What Is a Fiduciary Financial Advisor? Definition, Types and Examples

A fiduciary is an individual or organization that takes on the responsibility of acting on behalf of another person or entity, serving their best interests in the process. Whether it’s a financial advisor, lawyer or board member, fiduciaries are expected to prioritize their clients’ needs above their own.

This legal and ethical obligation is paramount in the financial advisor industry. Fiduciary financial advisors are required to act in their client’s best interests and disclose any potential conflicts of interest.

Types of Fiduciary Relationships

Fiduciary duty extends across various types of relationships, including, but not limited to:

Financial advisors and their clients

Guardians and their wards

Corporate boards and their shareholders

Lawyers and their clients

The Potential Value of a Fiduciary Advisor

Financial advisors registered with the SEC are required to abide by fiduciary duty and make investment decisions that align with their client’s best interests. Fiduciary advisors are required to be transparent and clear about conflicts of interest. Non-fiduciaries, on the other hand, are not necessarily held to the same legal standard as their fiduciary counterparts.

Even robo-advisors, which provide automated investment services, can be fiduciaries if they are SEC-registered. They must adhere to fiduciary standards, ensuring that client interests are prioritized, even with less human oversight.

Finding a Fiduciary Advisor

To help ensure you’re working with a fiduciary, look for advisors registered with either the SEC or state regulators. You may also want to look out for specific certifications, like Certified Financial Planner™ (CFP®) or Chartered Financial Consultant® (ChFC®), but it’s still crucial to verify an advisor’s registration status.

Utilize resources like the National Association of Personal Financial Advisors (NAPFA) and the CFP Board to find fiduciaries, and don’t hesitate to ask potential advisors about their compensation, services, and client communication practices. You may also want to review an advisor’s Form ADV and Form CRS for detailed information on their business and background. I’m a fiduciary committed to your best interests. Schedule a consultation here.