Financial Fiduciaries

The fiduciary status of a financial advisor is critical because it impacts the achievement of your financial goals.

A fiduciary is a person who holds a position of trust. Who holds a bigger position of trust than a person who influences or controls the investment of your assets?


The fiduciary status of a financial advisor is extremely important:

  • Financial fiduciaries are held to the highest ethical standards in the industry
  • Sales representatives are held to much lower ethical standards
  • Always select a financial fiduciary to be your advisor

A Critical Distinction

In the financial service industry there are fiduciaries and non-fiduciaries. The difference between the two may determine when you retire, how you live during retirement, and your financial security late in life.

Who is a Fiduciary?

Financial firms and professionals, who sell financial advice and ongoing services for fees, are fiduciaries. They have one of the following registrations:

  • RIAs (Registered Investment Advisors) are firms
  • IARs (Investment Advisor Representatives) are professionals who are registered with RIAs

Who is not a Fiduciary?

Financial firms and professionals, who sell investment products for commissions, are not fiduciaires. They have one of the following types of licenses:

  • Broker/Dealers are firms
  • Stockbrokers sell products for the broker/dealers

Two Ethical Standards

There are two ethical standards in the financial service industry:

  • Financial fiduciary is the highest ethical standard. Investor interests come first
  • Suitability* is a lower ethical standard. Investor interests do not have to come first

*Sales representatives are supposed to make suitable recommendations based on what they know about you: Goals, risk tolerance, concerns. However, suitability is vague standard, that varies by investor, and is difficult to enforce.

Wall Street

You may be wondering why Wall Street firms fight fiduciary standards for hundreds of thousands of stockbrokers. Again, the answer is money! Wall Street makes more money doing what is best for its firms. It makes a lot less money doing what is best for you. 

Wall Street's strategy is to blur the distinctions between fiduciaries and non-fiduciaries - consequently, everyone is a financial advisor. The strategy works. Very few investors know the issue exists or how it impacts them. 

Paladin says.....

Always select a financial fiduciary. Make sure the advisor documents his fiduciary status in writing.


Need help finding the right financial advisor?

Read our tips.

Download your free copy!