What Is Fiduciary?

The fiduciary duty is the highest standard of care in law. A fiduciary must act with loyalty (putting the client's interests first), prudence (making decisions a reasonable, careful person would make), and full disclosure (revealing any conflicts of interest). In financial services, the fiduciary standard is distinct from the lower 'suitability standard' — a fiduciary must recommend what is best for you, while a non-fiduciary advisor only needs to recommend something suitable. Registered Investment Advisors (RIAs) are legally required to act as fiduciaries. Many broker-dealers are not, which is why asking 'Are you a fiduciary?' is one of the most important questions when selecting a financial professional. Attorneys, trustees, and corporate officers also hold fiduciary duties to their clients, beneficiaries, and shareholders respectively.

Not all financial advisors are fiduciaries — and the distinction can cost you money. A non-fiduciary advisor can legally recommend higher-commission products that may not be in your best interest. Always confirm fiduciary status before engaging a financial advisor, and ask for it in writing. A fee-only financial planner is typically the clearest indication of fiduciary-aligned advice.