What is a fiduciary advisor?

By now, many Americans know to ask whether their financial advisor is a “fiduciary.” In the decade following the financial crisis, regulators moved to protect the interests of regular folks working with professional advisors. In the meantime, critics urged everyday Americans to ask one all-important question before accepting financial advice: Is the person advising you a fiduciary? Here’s why:

A fiduciary has a legal responsibility to put your financial well-being ahead of their own.

What’s an RIA?

RIAs are registered with the Securities and Exchange Commission (SEC) and are legally required to put client interests ahead of their own. While the RIA designation technically refers to a firm, it is often used loosely to refer to individuals as well. For an advisor to register with a firm, they must pass specific exams that demonstrate their knowledge of financial and investment products as well as ethics and fiduciary responsibility.

Certified Financial Planners® (CFPs) are bound to a fiduciary standard by the CFP Board of Standards. As the CFP Board puts it, “At all times when providing financial advice to a client, a CFP professional must act as a fiduciary.” While this is different than a legal requirement, the CFP Board requires advisors to pass extensive tests around products and ethics to qualify for the designation. Advisors who handle financial plans but not investments may seek this classification.

Broker-dealers—and representatives acting on behalf of a brokerage—are not fiduciaries. Instead, they’re held to a standard known as regulation best interest. Whatever product they recommend to you must be in your best interest at the time of the recommendation, but conflicts of interest are allowed, so long as they are disclosed.

If that sounds a bit murky, it can be. Consider a situation where product A and product B both address your needs; A is slightly better for your circumstances, but B offers the broker-dealer a commission. That broker-dealer representative can sell you B without mentioning A exists, so long as the broker-dealer discloses the potential conflict and “has a reasonable basis to believe” that product B is in your best interest. Sometimes, these conflicts may be buried in the fine print.

Some financial advisory firms are dual-registered, meaning their personnel can operate as both (either) an RIA (investment adviser representative) or a broker/dealer representative. That means they can take their fiduciary hat off when it suits them.

Tax professionals and insurance brokers are not held to a fiduciary standard. Some professionals may hold themselves to that standard (particularly on the tax side). When it comes to insurance agents, however, it’s fair to apply some skepticism. There are large commissions at play, so it’s important to be aware of the seller’s responsibility to you. One way to get more clarification when working with financial professionals? Ask how they get paid.

Is your advisor a fiduciary?

To find out if your advisor is a fiduciary, the simplest option is to ask. But as you can see, it’s easy for advisors to say yes, even if they’re only a fiduciary part of the time, or when it’s not a legally binding designation.

You can also look up how your advisor is registered using the Financial Industry Regulatory Authority (FINRA)’s BrokerCheck database.

Finally, you can ask how your advisor gets paid. Representatives of a broker-dealer tend to get paid on commission when making trades. (Sometimes this is in addition to other investment fees. We include more details on this in the next section.)

Similarly, some RIAs, who are legally required to put your interests first when it comes to investments, may also sell insurance products that don’t fall under that umbrella.

Fee-only advisors take the fiduciary standard a step further and don’t accept commissions. You can be confident that a fee-only advisor is never recommending a product because they get a kickback for doing so. It’s the best way to ensure that your advisor is 100% in your corner. Every advisor is legally required to file a piece of paperwork known as a Form ADV each year outlining their fee structure and other key details about how they operate.

Fee-based advisors, on the other hand, have the ability to earn commission from the sale of certain investment products or insurance policies. In addition to earning commission, they can also charge a flat-fee rate or percentage of the assets under management (AUM). While fee-based advisors do offer financial planning guidance, they are incentivized to sell clients certain products, making the best interest (or fiduciary) question particularly important.

At Bogart Wealth, we aim to remove some of this confusing guesswork. We are fee-only fiduciary advisors in the truest sense. We don’t sell insurance products, and we don’t have a dual registration. Our payments come from you and our obligation is to you, and you alone.

“There’s no such thing as free advice”

You’ve heard the saying, and when it comes to financial services, it’s true. If you think your advisor works for free, it’s likely they’re receiving commissions behind the scenes.

Several financial products, including annuities and mutual funds, are packaged and marketed just like anything else. The firms that design these products often pay commissions to the financial professionals that sell the products to clients.

Advisors commonly promote this as a good deal for clients: Because the advisor makes money from these products, clients pay less. Some even bill it as free advice!

But as we explained earlier, professionals selling these products are rarely obligated to put your interests—including the financial goals you have for your family—before their own. These products might have lower returns than competing products, higher fees that eat away at returns, or they might not match your goals or risk tolerance.

A fiduciary, on the other hand, is legally obligated to recommend the best product for you, even if another product offers a commission; fee-only advisors refuse those commissions entirely.

One of the main reasons we founded Bogart Wealth was because we wanted to put your interests first; we wanted to be fiduciaries. While some advisors might hide how they’re registered or structured, we’re proud to say we operate as fee-only fiduciaries, and we can help you evaluate products from other providers who do charge commissions.

Seeking professional advice and assistance, such as the personalized financial planning services offered by Bogart Wealth, can help ensure you make the most informed decisions based on your unique circumstances.Registration of Bogart Wealth or any investment adviser with the SEC does not imply any level of skill or training. For more information about Bogart Wealth and the fees we charge, please view our Form CRS. Free and simple tools are available to research firms and financial professionals at www.investor.gov/CRS. The site also provides educational materials about broker-dealers, investment advisers and investing.


Please remember that past performance is no guarantee of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Bogart Wealth, LLC [“Bogart Wealth”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Bogart Wealth. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Bogart Wealth is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Bogart Wealth’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.bogartwealth.comPlease Note: Bogart Wealth does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Bogart Wealth’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a Bogart Wealth client, please contact Bogart Wealth, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

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