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What’s a Fiduciary?

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Fiduciary kind of sounds like a bad word. And if you don’t understand what it means, you’re not alone. The elusive term is commonly misinterpreted. Today, we finally set things straight.

First, let’s set the scene.

Did you know not all financial advisors are equal? Until relatively recently, the term “financial advisor” was used to describe various positions across the financial industry. But recent regulation from the U.S. Securities and Exchange Commission (SEC), called Regulation Best Interest (Reg BI), has limited who can use the title.

Any advisor registered with the SEC is legally required to abide by fiduciary duty, and as a result, must put clients’ interests ahead of their own. According to the SEC, fiduciaries are expected to exercise a duty of care and loyalty to clients, and as a result, are “held to the highest standard of conduct.”

If you’re looking for a fiduciary financial advisor, SmartAsset’s free quiz can help match you with up to three vetted fiduciaries who serve your area. The entire process of finding and having initial discussions with a fiduciary is free!

So, What’s a Fiduciary?

Merriam-Webster’s definition, “one that holds a fiduciary relation or acts in a fiduciary capacity,” isn’t exactly crystal clear. We prefer’s take: “a person to whom property or power is entrusted for the benefit of another.”

Ah, now we’re getting somewhere!

Fiduciaries are financial advisors with a legal obligation to prioritize your interests as they manage your assets or money. Unlike an advisor who may push you into insurance policies or investments to rack up fees and commissions, fiduciaries are bound to recommend options that benefit you, the customer, and while conflicts of interest can still exist, any potential conflicts of interest must be disclosed.

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Entrusting Your Life’s Work and Savings

As mentioned earlier, the SEC’s Reg BI under the Securities Exchange Act of 1934 establishes a “best interest” standard of conduct for non-fiduciaries (such as broker-dealers and associated persons) for when they make a recommendation to a retail customer of any securities transaction or investment strategy involving securities, including recommendations of types of accounts. On the surface it sounds like a fiduciary duty, but dig a little deeper:

“Notably, the rule does not say that best interest means that a broker must place the customer’s interests ahead of the broker’s, which is what most people would think a best-interest regulation would include,” said Benjamin Edwards, an associate professor of law at the University of Nevada, Las Vegas. That still allows brokers or their firms to consider their own pockets when making recommendations.1

Why Is a Fiduciary Important?

Here’s why: studies show that U.S. adults working with a financial advisor feel that they could be able to achieve long term financial security.

While the value of working with a financial advisor varies by person and advisors are legally prohibited from promising returns, research suggests people who work with a financial advisor:

  • Feel more at ease about their finances.
  • Could end up with about 15% more money to spend in retirement.2

Many Americans choose not to consult a fiduciary financial advisor because they may believe the costs will be too high. However, a 2021 AdvisoryHQ study found that the average AUM fee for a $50,000 account was about 1.18% or just $590 with average fee percentages declining as portfolio balances increase. In fact, the study found that the average annual advisor fee for $1 million portfolio was just $10,200.3

How Do You Find a Fiduciary?

This is the biggest hurdle for many. With thousands of daily Google searches for “Fiduciary financial advisors near me,” “best fiduciary financial advisor” and “financial investment advisors near me,” the hunt for a vetted fiduciary advisor can feel like a wild goose chase. Fortunately, it doesn’t have to be.

Our free matching quiz links Americans with up to three fiduciary financial advisors who serve their area so they can evaluate and choose the one who fits their needs.

SmartAsset has matched thousands of people with financial advisors. Advisors are rigorously vetted through our proprietary due diligence process. We only match with fiduciaries, so all your financial advisor matches are legally committed to acting in your best interest.

Our advisor matching service is at no cost to you and there is no obligation to work with any of your advisor matches. You’re in control.

Get your fiduciary advisor matches today.


1. “‘Best Interest’ vs. Fiduciary Obligation – Know the Difference”. Center for Retirement Investing. (July 2020)

2. “Journal of Retirement Study Winter” (2020). The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results. Please follow the link to see the methodologies employed in the Journal of Retirement study.

3. “What are the Average Financial Advisor Fees & Investment Fees Being Charged in 2021?”, AdvisoryHQ (July 2021) The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results. Please follow the link to see the methodologies employed in the AdvisoryHQ study.

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