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What Percentage Of Financial Advisors Is Fiduciaries

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 7 minute read

Money management is a complex and challenging process. It takes time and effort to learn how to build a successful investing portfolio, when to purchase and sell stocks, and how to effectively manage your money to reach your financial objectives.

When it comes to managing their money, many people opt to work with a financial advisor. In most cases, when people need assistance managing their finances, they seek the advice of a financial adviser. The sort of counsel you go with, though, matters much. Most situations call for the assistance of a trusted third party.

Key Differences Between Fiduciary and Financial Advisor

Although the terms “fiduciary” and “financial advisor” are sometimes used interchangeably, the two roles are distinct. Below are some of the most salient distinctions between a fiduciary and a regular financial counselor.

Standard of Care

The level of care that financial counselors and fiduciaries are held to is the primary distinction between the two. When providing financial advice, they are bound by a “standard of care” that dictates the minimum requirements they must meet.

Fiduciary Standard of Care

A fiduciary’s duty is to look out for their client’s best interests at all times. Those who are paid to give advice should act in their clients’ best interests and not consider the potential gains for any other parties. A fiduciary’s sole responsibility is to look out for the interests of their clients.

If a fiduciary advisor has two investment options for a client that are identical except for the fact that one option is more expensive but offers a commission to the fiduciary and the other option is less expensive but offers no commission, the fiduciary is obligated to recommend the option that costs less to the client.

Financial Advisor Duty of Care

Financial advisers, on the other hand, should merely adhere to the so-called appropriateness criterion when making recommendations to their clients.

In a nutshell, financial advisers are allowed to offer suggestions to their customers so long as such suggestions are fair and “appropriate” given the circumstances. Despite the fact that fiduciaries have a duty to suggest the cheaper investment since it’s in the client’s best interest, financial advisers are permitted to suggest either choice above because they are both “appropriate” investments.

This means that financial advisors have an incentive to provide subpar service in exchange for compensation.

That’s not to imply all financial advisors are dishonest or that they’ll push you toward the most expensive choice just to line their own pockets. It’s important to keep in mind, though, that they might be motivated by more than one factor when giving a suggestion.


The responsibilities of fiduciaries and financial advisors are quite similar. They offer investment guidance and assist clients with financial planning.

Fiduciary Duties

A fiduciary financial advisor, as previously established, is legally obligated to put their client’s needs before their own. The focus should be entirely on the client while offering suggestions.

Additionally, fiduciaries owe a responsibility of loyalty to their patrons. This implies that any possible conflicts of interest must be disclosed. Trustees are required to be transparent with their clients about any conflicts of interest, such as receiving compensation based on client action.

Financial Advisor Duties

A financial advisor’s responsibilities are similar to those of a fiduciary in many respects. They aid clients in developing long-term financial strategies, handling investments, and other money matters.

Depending on the specific credentials they possess, their obligation to their customers may change. Financial planners who have earned the CFP designation, for instance, are held to a higher level. In truth, CFPs are obligated to be trustworthy advisors under the organization’s code of ethics.

It is the responsibility of investment advisers and broker-dealers to give their customers sound advice, but they are not compelled to work exclusively in a fiduciary role.

Registration & Licenses

Before beginning to offer financial advice, one must first get the necessary registrations and licenses. The registration and licensing processes may differ based on the advisor’s desired level of qualification and the level of service they want to provide.

Information regarding the various licenses and designations available, as well as the procedures for obtaining them, is kept by FINRA (the Financial Industry Regulatory Authority). If your adviser claims to have one of these certifications, you may find out what it entails by looking into the organizations that bestow them.

Registration, Licenses, and Designations as a Fiduciary

There is a fiduciary obligation associated with several standard certifications and professional licenses. Certified Financial Planners (CFPs) have a legal responsibility to act in their clients’ best interests at all times. A bachelor’s degree, 12–18 months of education, passing a test, and 4,500–6,000 hours of experience in financial advising are required to acquire the certification.

