What is a fiduciary financial advisor?

Summary 

What is a fiduciary? 

A fiduciary is a person, or sometimes an entity, committed to acting in the best interests of another party. They demonstrate a high standard of loyalty, trust, and care and are legally accountable for carrying out their expected tasks.  

In a financial context, this legal and ethical obligation requires prioritizing the beneficiary's well-being and making the best financial decisions for them without a personal agenda.  

This means a fiduciary financial advisor should avoid conflicts of interest and ensure transparent and prudent decision-making. 

What is a fiduciary duty? 

Fiduciary duty refers to the ethical and legal obligation that requires fiduciaries (individuals or entities) to act in the best interests of those they serve.  

This means avoiding conflicts of interest, exercising diligence, and ensuring responsible and transparent decision-making to safeguard the financial well-being of the clients they represent. 

What is a fiduciary financial advisor? 

Fiduciary financial advisors assume a critical role in managing clients' economic well-being. They must prioritize their client's best interests above all else.  

A fiduciary financial advisor is bound to act with unwavering loyalty and care, ensuring that every recommendation and decision aligns with their client's long-term financial goals. They go beyond the role of mere compliance with regulations and strive to create a relationship built on trust and openness. 

By emphasizing ethical conduct and client-centric practices, these advisors aim to build a solid foundation of trust and reliability. This means advisors can assure clients their financial advice is dedicated to optimizing their clients' economic well-being while navigating the complexities of the financial landscape on their behalf. 

Unbiased only works with fiduciary financial advisors who are legally obligated to maintain excellent standards in personalized financial care. Get matched with an SEC-regulated financial advisor now. 

What does a fiduciary financial advisor do? 

A fiduciary financial advisor is pivotal in helping individuals manage their financial affairs with trust and confidence. Below are some of their roles per their fiduciary duty:

Are all financial advisors fiduciaries? 

No, not all financial advisors are fiduciaries.  

Some advisors operate under a suitability standard, meaning they must recommend products suitable for clients' best interests. On the other hand, fiduciary financial advisors are held to a higher standard, requiring them to prioritize the client's best interests over their own. 

Fiduciary financial advisors are typically Registered Investment Advisors (RIAs). They are enlisted with and regulated by the Securities and Exchange Commission (SEC).  

What are the different types of fiduciary financial relationships? 

Not every fiduciary is a financial advisor, although they manage their client's economic well-being.  

As such, many different types of fiduciary financial relationships exist. Below are four of the most common types: 

Financial advisors & clients 

Financial advisors and clients form a fiduciary relationship where advisors are legally obligated to prioritize their client's best interests. This includes providing transparent and prudent financial advice, managing investments, and ensuring the chosen strategies align with the client's long-term goals. 

Guardians & wards 

In legal guardianship, a fiduciary relationship exists between guardians and wards, i.e., minors or individuals unable to make complex decisions. Guardians must act in the ward's best interests, overseeing their welfare, finances, and overall well-being. 

Boards & shareholders 

Within corporations, a fiduciary relationship exists between boards of directors and shareholders. Boards must make decisions that benefit the shareholders while ensuring transparency, responsible management, and strategic planning to maximize shareholder value. 

Lawyers & clients 

Lawyers and clients form a fiduciary relationship where attorneys are legally bound to act in the best interests of their clients. This involves providing competent legal advice, maintaining confidentiality, and avoiding conflicts of interest while representing and advocating for their client. 

How much does a fiduciary financial advisor cost? 

Fiduciary financial advisors may charge fees based on assets under management (AUM), hourly rates, or flat fees. Understanding their fee structure is crucial for transparency and managing costs effectively. 

Is a fiduciary financial advisor worth it? 

Not all individuals or scenarios require the services of a fiduciary financial advisor, so the answer is not a straightforward yes or no. 

The following is a scenario where it would be beneficial to seek an advisor's services: 

How to find a fiduciary financial advisor 

Here are five things to know when finding a fiduciary financial advisor: 

You can also check FINRA's BrokerCheck database to verify your advisor is a fiduciary. 

Seek expert financial advice.  

Fiduciary financial advisors are legally obligated to be transparent and put their client's needs before their own – not just offer suitable investment options. These financial professionals are held to a high standard and should have the relevant credentials and certifications and be regulated to ensure they act correctly.  

For expert financial advice, let Unbiased match you with a financial advisor who understands your unique situation and financial goals and will help you achieve them.