Fiduciary
Definition
A person or organization legally obligated to act in the best financial interest of another party, putting the client's interests ahead of their own.
A fiduciary is someone who is legally and ethically bound to act in your best interest when managing your money or providing financial advice. This is the highest standard of care in financial services — higher than the "suitability" standard that many brokers and insurance agents operate under.
The distinction matters enormously. A fiduciary financial advisor must recommend the lowest-cost index fund if it's best for you, even if a more expensive fund would pay them a higher commission. A non-fiduciary advisor only needs to recommend something "suitable" — which could be a higher-cost product that benefits them more.
Types of fiduciaries include: registered investment advisors (RIAs), certified financial planners (CFPs) acting in advisory capacity, trustees, and corporate officers and board members. Importantly, many financial professionals who call themselves "advisors" are actually salespeople operating under the lower suitability standard.
Questions to ask: "Are you a fiduciary?" and "Are you a fiduciary 100% of the time?" Some advisors are fiduciaries only for certain services, switching to the suitability standard for others (like insurance product sales).
Using tools like Clarity to track your portfolio's performance, fees, and allocation helps you independently verify whether your advisor is truly acting in your best interest.
Where this appears in Clarity
Clarity automatically tracks and calculates these concepts across your connected accounts.
Related Terms
Frequently Asked Questions
How do I know if my financial advisor is a fiduciary?
Ask them directly and get it in writing. Check if they're a Registered Investment Advisor (RIA) with the SEC or state regulators. CFP professionals must act as fiduciaries when providing financial advice. Broker-dealers at wirehouses are generally NOT fiduciaries.
What's the difference between fiduciary and suitability standards?
Fiduciary standard: must act in your best interest and disclose conflicts. Suitability standard: must only recommend products that are 'suitable' for your situation, even if better or cheaper options exist. The fiduciary standard is significantly more protective for consumers.