An additional credential for a financial advisor is the Registered Investment Advisor (RIA) designation. Registered investment advisors are required to take and pass tests as well as register with the SEC and their home state (SEC). A fiduciary duty also applies to RIAs.

The commitment to acting as a fiduciary is a requirement of many of the professional qualifications available to those working in the financial services industry. If your adviser mentions a distinction, you should investigate the credentials and rules that go along with it.

Registration, Licenses, and Designations for Financial Advisors

Those who wish to offer financial advise to customers but have no intention of becoming fiduciaries nevertheless need to fulfill certain standards.

When providing financial advice for a fee, individuals or businesses must become registered investment advisors with the Securities and Exchange Commission (SEC). In lieu of a fiduciary obligation, the only requirement placed on investment advisors is that their recommendations be reasonable under the circumstances.

There are few standards for the profession of “financial counselor.” There is no official certification process or exam that one must pass before calling oneself a financial advisor. The criteria instead depend on the services rendered and the advisor’s compensation structure.

Anybody can call oneself a financial adviser and charge clients for their services as long as they are properly registered as investment advisors. No examinations are needed. However, financial advisers who wish to sell products for a commission must first pass tests specific to such investments.


Your portfolio’s performance will be significantly impacted by the fees you incur. Over the course of a lengthy period of time, even a very little cost can have a significant effect on your results. One of the most effective strategies to raise profits is to minimize payments for financial services.

Fees for Fiduciary Services

When giving investing advice, fiduciaries are bound by ethical norms that prohibit them from considering the fees they may receive from the goods they propose. But that doesn’t imply they’re giving away retirement plans and other advice for free.

Fiduciaries often charge their clients a proportion of their total investment capital. A fiduciary may, for instance, levy an annual fee equal to 1 percent of the value of the assets under management. They charge $5,000 annually to handle a brokerage account with $500,000 in assets.

The fiduciary receives added motivation to provide valuable guidance under this compensation arrangement. The more successful you are, the better off they will be financially.

Fiduciaries might charge an hourly rate for their advising services. For a one-time fee, you may get assistance with things like reviewing your personal finances or creating an estate plan. Fiduciaries are allowed to charge an hourly rate for their services in reviewing client finances and providing recommendations.

Fees for Financial Advisors

Advisors can charge whatever they see fit for their services. It is common practice for many fiduciaries, including some financial advisers, to charge a percentage of the client’s invested assets.

Commissions from the sale of securities to customers is another revenue stream for financial advisers. This is allowed so long as the investments they provide are suitable for the client.

Advisors often recommend load-based mutual funds to their customers because of the commissions they may receive from those vehicles. When an investor buys or sells shares of the fund, they are subject to a fee called a load.

If a mutual fund has a 3% front-end load and you invest $10,000, you will only receive $9,700 in shares. Costs are covered by the remaining $300. The financial advisor may receive a commission for some of the work.

How Do I Locate a Fiduciary?

A fiduciary can be located in the same manner as any other financial advisor. An excellent starting point is the advice of those closest to you, such as family and friends, as well as coworkers. Finding local banking institutions is another option.

You may find advisers and learn about their rates by consulting directories maintained by organizations like the National Association of Personal Financial Advisors (NAPFA) and the Financial Planning Association (FPA).

Bottom Line

The main line is that you should seek out a financial advisor who will serve in a fiduciary position whenever possible. While non-fiduciary financial consultants can still be very helpful, fiduciaries have a legal responsibility to offer objective, best-interest guidance to their clients.

Working with a robo-advisor may be a smart choice if you are searching for a fiduciary adviser who can provide low-cost services and assist you in implementing complex investing techniques like tax-loss harvesting. By automatically picking the financial products that best meet your goals and risk tolerance, they can create and manage your investment portfolio, making it simple to prepare for your financial future.

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