which on $200,000 is $1,400 annually. The standard that applies decides what you can expect.

Easily confused

Fiduciary and its neighbours

A fiduciary is not the same as any financial professional; many people who give advice are not fiduciaries at all, or are fiduciaries only for some services. The standards differ by role and jurisdiction: registered investment advisers are generally fiduciaries, while broker-dealers may be held to a different standard when recommending products. Fee-only usually means paid only by clients, and fee-based can still include commissions, and the word trustee describes a related duty for handling assets. Ask directly whether the person is a fiduciary in all of their dealings with you, and get it in writing.

In real decisions

Where fiduciary turns up

You look for a fiduciary when choosing an adviser, a retirement plan manager, a trustee or an estate executor. Retirement plan sponsors owe fiduciary duties to participants. Trustees owe them to beneficiaries. When you review an advisory agreement, look for a statement of fiduciary status, the fee structure and disclosed conflicts; comparing how each adviser is paid tells you what incentives shape their recommendations.

Know the edges

Where fiduciary stops being reliable

Fiduciary status sets a standard of conduct. It does not guarantee results or protect against loss, and it does not mean the adviser is competent. Rules vary by country and by type of account; some services carry the duty and others do not, even at one firm. This page is a general explanation. It is not legal or financial advice. For your situation, check the adviser's registration and disclosures with the relevant regulator.

Quick answers

What people ask about fiduciary

How do I know if my adviser is a fiduciary? Ask directly, in writing, whether they act as a fiduciary at all times for all services. Check registration and disclosure documents with the relevant regulator.

Does fiduciary mean lowest cost? Not exactly. It means putting your interest first and managing conflicts. A fiduciary can still charge fees, so compare costs and value.

Are all financial advisors fiduciaries? No. Standards depend on the type of firm and service. Some professionals are held to a suitability standard instead.

What does a fiduciary duty include? Duties of loyalty and care: acting in your interest, managing conflicts and disclosing them, and using reasonable skill. The details depend on the role and place.