Broker Check

Should my Advisor be a Fiduciary?

| February 15, 2020

The term “Fiduciary” has received a lot of attention lately.  Certified Financial Planners (CFPs) act as fiduciaries, Registered Investment Advisors (RIAs) such as The Wealth Consulting Group work under the fiduciary standard, but what does the term really mean?

A Fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties.  Typically, a fiduciary prudently takes care of money or other assets for another person or entity.

In recent years, The Department of Labor (DOL) introduced a “fiduciary rule” to ensure all financial advisors offering advice on retirement plan assets were fiduciaries, but the effort was met with disagreement.  As of June 21, 2018, The U.S. Fifth Circuit Court of Appeals officially vacated the rule, essentially killing it.

Why the disagreement?  It may seem simple, but it’s slightly complicated.  According to the abandoned DOL’s fiduciary rule, any financial advisor who offers retirement-related financial planning or investment advice to clients for IRAs, 401(k) plans or other retirement accounts would be required to act as fiduciaries.  Advisors, however, have the flexibility to work under different structures.

Here’s the difference.  Advisors who are Registered Investment Advisors (RIAs) work under a fiduciary standard and have a fundamental obligation to work in the best interest of their clients, as well as disclose any conflicts of interest.  Non-RIAs, (brokers and registered representatives) provide investment advice and have a fundamental obligation to ensure investments are “suitable” for their clients.  RIA’s typically earn revenue through a management fee while brokers work under a commission structure.

While the “fiduciary rule” under the DOL died, the SEC approved “Regulation Best Interest (BI)” on June 5th, 2019 with an enforcement date of June 30, 2020.  The rule falls under the Securities and Exchange Act of 1934 and establishes a standard of conduct for broker-dealers when recommending any securities transaction or investment strategy, addressing the broker/registered representative scenario.

The SEC Reg BI as it’s called, includes key fiduciary principles designed to replicate the RIA fiduciary standard.  However, opponents of Reg BI including Former Senators Christopher J. Dodd (D., Conn.) and Barney Frank (D., Mass.) (of the 2010 Dodd- Frank Act) say while it requires brokers to act in a clients’ best interest, the standard is not a fiduciary one.  The two are filing an amicus brief, challenging the rule according to

So, with the disagreement, where does that leave investors?  If you prefer to work with an advisor who works under the fiduciary standard, a good place to start is to simply inquire.  Ask if they are a RIA, broker, registered representative or hold any professional designations.  In addition, ask about how they disclose any conflicts of interest, how they are compensated and areas of specialty.  For more information about an investment professional or firm, check their background at

Taking the steps to plan and implement your long-term financial goals are important.  Understanding your options and the questions to ask in finding the right team to help you get started or work toward improving are an essential part of the process.   For more on this topic, please feel free to contact us.